ClearBridge Investments, an investment management firm, published its “Value Equity Strategy” second quarter 2021 investor letter – a copy of which can be downloaded here. Accordingly, the portfolio remains diversified among the most attractive current valuation opportunities in the market: financials, energy, consumer recovery plays, and large-cap biotech and drug stocks. You can take a look at the fund’s top 5 holdings to have an idea about their top bets for 2021.
In the Q2 2021 investor letter of ClearBridge Investments, the fund mentioned Schlumberger Limited (NYSE: SLB) and discussed its stance on the firm. Schlumberger Limited is a Houston, Texas-based oilfield services company with a $43.2 billion market capitalization. SLB delivered a 38.94% return since the beginning of the year, while its 12-month returns are up by 102.07%. The stock closed at $30.33 per share on September 29, 2021.
Here is what ClearBridge Investments has to say about Schlumberger Limited in its Q2 2021 investor letter:
“Schlumberger is a leading oilfield services company that should enjoy both cyclical and secular opportunities over the next market cycle and beyond. On the cyclical front, after years of declining energy service activity and negative pricing, service activity is increasing modestly and pricing is inflecting higher, which is always the key cyclical driver for energy services stocks. In addition, we expect the Middle East to gain share of oil production as ESG considerations limit upstream investment in other regions. As the dominant service provider in the Middle East, Schlumberger is very well-positioned for this shift. On the secular front, Schlumberger has a rapidly growing digital services capability that helps producers operate much more efficiently and with much less waste, which will be a core ESG focus. Finally, Schlumberger is investing directly, and with partners, in energy transition capabilities such as carbon capture, hydrogen and geothermal that should allow Schlumberger to grow and remain viable well beyond the current energy cycle.”
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Based on our calculations, Schlumberger Limited (NYSE: SLB) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. SLB was in 41 hedge fund portfolios at the end of the first half of 2021, compared to 50 funds in the previous quarter. Schlumberger Limited (NYSE: SLB) delivered a -8.29% return in the past 3 months.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
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Disclosure: None. This article is originally published at Insider Monkey.
