Longleaf Partners Fund, a Memphis-based fund under Southeastern Asset Management, published its “Longleaf Partners Small-Cap Fund” second quarter 2021 investor letter – a copy of which can be downloaded here. A portfolio quarterly return of 1.91% was recorded by the fund for the second quarter of 2021, taking year-to-date (YTD) returns to 13.88% while its benchmark, the Russell 2000 Index, by comparison returned 4.29% and 17.54% over the same periods. You can view the fund’s top 5 holdings to have an idea about their top bets for 2021.
In the Q2 2021 investor letter of Longleaf Partners Small-Cap Fund, the fund mentioned Realogy Holdings Corp. (NYSE: RLGY), and discussed its stance on the firm. Realogy Holdings Corp. is a Madison, New Jersey-based real estate and relocation services company, that currently has a $2.01 billion market capitalization. RLGY delivered a 31.86% return since the beginning of the year, extending its 12-month returns to 68.78%. The stock closed at $17.30 per share on August 06, 2021.
Here is what Longleaf Partners Small-Cap Fund has to say about Realogy Holdings Corp. in its Q2 2021 investor letter:
“Realogy (20%, 1.35%), the residential real-estate brokerage franchisor, was the top contributor after another strong quarter of operating results, solid housing numbers and, most importantly, great management actions to continue to improve the company’s financial strength. The key operating numbers came in the Franchising segment, where revenues and EBITDA (earnings before interest, taxes, depreciation and amortization) both grew over 40% year-over-year (YOY). Management made two very savvy, value-accretive moves in the quarter. Realogy completed its first refranchising transaction in some time. While small (and therefore largely ignored by the market), it was a great sign that this path is possible and getting more likely as the world returns to normal. Later in the quarter, Realogy issued very low-rate convertible debt with an effective strike price over $30 per share. This was unthinkable over a year ago, when it was feared that the company would need to issue straight equity in the single digits. CEO Ryan Schneider and team expertly navigated the company through a difficult period without needing to act out of desperation.”
Based on our calculations, Realogy Holdings Corp. (NYSE: RLGY) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. RLGY was in 22 hedge fund portfolios at the end of the first quarter of 2021, compared to 26 funds in the fourth quarter of 2020. Realogy Holdings Corp. (NYSE: RLGY) delivered a -3.62% 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.