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Should You Consider Investing in Conn’s, Inc. (CONN)?

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·3 min read
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  • CONN

Raging Capital Management, an investment management firm, published its third-quarter 2021 investor letter – a copy of which can be downloaded here. The fund has compounded its returns at double-digits annually since its inception in 2006, but it plainly did not deliver the results that it expected for the past few years. Raging Capital struggled to adapt to the recent market environment which heavily favored momentum over value, in addition to making too many mistakes. You can take a look at the fund’s top 5 holdings to have an idea about their best picks for 2021.

Raging Capital Management, in its Q3 2021 investor letter, mentioned Conn's, Inc. (NASDAQ: CONN) and discussed its stance on the firm. Conn's, Inc. is a The Woodlands, Texas-based furniture stores company with a $713.4 million market capitalization. CONN delivered a 107.01% return since the beginning of the year, while its 12-month returns are up by 141.76%. The stock closed at $24.20 per share on November 12, 2010.

Here is what Raging Capital Management has to say about Conn's, Inc. in its Q3 2021 investor letter:

"Conn’s: Anchored by our deep analytic insights into their lending book, we made a living shorting this subprime lender masquerading as a retailer, including profitable trades in 2013, 2014 and 2019. The fact that this parasitic company is still in business speaks to the flaws in the Fed’s easy money policies."


Based on our calculations, Conn's, Inc. (NASDAQ: CONN) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. CONN was in 15 hedge fund portfolios at the end of the first half of 2021, compared to 12 funds in the previous quarter. Conn's, Inc. (NASDAQ: CONN) delivered a 3.29% 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. Recently we came across a high-growth stock that has tons of hidden assets and is trading at an extremely cheap valuation. We go through lists like the 10 best growth stocks to buy 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.