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Is it ‘Take Profit’ Time for Limbach Holdings (LMB)?

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  • LMB

1 Main Capital, an investment management firm, published its third-quarter 2021 investor letter – a copy of which can be downloaded here. A quarterly net return of 9.7% was delivered by the fund for the third quarter of 2021, bringing the year-to-date return to 53.9%, compared to its benchmarks, through the first nine months of the year, the S&P 500 (SPX) and Russell 2000 (RTY) Indexes returned 15.9% and 12.4%, respectively. You can take a look at the fund’s top 5 holdings to have an idea about their best picks for 2021.

1 Main Capital, in its Q3 2021 investor letter, mentioned Limbach Holdings, Inc. (NASDAQ: LMB) and discussed its stance on the firm. Limbach Holdings, Inc. is a Pittsburgh, Pennsylvania-based construction engineering company with an $80.6 million market capitalization. LMB delivered a -36.33% return since the beginning of the year, while its 12-month returns are down by -13.83%. The stock closed at $7.85 per share on November 12, 2010.

Here is what 1 Main Capital has to say about Limbach Holdings, Inc. in its Q3 2021 investor letter:

"During the third quarter the Fund exited the last of our investment in LMB almost immediately after the company reported its Q2 results, as management once again delivered guidance which was confusing and nonsensical, while continuing to refuse constructive engagement with various shareholders.

To make matters worse, the company also amended the Change in Control language in management’s incentive plan to include certain changes in board composition, further entrenching its leadership team that was already protected by a staggered board construct. The company subsequently filed a $100 million shelf with the SEC, giving management flexibility to make additional large capital allocation decisions, which should terrify any outsider who has been following the company over the years..." (Click here to see the full text)

top construction companies in USA in 2021
top construction companies in USA in 2021

Based on our calculations, Limbach Holdings, Inc. (NASDAQ: LMB) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. LMB was in 6 hedge fund portfolios at the end of the first half of 2021, compared to 9 funds in the previous quarter. Limbach Holdings, Inc. (NASDAQ: LMB) delivered a -0.38% 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.