Miller Value Partners, an investment management firm, published its “Miller Income Fund” second quarter 2021 investor letter – a copy of which can be downloaded here. A quarterly return of 10.21% was recorded by Miller Income Fund’s I-shares for the Q2 of 2021, beating its benchmark, the ICE BofA US High Yield Index, which had a 2.77% gain 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 Miller Value Partners, the fund mentioned Chico’s FAS, Inc. (NYSE: CHS) and discussed its stance on the firm. Chico’s FAS, Inc. is a Fort Myers, Florida-based clothing retail company with a $583.5 million market capitalization. CHS delivered a 200.94% return since the beginning of the year, while its 12-month returns are up by 373.76%. The stock closed at $4.71 per share on September 21, 2021.
Here is what Miller Value Partners has to say about Chico’s FAS, Inc. in its Q2 2021 investor letter:
“Chico’s FAS (CHS) was the top contributor over the quarter, advancing 98.8% in conjunction with the vaccine rollout accelerating apparel demand and strong Q1 results. Chico’s reported Q1 net sales of $388M, +37% above consensus and +38.4% year-over-year (Y/Y) driven by +65% growth at Soma and a +13.4% rise in digital. Gross margin rose to 32.7% on improved leverage of occupancy costs and leaner inventory driving significantly higher full-price selling. For Fiscal Year 2021 (FY21), management expects consolidated net sales improvement of 28%-34%, gross margin improvement of 18-20 percentage points, and Selling, General & Administrative expense (SG&A) rate improvement of 500-600 basis points (bps). Guidance at the midpoint implies revenue of $1.73Bn and gross margins of 32.9%, +7% and +180bps above consensus, respectively. Additionally, activist shareholder Barrington Capital issued a letter to the company, calling for a Board refresh and expanding the scope of financial disclosure in an attempt to unlock value of the rapidly growing Soma brand.”
Photo by Keagan Henman on Unsplash
Based on our calculations, Chico’s FAS, Inc. (NYSE: CHS) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. CHS was in 22 hedge fund portfolios at the end of the first half of 2021, compared to 15 funds in the previous quarter. Chico’s FAS, Inc. (NYSE: CHS) delivered a -19.33% 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.
