Headwaters Capital, an investment management firm, has released its third quarter 2021 letter to investors – a copy of which can be found downloaded here. A quarterly net portfolio return of 2.8% was recorded by the fund for the third quarter of 2021, outperforming the Russell Mid Cap Index which generated a return of -0.9% for the same period. You can check out the top 5 holdings in the fund to get a feel for their top picks for 2021.
Headwaters Capital, in its letter to investors for the third quarter of 2021, mentioned SPS Commerce, Inc. (NASDAQ: SPSC) and discussed his position on the company. SPS Commerce, Inc. is a Minneapolis, Minnesota-based software company with a market capitalization of $ 5.7 billion. SPSC has achieved a return of 46.85% year-to-date, while its 12-month returns are up 85.68%. The stock closed at $ 159.46 per share on October 8, 2021.
Here’s what Headwaters Capital has to say about SPS Commerce, Inc. in its Q3 2021 letter to investors:
“Best contributor: SPS Commerce (SPSC) + 62% SPS Commerce is a supplier of supply chain software called Electronic Data Interchange (EDI) used by mass retail vendors (Costco, Walmart, Bass Pro Shops, etc.). SPSC’s software helps automate and streamline the order fulfillment process for retailers and their suppliers by enabling real-time information exchange between the two parties, resulting in better inventory management and shipping. more efficient (direct or direct delivery to the store). SPSC is benefiting from the omnichannel retail trend where customers expect multiple order fulfillment options (in-store, delivery, online purchase, in-store pickup) and more complex supply chains because both trends require increased collaboration between the retailer and its suppliers. Along with the second quarter results, SPSC raised its long-term revenue forecast, which was welcomed by the market given continued concerns that customers had temporarily switched to SPSC’s software during COVID to enable drop shipping. . In reality, SPSC’s software is a sticky product that streamlines the fulfillment process and will be used more and more throughout the omnichannel retail supply chain. “
Photo by Danial Igdery on Unsplash
Based on our calculations, SPS Commerce, Inc. (NASDAQ: SPSC) was unable to secure a spot in our list of 30 most popular stocks among hedge funds. SPSC was in 20 hedge fund portfolios at the end of the first half of 2021. SPS Commerce, Inc. (NASDAQ: SPSC) has returned 58.24% in the past 3 months.
The reputation of hedge funds as savvy investors has been tarnished over the past decade, as their hedged returns could not keep up with the unhedged returns of stock indices. Our research has shown that small cap hedge fund stock selection managed to beat the market by double digits every year between 1999 and 2016, but the margin for outperformance has shrunk in recent years. Nonetheless, we were still able to identify in advance a select group of hedge funds that have outperformed S&P 500 ETFs by 115 percentage points since March 2017 (see details here). We were also able to identify in advance a select group of hedge funds that underperformed the market by 10 percentage points per year between 2006 and 2017. Interestingly, the margin of underperformance of these stocks has increased in recent years. Investors who are long in the market and short on these stocks would have reported more than 27% per year 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 was originally published on Monkey initiate.