Here’s Why LPL Financial (LPLA) Performed Poorly in the Recent Quarter

Carillon Tower Advisers, an investment management firm, published its “Carillon Eagle Mid Cap Growth Fund” second quarter 2021 investor letter – a copy of which can be downloaded here. Mid-cap stocks extended their recent run of success in the second quarter, advancing for the fifth consecutive quarter following the sharp selloff induced by the early stages of the pandemic. Among the two style indexes, the Russell Midcap® Growth Index (up 11.07%) staged a strong comeback against its Russell Midcap® Value Index (up 5.66%) counterpart, after lagging rather significantly in the first quarter. 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 Carillon Tower Advisers, the fund mentioned LPL Financial Holdings Inc. (NASDAQ: LPLA) and discussed its stance on the firm. LPL Financial Holdings Inc. is a San Diego, California-based investment and business solutions provider with an $11.6 billion market capitalization. LPLA delivered a 39.25% return since the beginning of the year, while its 12-month returns are up by 83.87%. The stock closed at $145.59 per share on September 15, 2021.

Here is what Carillon Tower Advisers has to say about LPL Financial Holdings Inc. in its Q2 2021 investor letter:

LPL Financial is an independent broker-dealer offering technology, brokerage, and investment advisory services to financial advisors and financial institutions. The firm’s shares underperformed in the quarter due in part to the somewhat lofty valuation the stock was trading at after its outperformance in the first quarter.”

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Based on our calculations, LPL Financial Holdings Inc. (NASDAQ: LPLA) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. LPLA was in 48 hedge fund portfolios at the end of the first half of 2021, compared to 38 funds in the previous quarter. LPL Financial Holdings Inc. (NASDAQ: LPLA) delivered a 4.22% 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.