Is Vista Outdoor (VSTO) A Great Investment Choice?

ClearBridge Investments, an investment management firm, published its “Small Cap Value Strategy” second quarter 2021 investor letter – a copy of which can be downloaded here. The ClearBridge Small Cap Value Strategy modestly outperformed the Russell 2000 Value Index, the Strategy’s benchmark, during the second quarter. 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 ClearBridge Investments, the fund mentioned Vista Outdoor Inc. (NYSE: VSTO) and discussed its stance on the firm. Vista Outdoor Inc. is an Anoka, Minnesota-based shooting sports company with a $2.3 billion market capitalization. VSTO delivered a 73.02% return since the beginning of the year, while its 12-month returns are up by 98.70%. The stock closed at $41.11 per share on October 01, 2021.

Here is what ClearBridge Investments has to say about Vista Outdoor Inc. in its Q2 2021 investor letter:

“Our Strategy outperformed with strong results from consumer discretionary stocks like Vista Outdoor. Vista Outdoor, a manufacturer of a wide range of products serving the outdoor sports and recreation markets, also performed well in the period on continued demand and growing margins.”

Based on our calculations, Vista Outdoor Inc. (NYSE: VSTO) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. VSTO was in 24 hedge fund portfolios at the end of the first half of 2021, compared to 22 funds in the previous quarter. Vista Outdoor Inc. (NYSE: VSTO) delivered a -0.36% 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.