Headwaters Capital, an investment management firm, published its third-quarter 2021 investor letter – a copy of which can be downloaded here. A quarterly portfolio net return of 4.5% was recorded by the fund for the fourth quarter of 2021, underperforming the Russell Mid Cap Index that delivered a +6.4% return for the same period. Spare some time to check the fund’s top 5 holdings to have a clue about their top bets for 2022.
Headwaters Capital, in its Q4 2021 investor letter, mentioned Cerence Inc. (NASDAQ: CRNC) and discussed its stance on the firm. Founded in 1922, Cerence Inc. is a Burlington, Massachusetts-based pure-play automotive software company with a $1.2 billion market capitalization, and is currently spearheaded by its CEO, Stefan Ortmanns. CRNC delivered a -58.83% return since the beginning of the year, while its 12-month returns are down by -71.92%. The stock closed at $31.55 per share on March 11, 2022.
Here is what Headwaters Capital has to say about Cerence Inc. in its Q4 2021 investor letter:
“Buys: Cerence (“CRNC”). See below. Note that this was a small position at the beginning of the year due to concern around auto production issues and the unknown duration of these delays. Share price weakness during Q4 as a result of continued auto production delays provided an opportunity to add to the position.
Cerence (“CRNC”) – The Switzerland Technology Platform Driving Digital Penetration in Autos
Summary Thesis
1) Industry leading voice recognition technology combined with auto OEM integration expertise. Cerence’s software is highly flexible and customizable and owned by each auto OEM, which serves to differentiate Cerence’s technology from big tech competition.
2) Increased voice assistant penetration and cross-selling of new internet connected services drives sustained revenue growth through both volume growth and ARPU uplift.
3) TAM expansion through entrance into adjacent mobility markets provides additional revenue growth optionality.
4) High visibility into future revenue given OEM design wins take multiple years to reach start of production.
5) High margin license business with minimal CAPEX requirements drives strong FCF conversion that is set to inflect higher beginning in FY ‘22…” (Click here to see the full text)
Our calculations show that Cerence Inc. (NASDAQ: CRNC) failed to obtain a mark on our list of the 30 Most Popular Stocks Among Hedge Funds. CRNC was in 21 hedge fund portfolios at the end of the fourth quarter of 2021, compared to 18 funds in the previous quarter. Cerence Inc. (NASDAQ: CRNC) delivered a -58.93% return in the past 3 months.
In August 2021, we also shared another hedge fund’s views on CRNC in another article. You can find other letters from hedge funds and prominent investors on our hedge fund investor letters 2021 Q4 page.
Disclosure: None. This article is originally published at Insider Monkey.
