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Bernzott Capital’s Top Q2 Detractor: Quotient Technology (QUOT)

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Bernzott Capital Advisors, an investment management firm, published its “US Small Cap Value Fund” second-quarter 2021 investor letter – a copy of which can be downloaded here. The fund recorded a quarterly portfolio return of +1.5% for the second quarter of 2021, compared to its benchmarks, the R200V Index that was up by 4.29%, and the R2500V Index which gained 5.0% 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 Bernzott Capital, the fund mentioned Quotient Technology Inc. (NYSE: QUOT) and discussed its stance on the firm. Quotient Technology Inc. is a California, United States-based coupon company with a $660.2 million market capitalization. QUOT delivered a -25.64% return since the beginning of the year, while its 12-month returns are down by -22.60%. The stock closed at $7.01 per share on August 20, 2021.

Here is what Bernzott Capital has to say about Quotient Technology Inc. in its Q2 2021 investor letter:

"Quotient Technology (QUOT): The company's strong earnings report in May together with conservative full-year guidance implied a disappointing 2H. The stock reacted negatively as the market seemed to take a glass-half-empty interpretation, possibly due in part to the stock's strong performance in the beginning of this year after being a top contributor to the portfolio's results in 1Q. The shift to digital promotions and couponing should prove durable, benefiting the company for several years into the future."

Most Profitable Industries in the World in 2021
Most Profitable Industries in the World in 2021

Photo by Campaign Creators on Unsplash

Based on our calculations, Quotient Technology Inc. (NYSE: QUOT) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. QUOT was in 24 hedge fund portfolios at the end of the first half of 2021, compared to 25 funds in the previous quarter. Quotient Technology Inc. (NYSE: QUOT) delivered a -36.20% 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.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest-growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 homepage.

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