Heartland Advisors, an investment management firm, published its “Heartland Value Fund” third-quarter 2021 investor letter – a copy of which can be seen here. The inflating bubble in many asset classes early in the quarter drained oxygen away from value stocks and the Fund was off modestly but kept pace with its benchmark. We believe the setback is temporary and your holdings should be in a stronger position for the long haul than many of the market darlings of today. You can take a look at the fund’s top 5 holdings to have an idea about their best picks for 2021.
Heartland Advisors, in its Q3 2021 investor letter, mentioned Covenant Logistics Group, Inc. (NASDAQ: CVLG) and discussed its stance on the firm. Covenant Logistics Group, Inc. is a Chattanooga, Tennessee-based truckload carrier with a $468.8 million market capitalization. CVLG delivered a 91.59% return since the beginning of the year, while its 12-month returns are up by 63.36%. The stock closed at $27.14 per share on October 21, 2021.
Here is what Heartland Advisors has to say about Covenant Logistics Group, Inc. in its Q3 2021 investor letter:
“As the global economy continues to work through kinks in the supply chain that emerged during the pandemic, commercial trucking companies such as Covenant Logistics Group Inc. (CVLG) should thrive.
Covenant Logistics provides shipping services for both dedicated routes and one-off deliveries. The company has benefited from increased demand in a tight shipping market. Management has also undertaken an aggressive plan to raise profit levels through the sale of its low-margin refrigerated delivery fleet, which should deemphasize its volatile spot in the shipping business.
Although share have appreciated, they remain attractive trading at 8X earnings and 4X enterprise value to earnings before interest, taxes, depreciation and amortization (EV/EBITDA). With shares priced just 70% of our estimates of intrinsic value, we believe investors should be well compensated in the quarters ahead, as the company completes its transformation to a high margin freight hauler.”
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Based on our calculations, Covenant Logistics Group, Inc. (NASDAQ: CVLG) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. CVLG was in 9 hedge fund portfolios at the end of the first half of 2021, compared to 12 funds in the previous quarter. Covenant Logistics Group, Inc. (NASDAQ: CVLG) delivered a 39.85% 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.
