Wedgewood Partners, an investment management firm, published its third-quarter 2021 investor letter – a copy of which can be downloaded here. A quarterly portfolio net return of +2.75% was recorded by the fund for the third quarter of 2021, outperforming the S&P 500 Index that delivered a +0.58% return for the same period, and the +1.16% gain of the Russell 1000 Growth Index. You can take a look at the fund’s top 5 holdings to have an idea about their best picks for 2021.
Wedgewood Partners, in its Q3 2021 investor letter, mentioned Tractor Supply Company (NASDAQ: TSCO) and discussed its stance on the firm. Tractor Supply Company is a Brentwood, Tennessee-based retail chain company with a $22.6 billion market capitalization. TSCO delivered a 41.06% return since the beginning of the year, while its 12-month returns are up by 29.53%. The stock closed at $197.29 per share on October 14, 2021.
Here is what Wedgewood Partners has to say about Tractor Supply Company in its Q3 2021 investor letter:
“Tractor Supply had a dominant business model before COVID, but COVID has only made it better by driving more customers into its arms and providing windfall profits that allowed them to accelerate a variety of initiatives in omnichannel as well as store upgrades and remodels. We continue to expect a premium business, that has had some long-term secular tailwinds handed to it by the pandemic should trade well above the current market multiple; however, Tractor Supply is trading just about at parity with the broader market and around the upper end of its longer-term historical range. For a great business that became sustainably better as a result of the pandemic, along with a multiple that we think is too low, we continue to hold the Company in an overweight position.”
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Based on our calculations, Tractor Supply Company (NASDAQ: TSCO) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. TSCO was in 38 hedge fund portfolios at the end of the first half of 2021, compared to 29 funds in the previous quarter. Tractor Supply Company (NASDAQ: TSCO) delivered a 4.76% 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.
