Yahoo Finance Is Cerence Inc. (CRNC) A Great Investment Pick?
Vulcan Value Partners, an investment management firm, published its “Large Cap, Small Cap, Focus Composite, Focus Plus Composite, and All Cap Composite” second quarter 2021 investor letter – a copy of which can be downloaded here. Vulcan’s Large Cap Composite Fund delivered a 12.4% net return for the second quarter of 2021, 9.9% for the Small Cap, 14.8% for the Focus Composite Fund, 13.9% return was delivered by the Focus Plus Composite Fund, and 13.6% was gained by the All Cap Composite Fund for the same period. You can view the fund’s top 5 holdings to have a peek at their top bets for 2021.
In the Q2 2021 investor letter of Vulcan Value Partners, the fund mentioned Cerence Inc. (NASDAQ: CRNC), and discussed its stance on the firm. Cerence Inc. is a Burlington, Massachusetts-based software company, that currently has a $4.2 billion market capitalization. CRNC delivered a 12.04% return since the beginning of the year, extending its 12-month returns to 123.68%. The stock closed at $112.58 per share on August 05, 2021.
Here is what Vulcan Value Partners has to say about Cerence Inc. in its Q2 2021 investor letter:
"Cerence Inc. was also a material contributor during the quarter. Cerence is a premier provider of automotive cognitive assistance solutions using speech recognition and natural language understanding (NLU). Approximately two-thirds of new vehicles have voice recognition systems installed. Cerence’s systems make up approximately 80% of the market. With the proliferation of more advanced voice recognition systems, Cerence’s revenues and operating profits have been growing at double-digit rates."
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Based on our calculations, Cerence Inc. (NASDAQ: CRNC) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. CRNC was in 20 hedge fund portfolios at the end of the first quarter of 2021, compared to 14 funds in the fourth quarter of 2020. Cerence Inc. (NASDAQ: CRNC) delivered a 25.90% 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.
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Disclosure: None. This article is originally published at Insider Monkey.
