Vulcan Value Partners, an investment management firm, published its second-quarter 2022 investor letter – a copy of which can be downloaded here. All five of the fund’s strategies trailed their respective benchmarks during the quarter. The good news is that across its portfolios most of its companies are performing well fundamentally. Go over the fund’s top 5 positions to have a glimpse of its finest picks for 2022.
In its Q2 2022 investor letter, Vulcan Value Partners mentioned Upstart Holdings Inc. (NASDAQ:UPST) and explained its insights for the company. Founded in 2012, Upstart Holdings Inc. (NASDAQ:UPST) is a San Mateo, California,-based consumer lending company with a $2.0 billion market capitalization. Upstart Holdings Inc. (NASDAQ:UPST) delivered a -83.34% return since the beginning of the year, while its 12-month returns are down by -88.70%. The stock closed at $25.21 per share on August 26, 2022.
Here is what Vulcan Value Partners has to say about Upstart Holdings Inc. (NASDAQ:UPST) in its Q2 2022 investor letter:
“Upstart Holdings Inc. was a material detractor for the quarter. It was a mistake, and we sold our position. Upstart is an artificial intelligence (AI) and cloud-based lending platform. The company uses AI models that are designed to underwrite superior loans with lower interest rates, lower default rates, higher approval rates, and increased underwriting automation. When we purchased Upstart, we believed the company had an excellent product and the addressable market was large.
Upstart’s results during 2021 were impressive. In the first quarter of 2022, the company reported solid results but lowered guidance and, more importantly, used its balance sheet to warehouse loans temporarily. The company’s decision to use its balance sheet to finance its growth surprised us and other market participants, and its stock price decreased dramatically. While we admire the management team, we are less confident in the company’s long-term prospects.
It will be more difficult than we anticipated for Upstart to extend its competitive advantages with smaller banks into adjacent markets such as auto loans and mortgages. As a result, our value for Upstart is unstable and the company no longer qualifies for investment. We are following our discipline and reallocating capital into companies with more stable values.”
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Our calculations show that Upstart Holdings Inc. (NASDAQ:UPST) fell short and didn’t make it on our list of the 30 Most Popular Stocks Among Hedge Funds. Upstart Holdings Inc. (NASDAQ:UPST) was in 15 hedge fund portfolios at the end of the second quarter of 2022, compared to 25 funds in the previous quarter. Upstart Holdings Inc. (NASDAQ:UPST) delivered a -49.91% return in the past 3 months.
In May 2022, we also shared another hedge fund’s views on Upstart Holdings Inc. (NASDAQ:UPST) in another article. You can find other investor letters from hedge funds and prominent investors on our hedge fund investor letters 2022 Q2 page.
Disclosure: None. This article is originally published at Insider Monkey.
