GoodHaven Funds, an investment management firm, published its second-quarter 2021 investor letter – a copy of which can be downloaded here. The fund returned 24.95% for the first half of 2021, while its benchmarks, the S&P 500 Index advanced 16.94%, the Wilshire 5000 Total Market Index returned 16.19%, the HFRI Fundamental Growth Index returned 17.61%, the HFRI Fundamental Value Index had a 22.68% gain, and the CS Hedge Fund Index delivered a 10.72% return for the same period. You can take a look at the fund’s top 5 holdings to have an idea about their top bets for 2021.
In the Q2 2021 investor letter of GoodHaven Funds, the fund mentioned Alphabet Inc. (NASDAQ: GOOG) and discussed its stance on the firm. Alphabet Inc. is a Mountain View, California-based multinational conglomerate company with a $1.8 trillion market capitalization. GOOG delivered a 62.83% return since the beginning of the year, while its 12-month returns are up by 94.78%. The stock closed at $2,852.66 per share on September 24, 2021.
Here is what GoodHaven Funds has to say about Alphabet Inc. in its Q2 2021 investor letter:
“Alphabet’s recent results exceeded our expectations. While we focus our efforts analyzing where our companies’ business results will be in a few years (not next quarter), recent Alphabet results have been impressive. In Q1 2021, revenues grew 32% year-over-year (YOY) and operating margins expanded 1,100 basis points YOY. YouTube was a standout growing revenues 50% YOY. Shares outstanding have actually modestly declined lately as well. We remain watchful of regulatory issues and the appointment of Lina Khan at the Federal Trade Commission (“FTC”) may add to regulatory scrutiny.”
Pixabay/Public Domain
Based on our calculations, Alphabet Inc. (NASDAQ: GOOG) ranks 7th in our list of the 30 Most Popular Stocks Among Hedge Funds. GOOG was in 155 hedge fund portfolios at the end of the first half of 2021, compared to 159 funds in the previous quarter. Alphabet Inc. (NASDAQ: GOOG) delivered a 12.47% 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.
