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 Allegiant Travel Company (NASDAQ: ALGT) and discussed its stance on the firm. Allegiant Travel Company is a Las Vegas, Nevada-based airline company with a $3.5 billion market capitalization. ALGT delivered a 3.12% return since the beginning of the year, while its 12-month returns are up by 54.46%. The stock closed at $195.15 per share on September 20, 2021.
Here is what Wasatch Global Investors has to say about Allegiant Travel Company in its Q2 2021 investor letter:
“Allegiant Travel Co. (ALGT) was also a large detractor. Allegiant offers airline flights, hotel bookings, car rentals, travel management and other related services. When the stock price declined in 2020, we performed more research on the company. Although other travel-related competitors were facing dire circumstances, Allegiant wasn’t forced to raise dilutive equity or take government money. Since then, Allegiant has strengthened its relationships with pilots and crews and has positioned itself to benefit from leisure travel—which should accelerate sooner than business travel. Although we didn’t purchase the company as a way to take advantage of the economic reopening, the stock did get a boost from economy-related optimism in the first quarter. During the second quarter, the stock simply gave back some of its gains but we still like the company’s fundamentals from a risk/reward perspective.”
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Based on our calculations, Allegiant Travel Company (NASDAQ: ALGT) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. ALGT was in 29 hedge fund portfolios at the end of the first half of 2021, compared to 22 funds in the previous quarter. Allegiant Travel Company (NASDAQ: ALGT) delivered a -3.86% 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.
