Wasatch Global Investors, an investment management firm, published its “Wasatch Micro Cap Value Fund” second quarter 2021 investor letter – a copy of which can be downloaded here. A quarterly return of 8.78% was recorded by the fund’s investor class for the Q2 of 2021, outperforming the benchmark, Russell Microcap® Index, which returned 4.14% 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 Wasatch Global Investors, the fund mentioned Skyline Champion Corporation (NYSE: SKY) and discussed its stance on the firm. Skyline Champion Corporation is a Michigan, United States-based manufactured home company with a $3.4 million market capitalization. SKY delivered a 97.06% return since the beginning of the year, while its 12-month returns are up by 148.15%. The stock closed at $62.90 per share on September 17, 2021.
Here is what Wasatch Global Investors has to say about Skyline Champion Corporation in its Q2 2021 investor letter:
“Moreover, we think our high-quality companies are better able to deal with supply-chain challenges and raise prices while still maintaining or increasing market share in an inflationary environment. For example, Skyline Champion Corp. (SKY)—which constructs affordable homes and modular buildings—was able to raise prices continually as lumber costs rose. And now that lumber costs are falling, home prices are steady or increasing so the company’s margins are expanding. Skyline has most of the business characteristics that we find ideal, including: (1) strong revenue and earnings growth with continued headroom; (2) rising margins; (3) a reasonable stock price; and (4) significant potential over time for investors to pay higher and higher price/earnings multiples on the stock.”
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Based on our calculations, Skyline Champion Corporation (NYSE: SKY) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. SKY was in 23 hedge fund portfolios at the end of the first half of 2021. Skyline Champion Corporation (NYSE: SKY) delivered an 18.36% 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.
