Right Tail Capital, an investment management company, released its fourth-quarter 2023 investor letter. A copy of the same can be downloaded here. In 2023, as well as since its launch in May 2022, the fund’s investments have increased dramatically. In 2023, Right Tail’s portfolio increased by 29% before fees. Net performance for performance fee investors grew ~23.4% while management fee investors grew ~27.4%. The S&P 500 also had a good year in 2023 and increased ~26.2%. Since its inception, the fund’s net performance is 22.5% for performance fee investors, 25.5% for management fee investors, and 21.7% for the S&P 500. In addition, please check the fund’s top five holdings to know its best picks in 2023.
Right Tail Capital featured stocks such as The Charles Schwab Corporation (NYSE:SCHW) in the fourth quarter 2023 investor letter. Headquartered in Westlake, Texas, The Charles Schwab Corporation (NYSE:SCHW) is a savings and loan holding company. On January 10, 2024, The Charles Schwab Corporation (NYSE:SCHW) stock closed at $65.82 per share. One-month return of The Charles Schwab Corporation (NYSE:SCHW) was -7.22%, and its shares lost 21.15% of their value over the last 52 weeks. The Charles Schwab Corporation (NYSE:SCHW) has a market capitalization of $119.962 billion.
Right Tail Capital stated the following regarding The Charles Schwab Corporation (NYSE:SCHW) in its fourth quarter 2023 investor letter:
“Some of Right Tail’s larger investment decisions this year involved moving on from an investment. Charlie would say don’t avoid mistakes because they are inevitable. Instead, focus on repeating what works.
Notably, I sold The Charles Schwab Corporation (NYSE:SCHW) in March. Now that some time has passed, I’ll share how I approached the decision. In March, Charles Schwab stock declined ~25% during the banking challenges that crippled First Republic Bank and Silicon Valley Bank. Schwab has some similarities in that it is a bank (investing idle cash in their customers’ accounts allows them to charge less for other products and services) and had invested in bonds during the low interest rate years that would be worth less if Schwab needed to liquidate today. Also, Schwab clients were leaving less cash in their accounts favoring higher interest alternatives that were a more expensive cost of funds for Schwab. However, Schwab had many positives relative to the troubled banks such as limited uninsured deposits and sticky assets. For example, investment advisors such as Right Tail who custody at Schwab have limited options. It would be a hassle (though quite doable) to switch to a different custodian (and I would absolutely make the change if I thought it was in the best interest of our investors). I carefully considered the pros and cons. Something had changed in that I had always considered Schwab to be a beneficiary of rising interest rates – now the company was rooting for lower rates in the intermediate term. I thought Schwab may have to raise capital to deal with their short-term liquidity challenges (they indirectly raised capital by pausing their stock repurchase program). I also thought regulators may ask more of Schwab as an important institution that no one wants to fail. Positively, I was still rooting for Schwab and thought they’d continue to be a blue chip brokerage firm that would likely keep taking share over time.
Ultimately, I felt my time and energy would be better spent trying to find the next great Right Tail investment than in trying to untangle Schwab. I sold the stock in the mid to high $50s and used the proceeds to add to our existing positions that I felt best about. I estimate that owning Schwab reduced our returns by less than 100 bps since inception and ~250 bps for 2023.”
A corporate finance professional studying a financial performance chart.
The Charles Schwab Corporation (NYSE:SCHW) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 77 hedge fund portfolios held The Charles Schwab Corporation (NYSE:SCHW) at the end of third quarter which was 88 in the previous quarter.
We discussed The Charles Schwab Corporation (NYSE:SCHW) in another article and shared the list of biggest stocks that benefit from high interest rates. In addition, please check out our hedge fund investor letters Q4 2023 page for more investor letters from hedge funds and other leading investors.
Suggested Articles:
- 11 Best Natural Gas Dividend Stocks To Buy
- Analysts on Wall Street Lower Ratings for These 10 Stocks
- Jim Cramer Recommended Selling These 12 Stocks
Disclosure: None. This article is originally published at Insider Monkey.
