Third Avenue Management, an investment management firm, published its “Small-Cap Value Fund” second quarter 2021 investor letter – a copy of which can be downloaded here. A quarterly portfolio return of 1.92% was recorded by the fund for the second quarter of 2021, below the Russell 2000 Value Index that delivered a 4.56% gains for the same period. You can view the fund’s top 5 holdings to have an idea about their top bets for 2021.
In the Q2 2021 investor letter of Third Avenue Management, the fund mentioned MYR Group Inc. (NASDAQ: MYRG), and discussed its stance on the firm. MYR Group Inc. is a Rolling Meadows, Illinois-based construction engineering company, that currently has a $1.5 billion market capitalization. MYRG delivered a 55.79% return since the beginning of the year, extending its 12-month returns to 194.62%. The stock closed at $92.53 per share on July 21, 2021.
Here is what Third Avenue Management has to say about MYR Group Inc. in its Q2 2021 investor letter:
“The Fund’s compounder bucket includes companies such as MYR Group (engineering and construction). We believe balance sheet strength and prudent capital allocation should allow these companies to compound NAV for many years to come. Financial services companies are roughly one third of the compounder category and are largely comprised of well-capitalized regional banks which make up 21% of the portfolio.”
Based on our calculations, MYR Group Inc. (NASDAQ: MYRG) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. MYRG was in 14 hedge fund portfolios at the end of the first quarter of 2021, compared to 11 funds in the fourth quarter of 2020. MYR Group Inc. (NASDAQ: MYRG) delivered a 31.97% 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.