Miller Value Partners, an investment management firm, published its “Miller Income Strategy” third quarter 2021 investor letter – a copy of which can be seen here. A quarterly return of -2.8% has been recorded by the fund for the third quarter of 2021, versus the 0.9% return of the ICE BofA US High Yield Index for the same period. You can take a look at the fund’s top 5 holdings to have an idea about their best picks for 2021.
Miller Value Partners, in its Q3 2021 investor letter, 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 $742.1 million market capitalization. CHS delivered a 281.13% return since the beginning of the year, while its 12-month returns are up by 377.17%. The stock closed at $6.06 per share on November 4, 2021.
Here is what Miller Value Partners has to say about Chico’s FAS, Inc. in its Q3 2021 investor letter:
“Chico’s FAS (CHS) declined 31.8% during the period despite reporting Q2 revenue of $472M (+54% Y/Y) and EBITDA of $50M, both well ahead of consensus of $407M and $5M, respectively. Gross margin of 38.4% reached the highest level in five years, driven by controlled inventories and lower promotional levels while free cash flow (FCF) of $35M improved from $6.7M Y/Y and $8.9M in 2Q19. Management raised their FY21 outlook, including net sales improvement of 32%-35% (from 28%-34%) and gross margin improvement of 20%-22% (from 18%-20%), implying net sales of $1.75Bn-$1.79Bn (versus consensus of $1.75Bn) and EBITDA of $45M-$98M (versus consensus of $55M). Additionally, Chico’s announced the appointment of Patrick Guido as CFO. Mr. Guido brings over twenty years of retail experience to the management team, including as the CFO of lululemon (LULU) and Treasurer of VF Corporation (VFC).”
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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 3.24% 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.
