Stewart Asset Management LLC, an investment management firm, published its second quarter 2021 investor letter – a copy of which can be seen here. A quarterly portfolio net return of 13.07% was recorded by the fund for the second quarter of 2021, outperforming its S&P 500 benchmark that delivered an 8.55% return 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 Stewart Asset Management, the fund mentioned Domino’s Pizza, Inc. (NYSE: DPZ), and discussed its stance on the firm. Domino’s Pizza, Inc. is an Ann Arbor, Michigan-based pizza restaurant chain, that currently has an $18.5 billion market capitalization. DPZ delivered a 24.54% return since the beginning of the year, while its 12-month revenues are up by 19.90%. The stock closed at $477.56 per share on July 09, 2021.
Here is what Stewart Asset Management has to say about Domino’s Pizza, Inc. in its Q2 2021 investor letter:
“We should point out, however, that some of our holdings do have exposure to higher costs. Domino’s Pizza is a clear example. It is exposed to both the volatile cost of milk and higher employment costs for both its store employees and those employed in its delivery system. In response to higher costs, the company has begun charging more for its industry-leading delivery service. Despite this, its volumes continue to grow at double-digit rates. Moreover, Domino’s has not raised food prices in the face of rising input costs, yet has managed to increase its operating margin.”
Based on our calculations, Domino’s Pizza, Inc. (NYSE: DPZ) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. Domino’s Pizza, Inc. was in 29 hedge fund portfolios at the end of the first quarter of 2021, compared to 37 funds in the fourth quarter of 2020. DPZ delivered a 22.34% 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.