SRK Capital: “Tile Shop (TTSH) was a Huge Winner for Us”

SRK Capital, an investment management firm, published its fourth-quarter 2020 Investor Letter – a copy of which can be downloaded here. A net return of 10.9% was recorded by the fund for the Q4 of 2020, below its S&P 500 TR benchmark that delivered a 12.15% return, and its Russell 2000 index that gained 31.40%. You can view the fund’s top 5 holdings to have a peek at their top bets for 2021.

SRK Capital, in their Q4 2020 Investor Letter, said that Tile Shop Holdings, Inc. (NYSE: TTSH) was a great contributor to their results. Tile Shop Holdings, Inc. is a natural stone tiles and maintenance materials manufacturer that currently has a $338.2 million market cap. For the past 3 months, TTSH delivered a decent 51.39% return and settled at $6.54 per share at the closing of February 19th.

Here is what SRK Capital has to say about Tile Shop Holdings, Inc. in their Q4 2020 investor letter:

"The Tile Shop was a huge winner for us during 2020. Our average cost per share is $0.81 and the stock closed out the year at $4.30 per share, a gain of 430%. This was the combination of buying a business that was severely mispriced and being in the right place at the right time with a strong housing market. My initial reasoning for owning shares was that the company had enough liquidity to make it through the year; they were able to crush even my best-case expectations. At the end of 2019, the company had $56.00 Million of net debt on its balance sheet and finished Q3 with $1.96 Million of net cash. Same store sales were down 6.5% during Q3 compared to the previous year; on the surface this number is concerning, but when factoring in the reduced store hours compared to last year the stores had higher sales per day in Q3 2020. The strong housing market and consumers flush with cash should continue to benefit The Tile Shop. A catalyst for the share price in the short term has been the recent emergence of several activist that are urging the company to relist its shares on the Nasdaq, the company has formed a committee to evaluate the potential uplisting. An uplisting could help close the valuation gap between The Tile Shop and its closest competitors, which is significant (TTSH does not deserve a Floor & Decor valuation but potentially half of FNDs valuation is fair)."

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TTSH delivered a massive 230.30% return in the past 12 months. However, our calculations show that Tile Shop Holdings, Inc. (NYSE: TTSH) does not belong in our list of the 30 most popular stocks among hedge funds.

The top 10 stocks among hedge funds returned 216% since the end of 2014 and outperformed the S&P 500 Index ETFs by more than 121 percentage points. We know it sounds unbelievable. You have been dismissing our articles about top hedge fund stocks mostly because you were fed biased information by other media outlets about hedge funds’ poor performance. You could have doubled the size of your nest egg by investing in the top hedge fund stocks instead of dumb S&P 500 ETFs. Here you can watch our video about the top 5 hedge fund stocks right now. All of these stocks had positive returns in 2020.

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