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 Berry Corporation (NASDAQ: BRY) and discussed its stance on the firm. Berry Corporation is a Bakersfield, California-based upstream energy company with a $784.5 million market capitalization. BRY delivered a 164.91% return since the beginning of the year, while its 12-month returns are up by 210.46%. The stock closed at $9.89 per share on October 21, 2021.
Here is what Heartland Advisors has to say about Berry Corporation in its Q3 2021 investor letter:
“Uncertainty about near-term oil prices sent Energy companies tumbling early in the period, but signs of a rebound took shape late in the quarter. We continue to take a cautious approach in the sector and are placing an emphasis on proven management teams and balance sheet strength. Longtime holding Berry Corporation (BRY) is an example of our thinking.
The company is a seasoned oil and gas producer with a solid balance sheet and a shareholder-friendly management team. Berry boosted its dividend 50% earlier this year and has been actively repurchasing shares during the quarter. Additionally, the company has been using free cash flow to opportunistically retire debt.
We’ve recently been trimming Berry on strength to manage the portfolio’s exposure. However, the moves detailed above, combined with compelling valuations—shares trade at just 4.5X next year’s estimated earnings and 3X EV/EBITDA—make Berry, in our view, an attractive opportunity. Management continues to demonstrate discipline in allocating capital, reining in debt, and focusing on high-margin production. This approach, along with aggressive efforts to return capital to shareholders through share repurchases and increased dividends, should attract additional investor interest.”
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Based on our calculations, Berry Corporation (NASDAQ: BRY) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. BRY was in 16 hedge fund portfolios at the end of the first half of 2021, compared to 13 funds in the previous quarter. Berry Corporation (NASDAQ: BRY) delivered a 73.52% 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.
