Wasatch Global Investors, an investment management firm, published its “Wasatch Small Cap Growth Fund” second quarter 2021 investor letter – a copy of which can be downloaded here. A return of 6.32% was recorded by the fund’s investor class for the Q2 of 2021, outperforming the benchmarks, Russell 2000 Growth Index, that increased 3.92%, and the Russell 2000 Index that rose to 4.29% 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 Purple Innovation, Inc. (NASDAQ: PRPL) and discussed its stance on the firm. Purple Innovation, Inc. is a Lehi, Utah-based comfort technology company with a $1.4 billion market capitalization. PRPL delivered a -32.03% return since the beginning of the year, while its 12-month returns are down by -5.92%. The stock closed at $22.39 per share on September 20, 2021.
Here is what Wasatch Global Investors has to say about Purple Innovation, Inc. in its Q2 2021 investor letter:
“Another significant detractor was Purple Innovation, Inc. (PRPL), a direct-to-consumer retailer of products intended to improve sleep quality. Purple sells mattresses, bedding items and cushions. The stock was down because the company experienced problems getting machinery back online after a temporary shutdown at one of its manufacturing facilities, which will reduce revenues and earnings in the short term. Having said that, we still like Purple because we believe the company’s three- to five-year growth will be strong. (Current and future holdings are subject to risk.)”
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Based on our calculations, Purple Innovation, Inc. (NASDAQ: PRPL) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. PRPL was in 25 hedge fund portfolios at the end of the first half of 2021, compared to 24 funds in the previous quarter. Purple Innovation, Inc. (NASDAQ: PRPL) delivered a -17.96% 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.
