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ClearBridge on TJX Companies: “We Believe Long-Term Fundamentals Remain Robust”

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ClearBridge Investments, an investment management firm, published its “Large Cap Value Strategy” second quarter 2021 investor letter – a copy of which can be downloaded here. The ClearBridge Large Cap Value Strategy outperformed its Russell 1000 Value Index benchmark during the second quarter. On an absolute basis, the Strategy had gains in nine of 11 sectors in which it was invested for the quarter. The strongest contributions came from the financials, industrials, communication services and information technology (IT) sectors. The utilities and consumer discretionary sectors were detractors. You can view the fund’s top 5 holdings to have a peek at their top bets for 2021.

In the Q2 2021 investor letter of ClearBridge Investments, the fund mentioned The TJX Companies, Inc. (NYSE: TJX), and discussed its stance on the firm. The TJX Companies, Inc. is a Framingham, Massachusetts-based department store company, that currently has an $81.9 billion market capitalization. TJX delivered a -0.48% return since the beginning of the year, while its 12-month revenues are up by 28.45%. The stock closed at $68.07 per share on July 15, 2021.

Here is what ClearBridge Investments has to say about The TJX Companies, Inc. in its Q2 2021 investor letter:

"The moderation of the recovery trade meant a pause in shares of some companies that saw early gains following positive vaccine announcements in November. Leading off-price retailer TJX has proved resilient through the pandemic, benefiting from customer appetites for bargain hunting. Here too investors took some profits in the second quarter amid near-term concerns that wage inflation would weigh on gross margins, though we believe long-term fundamentals remain robust and increased our position during the quarter."

Department Store, Store
Department Store, Store

Photo by Carl Raw on Unsplash

Based on our calculations, The TJX Companies, Inc. (NYSE: TJX) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. The TJX Companies, Inc. was in 63 hedge fund portfolios at the end of the first quarter of 2021, compared to 68 funds in the fourth quarter of 2020. TJX delivered a -2.85% 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, pet market is growing at a 7% annual rate and is expected to reach $110 billion in 2021. So, we are checking out the 5 best stocks for animal lovers. We go through lists like the 10 best battery 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.