Here’s why you should invest in Covenant Logistics Group (CVLG)
Heartland Advisors, an investment management firm, released its third quarter 2021 “Heartland Value Fund” letter to investors – a copy of which can be viewed here. Bubble inflation across many asset classes at the start of the quarter drained the oxygen from value stocks and the Fund edged down but kept pace with its benchmark. We believe the pullback is temporary and that your holdings should be in a stronger position over the long term than many of the darlings in today’s market. You can check out the top 5 holdings in the fund to get a feel for their top picks for 2021.
Heartland Advisors, in its letter to investors for the third quarter of 2021, mentioned Covenant Logistics Group, Inc. (NASDAQ: CVLG) and discussed his position on the company. Covenant Logistics Group, Inc. is a Chattanooga, Tennessee-based truck carrier with a market capitalization of $ 468.8 million. CVLG has achieved a 91.59% year-to-date return, while its 12-month returns are up 63.36%. The stock closed at $ 27.14 per share on October 21, 2021.
Here’s what Heartland Advisors has to say about Covenant Logistics Group, Inc. in its Q3 2021 letter to investors:
“As the global economy continues to operate through supply chain issues that emerged during the pandemic, commercial trucking companies such as Covenant Logistics Group Inc. (CVLG) should prosper.
Covenant Logistics provides shipping services for dedicated routes and on-time deliveries. The company benefited from increased demand in a tight maritime market. Management has also embarked on an aggressive plan to increase profit levels through the sale of its low-margin refrigerated delivery fleet, which should mitigate its volatile position in the shipping industry.
Although stocks have appreciated, they remain attractive and trade at 8 times earnings and 4 times enterprise value relative to earnings before interest, taxes, depreciation and amortization (EV / EBITDA). With stocks listed at just 70% of our intrinsic value estimates, we believe investors should be well paid in the coming quarters as the company completes its transformation into a high margin freight carrier. “
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Based on our calculations, Covenant Logistics Group, Inc. (NASDAQ: CVLG) failed to land a spot on our list of the 30 most popular stocks among hedge funds. CVLG was in 9 hedge fund portfolios at the end of the first half of 2021, compared to 12 funds in the previous quarter. Covenant Logistics Group, Inc. (NASDAQ: CVLG) generated a return of 39.85% over the past 3 months.
The reputation of hedge funds as savvy investors has been tarnished over the past decade, as their hedged returns could not keep up with the unhedged returns of stock indices. Our research has shown that small cap hedge fund stock selection managed to beat the market by double digits every year between 1999 and 2016, but the margin for outperformance has shrunk in recent years. Nonetheless, we were still able to identify in advance a select group of hedge funds that have outperformed S&P 500 ETFs by 115 percentage points since March 2017 (see details here). We were also able to identify in advance a select group of hedge funds that underperformed the market by 10 percentage points per year between 2006 and 2017. Interestingly, the margin of underperformance of these stocks has increased in recent years. Investors who are long in the market and short on these stocks would have reported more than 27% per year between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
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Disclosure: none. This article originally appeared on Insider Monkey.