Harding Loevner, an investment management firm, published its “Global Small Companies Equity Fund” second-quarter 2021 investor letter – a copy of which can be downloaded here. A quarterly net return of 6.82% was recorded by the fund for the Q2 of 2021, beating its Benchmark, the MSCI All Country World Small Cap Index, which returned 5.79% for the same period. 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 Harding Loevner, the fund mentioned Stock Yards Bancorp, Inc. (NASDAQ: SYBT) and discussed its stance on the firm. Stock Yards Bancorp, Inc. is a Louisville, Kentucky-based commercial banking company with a $1.4 billion market capitalization. SYBT delivered a 36.44% return since the beginning of the year, while its 12-month returns are up by 61.68%. The stock closed at $55.23 per share on September 24, 2021.
Here is what Harding Loevner has to say about Stock Yards Bancorp, Inc. in its Q2 2021 investor letter:
“If Signature, which currently sits around our market cap ceiling, could be the next First Republic, then the Louisville-based bank Stock Yards could be the next Signature. Stock Yards operates in Kentucky, Ohio, and Indiana, smaller markets where local bankers develop knowledge of their communities not easily replicated by national competitors. Stock Yards’ 60 relationship managers live in the neighborhoods where they do business and have spent decades getting to know local companies and their owners, serving them with a high level of personal attention. The result is a bank that has grown at twice the pace of the industry, while earning higher returns.
Like Signature, Stock Yards was able to grow its market share during last year’s pandemic-driven downturn. Working closely within their local communities, its bankers understood how urgently businesses needed the federally funded small business loans offered under the 2020 Payroll Protection Program Flexibility Act. Many banks struggled to process the loans, which, among other things, required close coordination with the federal Small Business Administration. Stock Yards learned the procedures quickly and was able to provide loans when other banks could not. In addition to helping its existing clients during a difficult time, it was able to attract a large number of new clients by agreeing to write the loans on condition that they move their deposit accounts from their old banks to Stock Yards.”
Based on our calculations, Stock Yards Bancorp, Inc. (NASDAQ: SYBT) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. SYBT was in 8 hedge fund portfolios at the end of the first half of 2021, compared to 5 funds in the previous quarter. Stock Yards Bancorp, Inc. (NASDAQ: SYBT) delivered a 7.45% 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.
