Madison Funds, an independent investment management firm, published its fourth quarter 2020 “Madison Small Cap Fund” investor letter – a copy of which can be downloaded here. A return of 27.61% was recorded by the fund’s Class Y shares in the fourth quarter of 2020, outperforming its Russell 2500 benchmark that had a 27.41% gain, but below its Russell 2000 index that delivered a 31.37% return in the same period. You can view the complete list of the fund’s Average Annual Total Returns and its top 5 holdings to have a peek at their top bets for 2021.
Madison Small Cap Fund, in their Q4 2020 investor letter, mentioned Huntsman Corporation (NYSE: HUN) and emphasized their views on the company. Huntsman Corporation is a Texas, United States-based chemical manufacturing company that currently has a $6.4 billion market capitalization. Since the beginning of the year, HUN delivered a 14.68% return, impressively extending its 12-month gains to 102.46%. As of March 26, 2021, the stock closed at $28.83 per share.
Here is what Madison Small Cap Fund has to say about Huntsman Corporation in their Q4 2020 investor letter:
“We have increased our exposure modestly to several industrial and materials names that we believe should benefit from the reopening of the economy in 2021. One such name is Huntsman Corporation (HUN); a company we have followed for more than 15 years and have never owned before. Huntsman Corporation is a global producer of organic chemicals. The company was founded by well-known businessperson and political figure, Jon Huntsman, in 1970 and has grown through its history into a diversified portfolio of chemical businesses Our interest in Huntsman coincides with the current trough conditions in the global economy due to the Covid-19 recession. The company’s end markets are cyclical and demand for their products is highly price elastic. Additionally, the advanced materials business suffered due to the exposure to the aerospace original equipment manufacturer (OEM) down cycle. Despite these challenges, we believe management has executed well; no surprise, given their track record. We think Earnings before interest, taxes, and amortization (EBITDA) troughed in second quarter and are heartened by the lack of further deterioration in 3Q and 4Q. Looking to the future, we see an intriguing reflation opportunity driven by the resumption of economy activity in late 2021. Further, we posit that the easy monetary policy, that has characterized this cycle, has inflationary side effects which would benefit a basic materials producer such as HUN. The company has also been moving downstream to more value-added businesses, which may drive EBITDA multiple expansion in
Our calculations show that Huntsman Corporation (NYSE: HUN) does not belong in our list of the 30 Most Popular Stocks Among Hedge Funds. As of the end of the fourth quarter of 2020, Huntsman Corporation was in 29 hedge fund portfolios, compared to 24 funds in the third quarter. HUN delivered a 12.93% return in the past 3 months.