Third Avenue Management, an investment management firm, published its “Small-Cap Value Fund” second quarter 2021 investor letter – a copy of which can be downloaded here. A quarterly portfolio return of 1.92% was recorded by the fund for the second quarter of 2021, below the Russell 2000 Value Index that delivered a 4.56% gains 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 Third Avenue Management, the fund mentioned Tidewater Inc. (NYSE: TDW), and discussed its stance on the firm. Tidewater Inc. is a Houston, Texas-based petroleum service company, that currently has a $455.9 million market capitalization. TDW delivered a 28.70% return since the beginning of the year, extending its 12-month returns to 73.48%. The stock closed at $11.12 per share on July 24, 2021.
Here is what Third Avenue Management has to say about Tidewater Inc. in its Q2 2021 investor letter:
“The time-arbitrage/special-situations bucket predominantly comprises energy services company Tidewater. This company is cyclical and currently out of favor, but given its strong financial positions, Fund Management believes they have the luxury of time and capital to invest and grow until the clouds dissipate.”
Based on our calculations, Tidewater Inc. (NYSE: TDW) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. TDW was in 9 hedge fund portfolios at the end of the first quarter of 2021. Tidewater Inc. (NYSE: TDW) delivered a -12.44% 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.