Longleaf Partners Fund, a Memphis-based fund under Southeastern Asset Management, published its “Longleaf Partners Small-Cap Fund” third quarter 2021 investor letter – a copy of which can be downloaded here. Longleaf Partners Small-Cap Fund fell 4.20% in the third quarter, narrowly ahead of the Russell 2000 Index’s 4.36% decline in the period. The Fund has delivered positive absolute returns year-to-date, adding 9.10%, but it trails the Index’s 12.41% return for the year. You can take a look at the fund’s top 5 holdings to have an idea about their best picks for 2021.
Longleaf Partners Small-Cap Fund, in its Q3 2021 investor letter, mentioned Mattel, Inc. (NASDAQ: MAT) and discussed its stance on the firm. Mattel, Inc. is an El Segundo, California-based toy company with a $7.9 billion market capitalization. MAT delivered a 30.26% return since the beginning of the year, while its 12-month returns are up by 58.29%. The stock closed at $22.73 per share on November 12, 2021.
Here is what Longleaf Partners Small-Cap Fund has to say about Mattel, Inc. in its Q3 2021 investor letter:
“Mattel (-8%, -0.51%), the global toy and intellectual property franchisor, detracted despite strong quarterly performance that increased our appraisal of the value by 5%. Sales grew 40% above weak 2020 comps, with particularly encouraging results in American Girl, the doll brand that had been struggling for years before CEO Ynon Kreiz initiated a successful turnaround. Despite some cost inflation, the consolidated gross margin increased nearly 4%. We think Mattel will earn $1.50/share next year and the multiple remains too low despite two years of price appreciation. The company has recently announced 13 feature films, 18 TV shows, and 24 other projects in development. The intellectual property (IP) efforts create substantial earnings power but haven’t contributed much yet. These are some of the best non-earning assets in our portfolio and we expect many of them to be realized within the next few years.”
Photo by Elena Mishlanova on Unsplash
Based on our calculations, Mattel, Inc. (NASDAQ: MAT) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. MAT was in 25 hedge fund portfolios at the end of the first half of 2021, compared to 25 funds in the previous quarter. Mattel, Inc. (NASDAQ: MAT) delivered a 3.98% 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.
