Steel City Capital: “Liberated Syndication (LSYN) Remains in Purgatory”

·3 min read

Steel City Capital, an investment management firm, published its third-quarter 2021 investor letter – a copy of which can be downloaded here. A quarterly portfolio net return of 0.4% was recorded by the fund for the third quarter of 2021. Year-to-date, the Partnership gained 10.7%, net. You can take a look at the fund’s top 5 holdings to have an idea about their best picks for 2021.

Steel City Capital, in its Q3 2021 investor letter, mentioned Liberated Syndication Inc. (NYSE: LSYN) and discussed its stance on the firm. Liberated Syndication Inc. is a Pittsburgh, Pennsylvania-based IT service management company with a $93 million market capitalization. LSYN delivered a -35.66% return since the beginning of the year, while its 12-month returns are down by -5.41%. The stock closed at $3.2250 per share on October 25, 2021.

Here is what Steel City Capital has to say about Liberated Syndication Inc. in its Q3 2021 investor letter:

"Liberated Syndication (LSYN) remains in purgatory (some would argue worse), with volatility ramping up due to trading restrictions that went into effect in late September. Investors are continuing to fly blind with financials expected no earlier than December 1, 2021, although I think it’s more likely the issue drags meaningfully into 2022 before shares regain compliance and are re-listed. On a positive note, the company finally hired a CFO to accelerate the restatement process, although I have no idea if the Board is any closer to bringing a CEO on board."

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Software

Based on our calculations, Liberated Syndication Inc. (NYSE: LSYN) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. Liberated Syndication Inc. (NYSE: LSYN) delivered a 6.06% 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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