Tao Value, an investment management firm, published its third-quarter 2021 investor letter – a copy of which can be downloaded here. A return of -7.53% was delivered by the fund for the Q3 of 2021, compared to its benchmark, the MSCI All Country World Index that delivered a -1.26% return for the same period. You can take a look at the fund’s top 5 holdings to have an idea about their best picks for 2021.
Tao Value, in its Q3 2021 investor letter, mentioned KE Holdings Inc. (NYSE: BEKE) and discussed its stance on the firm. KE Holdings Inc. is a China-based holding company with a $23.2 billion market capitalization. BEKE delivered a -68.33% return since the beginning of the year, while its 12-month returns are down by -72.09%. The stock closed at $18.22 per share on October 29, 2021.
Here is what Tao Value has to say about KE Holdings Inc. in its Q3 2021 investor letter:
“As witnessed in the past quarter, the government intervention in Chinese private sector is elevated to an unprecedented level. Given this background, I thoroughly reviewed all our Chinese holdings and made a few changes. We exited KE holdings (ticker: BEKE), for high potential regulatory risk and the passing of the visionary founder & CEO Zuo Hui (who was a core tenet of our original thesis).”
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Based on our calculations, KE Holdings Inc. (NYSE: BEKE) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. BEKE was in 31 hedge fund portfolios at the end of the first half of 2021, compared to 33 funds in the previous quarter. KE Holdings Inc. (NYSE: BEKE) delivered a -12.93% 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.
