ClearBridge Investments, an investment management firm, published its “Large Cap Value Strategy” second quarter 2021 investor letter – a copy of which can be downloaded here. The ClearBridge Large Cap Value Strategy outperformed its Russell 1000 Value Index benchmark during the second quarter. On an absolute basis, the Strategy had gains in nine of 11 sectors in which it was invested for the quarter. The strongest contributions came from the financials, industrials, communication services and information technology (IT) sectors. The utilities and consumer discretionary sectors were detractors. 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 ClearBridge Investments, the fund mentioned Capital One Financial Corporation (NYSE: COF), and discussed its stance on the firm. Capital One Financial Corporation is a McLean, Virginia-based bank holding company, that currently has a $71.7 billion market capitalization. COF delivered a 60.76% return since the beginning of the year, extending its 12-month revenues to 156.36%. The stock closed at $160.35 per share on July 15, 2021.
Here is what ClearBridge Investments has to say about Capital One Financial Corporation in its Q2 2021 investor letter:
“Portfolio holdings in the communication services and financials sectors also made strong contributions… In financials, Capital One has also benefited, at least indirectly, from government stimulus that has strengthened customer balances sheets and driven credit losses to record lows. Capital One should also benefit from a reopening of the economy and increased discretionary spending.”
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Based on our calculations, Capital One Financial Corporation (NYSE: COF) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. Capital One Financial Corporation was in 59 hedge fund portfolios at the end of the first quarter of 2021, compared to 56 funds in the fourth quarter of 2020. COF delivered a 16.41% 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.
