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Here’s Why Carillon Tower Sold its Cricut (CRCT) Stake

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  • CRCT

Carillon Tower Advisers, an investment management firm, published its “Carillon Eagle Small Cap Growth Fund” third quarter 2021 investor letter – a copy of which can be downloaded here. Small-cap stocks experienced a bit of a disappointing quarter as both growth and value indexes saw negative quarterly returns for the first time since the pandemic-led market selloff in the early part of 2020. In a continuation of the recent trend, the Russell 2000® Growth Index (down 5.65%) trailed its Russell 2000® Value Index (down 2.98%) counterpart once again, with this quarter now marking four consecutive quarters of underperformance for growth. You can take a look at the fund’s top 5 holdings to have an idea about their best picks for 2021.

Carillon Tower Advisers, in its Q3 2021 investor letter, mentioned Cricut, Inc. (NASDAQ: CRCT) and discussed its stance on the firm. Cricut, Inc. is a South Jordan, Utah-based home and office supplies products provider with a $6.1 billion market capitalization. CRCT delivered a 12.53% return for the past month and it closed at $27.53 per share on November 8, 2021.

Here is what Carillon Tower Advisers has to say about Cricut, Inc. in its Q3 2021 investor letter:

"Cricut designs and markets a creativity platform that enables users to turn ideas into professional-looking handmade goods by using the firm’s assortment of connected machines, design apps, and accessories and materials. The stock underperformed in the quarter as the company’s forward outlook disappointed investors. While the quarterly results were solid, the firm spoke about seeing more pronounced seasonality trends moving forward as well as some persisting supply chain issues. We sold the stock in the third quarter as we believe shares are currently fully valued."

Office, School, materials
Office, School, materials

Photo by Rachael Gorjestani on Unsplash

Based on our calculations, Cricut, Inc. (NASDAQ: CRCT) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. CRCT was in 13 hedge fund portfolios at the end of the first half of 2021, compared to 12 funds in the previous quarter. Cricut, Inc. (NASDAQ: CRCT) delivered a -16.65% 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.