Here’s Why Wasatch Added its Position in Nautilus Inc. (NLS) Despite Performing Poorly

Wasatch Global Investors, an investment management firm, published its “Wasatch Micro Cap Value Fund” first quarter 2021 investor letter – a copy of which can be downloaded here. A return of 14.74% was recorded by the fund’s investor class for the Q1 of 2021, trailing the benchmark, Russell Microcap® Index, which leapt 23.89% for the same period. You can view the fund’s top 5 holdings to have a peek at their top bets for 2021.

Wasatch Micro Cap Value Fund, in its Q1 2021 investor letter, mentioned Nautilus, Inc. (NYSE: NLS), and shared their insights on the company. Nautilus, Inc. is a Vancouver, Washington-based fitness equipment manufacturer that currently has a $485.5 million market capitalization. Since the beginning of the year, NLS delivered a -12.46% return, while its 12-month gains are up by 172.38%. As of May 10, 2021, the stock closed at $15.88 per share.

Here is what Wasatch Micro Cap Value Fund has to say about Nautilus, Inc. in its Q1 2021 investor letter:

“The largest detractor from Fund performance in the first quarter was Nautilus, Inc. (NLS). The company develops, manufactures and markets health and fitness products—including cardio and strength-training equipment and related accessories. The stock fell on news of higher freight costs due to a shortage of shipping containers. The shortage is disrupting the international transport of raw materials, parts and finished goods. While the stock decline was disappointing, we still have a positive view on the company.

Nautilus offers exercise bikes that rival Peloton bikes. From an investment standpoint, the most attractive characteristic of these bikes is that they typically incorporate subscriptions for online fitness instruction. And subscriptions create recurring revenues that are relatively predictable. Nautilus’s stock trades at a valuation that’s about four times the company’s estimated 2021 EBITDA (earnings before interest, taxes, depreciation and amortization). We think this is a very attractive valuation, and we added to our position in the company because we believe the transport disruptions will be resolved within several months.”


Our calculations show that Nautilus, Inc. (NYSE: NLS) does not belong in our list of the 30 Most Popular Stocks Among Hedge Funds. As of the end of the fourth quarter of 2020, Nautilus, Inc. was in 20 hedge fund portfolios, compared to 17 funds in the third quarter. NLS delivered a -40.32% return in the past 3 months.

The top 10 stocks among hedge funds returned 231.2% between 2015 and 2020, and outperformed the S&P 500 Index ETFs by more than 126 percentage points. We know it sounds unbelievable. You have been dismissing our articles about top hedge fund stocks mostly because you were fed biased information by other media outlets about hedge funds’ poor performance. You could have doubled the size of your nest egg by investing in the top hedge fund stocks instead of dumb S&P 500 ETFs. Here you can watch our video about the top 5 hedge fund stocks right now. All of these stocks had positive returns in 2020.

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