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Is Turning Point Brands (TPB) A Worthy Investment to Take?

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Maran Capital Management, an investment management firm, published its second quarter 2021 investor letter – a copy of which can be downloaded here. A quarterly median account return of +24.9% net of fees was recorded by the fund for the second quarter of 2021, bringing year-to-date returns to +53.1%, net. Over the past five years, the partnership has compounded at the annualized rate of +26.2%, net, based on the fund’s standard fee structure. You can view the fund’s top 5 holdings to have an idea about their top bets for 2021.

In the Q2 2021 investor letter of Maran Capital Management, the fund mentioned Turning Point Brands, Inc. (NYSE: TPB), and discussed its stance on the firm. Turning Point Brands, Inc. is a Louisville, Kentucky-based tobacco company, that currently has a $987.4 million market capitalization. TPB delivered a 16.27% return since the beginning of the year, extending its 12-month returns to 57.57%. The stock closed at $51.81 per share on July 29, 2021.

Here is what Maran Capital Management has to say about Turning Point Brands, Inc. in its Q2 2021 investor letter:

"We continue to hold core positions in previously disclosed companies (including) Turning Point Brands (TPB). Turning Point Brands remains cheap given its organic growth profile, low capital intensity, and large collection of small, asymmetric bets in vaping and active ingredients. TPB’s Zig Zag brand is among the most well-positioned brands in the US as cannabis legalization marches forward, jurisdiction by jurisdiction."

Copyright: kophoto / 123RF Stock Photo

Based on our calculations, Turning Point Brands, Inc. (NYSE: TPB) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. TPB was in 25 hedge fund portfolios at the end of the first quarter of 2021, compared to 22 funds in the fourth quarter of 2020. Turning Point Brands, Inc. (NYSE: TPB) delivered a 6.12% 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, pet market is growing at a 7% annual rate and is expected to reach $110 billion in 2021. So, we are checking out the 5 best stocks for animal lovers. We go through lists like the 10 best battery 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.