Is Whole Earth Brands (FREE) Still A Great Investment Choice?

Richie Capital Group, an investment management firm, published its third-quarter 2021 investor letter – a copy of which can be downloaded here.  A quarterly portfolio net return of -5.0% was recorded by the RCG Long Only strategy for the third quarter of 2021, while the RCG Long Short Fund lost -5.3%. The fund’s closest benchmarks, the Russell 3000 Index and the Equity Long-Short Index returned -0.1% and -0.2% respectively 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.

Richie Capital Group, in its Q3 2021 investor letter, mentioned Whole Earth Brands, Inc. (NASDAQ: FREE) and discussed its stance on the firm. Whole Earth Brands, Inc. is a Chicago, Illinois-based global food company with a $461.4 million market capitalization. FREE delivered a 9.27% return since the beginning of the year, while its 12-month returns are up by 44.01%. The stock closed at $11.91 per share on October 13, 2021.

Here is what Richie Capital Group has to say about Whole Earth Brands, Inc. in its Q3 2021 investor letter:

Whole Earth Brands (FREE – down 20.14%) – The manufacturer of “better for you” sweeteners reported a solid Q2 in August. The company beat on earnings and revenue but reported softer margins within their Wholesome private label business. Of more concern, at the end of September, FREE announced the unexpected departure of their CFO, Andy Rusie. Typically, such an announcement could portend any number of problems within Whole Earth Brands. However, I spoke with the company shortly after the announcement to get additional color on the departure. The situation was very black and white. Mr. Rusie was presented with a unique business opportunity by a close personal friend. There were no internal disagreements or concerns about the future of FREE. Mr. Rusie is leaving the company in a very good position: the most recent acquisitions have been closed and fully integrated, and the company is now focused on the next phase of acquisitions and consolidation. It was an unfortunate development, but Whole Earth Brands is now in a position to potentially attract and hire an even more seasoned CFO to lead the company through the next phase of growth.”

Diet, Food, Vegetable

Photo by Brooke Lark on Unsplash

Based on our calculations, Whole Earth Brands, Inc. (NASDAQ: FREE) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. FREE was in 18 hedge fund portfolios at the end of the first half of 2021, compared to 25 funds in the previous quarter. Whole Earth Brands, Inc. (NASDAQ: FREE) delivered a -8.94% 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.