Rocky Mountain Chocolate (RMCF) is Merion Road Capital’s Largest Detractor

Merion Road Capital Management, an investment management firm, published its fourth-quarter 2020 Investor Letter for its ‘MRCM Long Short Small Cap’ and ‘MRCM Long Only Large Cap’– a copy of which can be downloaded here. A return of 11.5% was recorded by its Long Short Small Cap fund for the Q4 of 2020, outperforming its Barclay Hedge Fund index that made a 9% return, but below its Russell 2000 benchmark that delivered 31.3%. Its Long Only Large Cap fund delivered a 21.2% return, above its S&P 500 benchmark that accumulated 12.1%. You can view the fund’s top 5 holdings to have a peek at their top bets for 2021.

Merion Road Capital Management, in their Q4 2020 Investor Letter, said that Rocky Mountain Chocolate Factory, Inc. (NASDAQ: RMCF) was the largest detractor for their ‘Small Cap’ portfolio during the fourth quarter of 2020. Rocky Mountain Chocolate Factory, Inc. is a chocolate global franchisor, confectionary manufacturer, and retail operator that currently has a $38.9 million market cap. For the past 3 months, RMCF delivered a decent 87.72% return and settled at $6.42 per share at the closing of February 11th.

Here is what Merion Road Capital Management has to say about Rocky Mountain Chocolate Factory, Inc. in their Q4 2020 investor letter:

“Our largest detractor was Rocky Mountain Chocolate Factory (“RMCF”) which got caught in the cross-hairs of the pandemic. As I discussed in my Q1 letter, my entry was poorly timed though I continued to hold as I thought that the company possessed enough liquidity to manage through the crisis and that there would be tremendous upside should they make it to the other side. While I still believe the latter to be true, I ended up selling the stock in the back half of the year as I became increasingly concerned about the company’s ability to manage costs and their failure to secure additional financing.

RMCF delivered a -22.74% return in the past 12 months. Our calculations show that Rocky Mountain Chocolate Factory, Inc. (NASDAQ: RMCF) does not belong in our list of the 30 most popular stocks among hedge funds.

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Video: Top 5 Stocks Among Hedge Funds

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