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Ariel Investments Stays Optimistic to U.S. Silica (SLCA)

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Jose Karlo Mari Tottoc
·3 min read
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Ariel Investments, a minority-owned investment company that focuses in small and mid-capitalized US based stocks, published its third-quarter 2020 Investor Letter – a copy of which can be downloaded here. A positive return of 4.56% was recorded by the fund for the 3rd Quarter of 2020, ahead of its Russell 2500 Value benchmark that returned 3.54%. You can view the fund’s top 10 holdings to have a peek at their top bets for 2021.

Ariel Investments in their Q3 2020 Investor Letter said that they were able to distinguish a value in U.S. Silica Holdings, Inc. (NYSE: SLCA) and initiated a position in the company. U.S. Silica Holdings, Inc. is a producer and supplier of sand proppants along with silica that currently has a $726.189 million market cap. For the past 3 months, SLCA delivered a massive 236.30% return and settled at $9.82 per share at the closing of January 14th.

Here is what Ariel Investments has to say about U.S. Silica Holdings, Inc. in their Investor Letter:

"U.S. Silica Holdings, Inc. (NYSE: SLCA) also weighed on returns over the trailing one year period. Weakened demand across the energy patch, including markets in West Texas drove an oversupply of sand resulting in pricing pressure and margin degradation. While a key component of our investment thesis in SLCA continues to be driven by its Industrial segment, we underestimated the impact that weakness in oil and gas could have on the cost structure of the Industrial business. Looking ahead, SLCA remains in a solid position from a liquidity perspective. They do not have any maturities due until 2025, and the balance sheet and cash on hand remain sound."

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Last December 2020, we published an article telling that U.S. Silica Holdings, Inc. (NYSE: SLCA) was in 16 hedge funds’ portfolio. U.S. Silica Holdings, Inc. proved its worth by delivering a 73.50% return YTD.

As of September 2020, Ariel Investments had an 8.7 million share position in SLCA that amounted to $26 million. This made Ariel Investments as the top hedge fund that holds most of SLCA’s stake, followed by Renaissance Technologies with $15 million worth of SLCA shares, and D.E. Shaw with $4 million. However, our calculations showed that U.S. Silica Holdings, Inc. (NYSE: SLCA) does not belong to the 30 most popular stocks among hedge funds.

The top 10 stocks among hedge funds returned 216% since the end of 2014 and outperformed the S&P 500 Index ETFs by more than 121 percentage points. We know it sounds unbelievable. You have been dismissing our articles about top hedge fund stocks mostly because you were fed biased information by other media outlets about hedge funds’ poor performance. You could have doubled the size of your nest egg by investing in the top hedge fund stocks instead of dumb S&P 500 ETFs. Below you can watch our video about the top 5 hedge fund stocks right now. All of these stocks had positive returns in 2020.

Video: Top 5 Stocks Among Hedge Funds

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website.

Disclosure: None. This article is originally published at Insider Monkey.