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Curreen Capital on Kontoor (KTB): “We Sold Our Position Despite Positive Operating Results”

·3 min read

Curreen Capital, an investment management firm, published its third-quarter 2021 investor letter – a copy of which can be downloaded here. A quarterly portfolio net return of -5.15% was recorded by the fund for the third quarter of 2021, trailing the S&P 500 and MSCI Word Index which had a 0.58% and 0.06% gain respectively for the same period. You can take a look at the fund’s top 5 holdings to have an idea about their best picks for 2021.

Curreen Capital, in its Q3 2021 investor letter, mentioned Kontoor Brands, Inc. (NYSE: KTB) and discussed its stance on the firm. Kontoor Brands, Inc. is a Greensboro, North Carolina-based clothing company with a $2.8 billion market capitalization. KTB delivered a 21.75% return since the beginning of the year, while its 12-month returns are up by 61.90%. The stock closed at $50.22 per share on October 18, 2021.

Here is what Curreen Capital has to say about Kontoor Brands, Inc. in its Q3 2021 investor letter:

"With Kontoor, we sold our position despite positive operating results. I do not want to cut the flowers, but with a slow-growing business like Kontoor, even excellent operating momentum can be relatively unattractively priced. When I wanted to buy Jackson in September, Kontoor appeared to be our least attractive investment. It is an excellent and well managed business, but the upside-to-downside was not as attractive as Jackson’s. We received $54.88/share."

Based on our calculations, Kontoor Brands, Inc. (NYSE: KTB) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. KTB was in 23 hedge fund portfolios at the end of the first half of 2021, compared to 16 funds in the previous quarter. Kontoor Brands, Inc. (NYSE: KTB) delivered a -10.85% 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, we like undervalued, EBITDA-positive growth stocks, so we are checking out stock pitches like this biotech 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.