Choice Equities Capital Management, an investment management firm, published its second-quarter 2021 investor letter – a copy of which can be downloaded here. A net return of +6.2% was recorded by the fund for the Q2 of 2021, outperforming its Russell 2000 benchmark that delivered a +4.3% return, but slightly below the S&P 500 Index that had a +8.6% gain for the same period. You can view the fund’s top 5 holdings to have a peek at their top bets for 2021.
In the Q2 2021 investor letter of Choice Equities Capital Management, the fund mentioned Select Interior Concepts, Inc. (NASDAQ: SIC) and discussed its stance on the firm. Select Interior Concepts, Inc. is an Atlanta, Georgia-based interior building products manufacturer with a $374.6 million market capitalization. SIC delivered a 101.89% return since the beginning of the year, while its 12-month returns are up by 124.84%. The stock closed at $14.43 per share on September 23, 2021.
Here is what Choice Equities Capital Management has to say about Select Interior Concepts, Inc. in its Q2 2021 investor letter:
“As it relates to SIC, an update is due from just a few weeks ago, as CEO Bill Varner and the team have unlocked a good deal of value for shareholders. Entering this spring trading around $7 and 7x EBITDA, the team first sold the RDS business for 11x. Then a couple months later, they sold the ASG business for 13x EBITDA at a price of $14.50. From a long-term perspective, I would have liked to see the refocused company direct their new cash reserves to pursuit of the market consolidation opportunity in the granite and quartz distribution business, but this is a successful outcome which has created value for all shareholders involved. Congratulations to Bill Varner and the team in executing the two-step transaction.”
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Based on our calculations, Select Interior Concepts, Inc. (NASDAQ: SIC) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. SIC was in 11 hedge fund portfolios at the end of the first half of 2021, compared to 12 funds in the previous quarter. Select Interior Concepts, Inc. (NASDAQ: SIC) delivered a 48.05% 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.
