Here’s Why Headwaters Capital Sold its Cerence (CRNC) Stake

Headwaters Capital, an investment management firm, published its first-quarter 2022 investor letter – a copy of which can be downloaded here. The Headwaters Capital portfolio declined by -10.9% for the first quarter of 2022 compared to the -5.7% decline of the Russell Mid Cap index for the same period. Try to spend some time taking a look at the fund’s top 5 holdings to be informed about their best picks for 2022.

In its Q1 2022 investor letter, Headwaters Capital mentioned Cerence Inc. (NASDAQ:CRNC) and explained its insights for the company. Founded in 2019, Cerence Inc. (NASDAQ:CRNC)  is a Burlington, Massachusetts-based multinational software company with a $1.1 billion market capitalization. Cerence Inc. (NASDAQ:CRNC) delivered a -61.51% return since the beginning of the year, while its 12-month returns are down by -69.31%. The stock closed at $29.50 per share on April 29, 2022.

Here is what Headwaters Capital has to say about Cerence Inc. (NASDAQ:CRNC) in its Q1 2022 investor letter:

“Cerence (“CRNC”). Cerence was sold during the quarter despite purchasing shares in the company last quarter. Following purchase of a full position in the company in Q4 ‘21, the company saw a departure of its CEO, CFO, and General Counsel. Additionally, 2024 financial guidance that was issued in August of last year was removed as the previous management team had clearly set unrealistic growth targets. More clarity around why these targets were unachievable was provided during the Q1 earnings call, when management explained that prior revenue growth had a higher level of non-recurring revenue than had previously been disclosed and growth from new end markets was largely unproven. Given wholesale management turnover and an inability to trust any of the previous financial disclosures, the thesis was clearly broken, which forced a sale of the shares. “

Copyright: gmast3r / 123RF Stock Photo

Our calculations show that Cerence Inc. (NASDAQ:CRNC) fell short and didn’t make it on our list of the 30 Most Popular Stocks Among Hedge Funds. Cerence Inc. (NASDAQ:CRNC) was in 21 hedge fund portfolios at the end of the fourth quarter of 2021, compared to 18 funds in the previous quarter. Cerence Inc. (NASDAQ:CRNC) delivered a (3-Month)% return in the past 3 months.

In March 2022, we also shared another hedge fund’s views on Cerence Inc. (NASDAQ:CRNC) in another article. You can find other investor letters from hedge funds and prominent investors on our hedge fund investor letters 2022 Q1 page.

Disclosure: None. This article is originally published at Insider Monkey.