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Is it Still Good to Keep Your Ollie’s Bargain Outlet (OLLI) Position?

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Alger, an investment management firm, published its “Alger Weatherbie Specialized Growth Fund” third quarter 2021 investor letter – a copy of which can be downloaded here. During the third quarter, the largest portfolio sector weightings were Information Technology and Health Care. The largest sector overweight was Financials. The portfolio had no exposure to the Communication Services, Consumer Staples, or Utilities sectors. You can take a look at the fund’s top 5 holdings to have an idea about their best picks for 2021.

Alger, in its Q3 2021 investor letter, mentioned Ollie's Bargain Outlet Holdings, Inc. (NASDAQ: OLLI) and discussed its stance on the firm. Ollie's Bargain Outlet Holdings, Inc. is a Harrisburg, Pennsylvania-based discount store company with a $4.3 billion market capitalization. OLLI delivered a -18.08% return since the beginning of the year, while its 12-month returns are down by -26.64%. The stock closed at $66.99 per share on October 22, 2021.

Here is what Alger has to say about Ollie's Bargain Outlet Holdings, Inc. in its Q3 2021 investor letter:

"Ollie’s Bargain Outlet Holdings Inc. was among the top detractors from performance. Ollie's Bargain Outlet Holdings is a retailer of brand name merchandise such as food, houseware, books and stationery, bed and bath products, floor coverings, electronics and toys. Other products include hardware, personal health care items, candy, clothing, sporting equipment, pet and lawn goods, and garden items. Ollie’s faced a challenging comparison to the second quarter of 2020, when it was one of the traditional brickand-mortar retailers that benefited from the COVID-19 pandemic as food offerings made the company an essential service and the Ollie’s Army brand loyalty program expanded. Ollie'’s posted a negative same store sales comparison for the second quarter of this year as expected, but other factors contributed to the stock’s underperformance, including supply chain disruptions and a tight labor market."

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Based on our calculations, Ollie's Bargain Outlet Holdings, Inc. (NASDAQ: OLLI) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. OLLI was in 21 hedge fund portfolios at the end of the first half of 2021, compared to 24 funds in the previous quarter. Ollie's Bargain Outlet Holdings, Inc. (NASDAQ: OLLI) delivered a -27.62% 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, lithium mining is one of the fastest-growing industries right now, so we are checking out stock pitches like this emerging lithium 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.