Fiduciary Management Inc., an investment management firm, published its “Small Cap Equity” first quarter 2021 investor letter – a copy of which can be downloaded here. A return of 12.6% was reported by the FMI Small Cap portfolios for the Q1 of 2021, compared to 12.70% for the Russell 2000 Index and 21.17% for the Russell 2000 Value Index over the same period. You can view the fund’s top 5 holdings to have a peek at their top bets for 2021.
Fiduciary Management, in their Q1 2021 investor letter, mentioned Insight Enterprises, Inc. (NASDAQ: NSIT) and shared their insights on the company. Insight Enterprises, Inc. is a Tempe, Arizona-based computer hardware, software, cloud solutions and IT services provider that currently has a $3.5 billion market capitalization. Since the beginning of the year, NSIT delivered a 32.58% return, extending its 12-month gains to 118.97%. As of April 14, 2021, the stock closed at $100.02 per share.
Here is what Fiduciary Management has to say about Insight Enterprises, Inc. in their Q1 2021 investor letter:
“Insight specializes in digital innovation, cloud/data center modernization, and connected workforce and supply chain optimization. The company designs and implements an array of solutions from over 6,000 information technology (IT) vendors for more than 150,000 end customers including government organizations, businesses, and healthcare and education institutions. Insight derives 78% of sales from North America; 19% from Europe, the Middle East and Africa; and 3% from Asia-Pacific. In total, the company operates across 19 countries.
Good Business
• As one of the largest value-added resellers of necessary technology product and service solutions, Insight benefits from scale and global growth in technology without being exposed to the same obsolescence risk as technology manufacturers.
• Insight helps customers manage a complex IT environment in a cost-efficient manner.
• The company is focused on services and integrated solutions to customers, which should benefit margins and returns over time.
• Over the past five years the company has averaged a 12% return on invested capital (ROIC), exceeding its cost
of capital.
• Its balance sheet leverage is low, and the business is easy to understand.Valuation
• The stock trades at a significant discount to the Russell 2000 despite it being a better-than-average business.
• Insight is being valued at a low double-digit enterprise value-to-EBITDA3 multiple and, using our estimate for next year’s earnings, a mid-teens forward price-to-earnings multiple.Management
• Ken Lamneck was appointed President and Chief Executive Officer and a director in January 2010. From 2004 through 2009, he was President of the Americas at Tech Data Corp., and from 1996 to 2003, held various executive management positions at Arrow Electronics, Inc. He currently owns around $29.4 million of Insight stock.
• Glynis Bryan joined Insight in December 2007 as Chief Financial Officer. Prior to joining Insight, Ms. Bryan served as Executive Vice President and CFO at Swift Transportation Co., Inc. from April 2005 to May 2007. Prior to joining Swift, she served as CFO at APL Logistics Ltd. in Oakland, California and in various finance roles at Ryder System Inc., including CFO of Ryder’s largest business unit. She currently owns approximately $7.2 million worth of Insight stock.Investment Thesis
As a reseller of IT solutions, the company gives investors exposure to technology growth without subjecting them to the short product cycles, cut-throat competition, and poor capital allocation decisions that are typically inherent in technology investments. We believe Insight has solid long-term growth prospects, and that it will continue to expand its margins over time by selling more services and solutions to end customers. Given the earnings growth potential and the company’s ROIC profile, we view the current valuation as attractive.”
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Our calculations show that Insight Enterprises, Inc. (NASDAQ: NSIT) 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, Insight Enterprises, Inc. was in 19 hedge fund portfolios, compared to 22 funds in the third quarter. NSIT delivered a 25.59% 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.
