Is American Outdoor Brands (AOUT) A Smart Long-Term Buy?

Wasatch Global Investors, an investment management firm, published its “Wasatch Micro Cap Value Fund” second quarter 2021 investor letter – a copy of which can be downloaded here. A quarterly return of 8.78% was recorded by the fund’s investor class for the Q2 of 2021, outperforming the benchmark, Russell Microcap® Index, which returned 4.14% for the same period. 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 Wasatch Global Investors, the fund mentioned American Outdoor Brands, Inc. (NASDAQ: AOUT) and discussed its stance on the firm. American Outdoor Brands, Inc. is a Columbia, Missouri-based outdoor sports and recreation products manufacturer with a $366.5 million market capitalization. AOUT delivered a 52.61% return since the beginning of the year, while its 12-month returns are up by 86.44%. The stock closed at $25.99 per share on September 17, 2021.

Here is what Wasatch Global Investors has to say about American Outdoor Brands, Inc. in its Q2 2021 investor letter:

“Another significant contributor was American Outdoor Brands, Inc. (AOUT), which makes and distributes outdoor sports and recreational products, electro-optics and accessories. Covid-related limits on indoor activities encouraged people to spend more time enjoying the outdoors. And we’ve seen this trend continue, which obviously benefits the company. As we look ahead, we still like American Outdoor Brands because its market position is strong and its stock is relatively inexpensive in our view.”

Outdoor

Based on our calculations, American Outdoor Brands, Inc. (NASDAQ: AOUT) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. AOUT was in 16 hedge fund portfolios at the end of the first half of 2021. American Outdoor Brands, Inc. (NASDAQ: AOUT) delivered a -19.66% 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.