Is Cerence Inc. (CRNC) A Smart Long-Term Buy?

Vulcan Value Partners, an investment management firm, published its “Large Cap, Small Cap, Focus Composite, Focus Plus Composite, and All Cap” fourth quarter 2020 investor letter – a copy of which can be downloaded here. Vulcan’s Large Cap, Small Cap and All Cap strategies beat both their primary and secondary benchmarks, while Focus and Focus Plus trailed their primary benchmarks but beat their secondary benchmarks. You can view the fund’s top 5 holdings to have a peek at their top bets for 2021.

Vulcan Value Partners, in their Q4 2020 investor letter, mentioned Cerence Inc. (NASDAQ: CRNC) and emphasized their views on the company. Cerence Inc. is a Burlington, Massachusetts-based automotive cognitive assistance solutions provider that currently has a $3.2 billion market capitalization. Since the beginning of the year, CRNC delivered a -14.96% return, but its 12-month gains are impressively up by 454.87%. As of March 30, 2021, the stock closed at $85.45 per share.

Here is what Vulcan Value Partners has to say about Cerence Inc. in their Q4 2020 investor letter:

“Cerence Inc. is a premier provider of automotive cognitive assistance solutions using speech recognition and natural language understanding (NLU). It was spun out of Nuance Communications in October of 2019. Nuance launched the first commercial speech recognition software in 1990 and has since led the world in speech recognition technology. In fact, Apple’s Siri was created using this technology. Cerence works with all major automobile manufacturers or their tier one suppliers. Its technology has been installed in nearly a quarter of all automobiles worldwide, and we expect that percentage to grow. Cerence’s virtual assistant can be used for vehicle related functions such as navigation control, safety features, and air conditioning, and it also supports third party virtual assistants such as Siri and Google Assistant. Cerence’s platform strengthens automakers’ brands and provides an optimal experience for drivers and passengers. We expect Cerence’s opportunity set to increase as more automobile brands incorporate its technology and content per vehicle grows.”

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Our calculations show that Cerence Inc. (NASDAQ: CRNC) does not belong in our list of the 30 Most Popular Stocks Among Hedge Funds. As of the end of the fourth quarter of 2020, Cerence Inc. was in 14 hedge fund portfolios, compared to 12 funds in the third quarter. CRNC delivered a -15.00% return in the past 3 months.