Maran Capital Management, an investment management firm, published its third-quarter 2021 investor letter – a copy of which can be downloaded here. In the third quarter of 2021, Maran Partners Fund returned -3.1%, net of all fees and expenses, which brings the year-to-date return to +48.3%, net. Over the past five years, the fund has compounded at the annualized rate of +22.2%, net of all fees and expenses. You can take a look at the fund’s top 5 holdings to have an idea about their best picks for 2021.
Maran Capital Management, in its Q3 2021 investor letter, mentioned Turning Point Brands, Inc. (NYSE: TPB) and discussed its stance on the firm. Turning Point Brands, Inc. is a Louisville, Kentucky-based tobacco company with a $738.1 million market capitalization. TPB delivered a -12.39% return since the beginning of the year, while its 12-month returns are up by 6.26%. The stock closed at $39.44 per share on November 2, 2021.
Here is what Maran Capital Management has to say about Turning Point Brands, Inc. in its Q3 2021 investor letter:
“At Turning Point Brands, the tail is wagging the dog. TPB has three segments, Zig Zag rolling papers, Stokers smokeless tobacco, and “New Gen,” a collection of investments in vaping and other alternative products. Zig Zag and Stokers are both performing very well, together run-rating approximately $100mm of annual EBITDA. Zig Zag is benefitting from the ongoing trend of cannabis legalization, and Stokers is a low-cost, high-quality competitor in its niche, taking share and operating under a pricing umbrella. New Gen, though, is struggling and operating at close to break-even levels. It is this third segment that investors seem to be focused on. The stock is cheap even assuming New Gen is worth nothing, and I believe risk-reward is asymmetrically skewed to the upside.”
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Based on our calculations, Turning Point Brands, Inc. (NYSE: TPB) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. TPB was in 30 hedge fund portfolios at the end of the first half of 2021, compared to 25 funds in the previous quarter. Turning Point Brands, Inc. (NYSE: TPB) delivered a -24.95% 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.
