Baron Funds, an asset management firm, published its “Baron Real Estate Fund” third quarter 2021 investor letter – a copy of which can be downloaded here. A modest decline of 1.66% was delivered by the fund’s institutional shares for the third quarter of 2021, marginally underperforming its primary benchmark index, the MSCI USA IMI Extended Real Estate Index (the “MSCI Real Estate Index”), and the MSCI US REIT Index (the “REIT Index”), which increased 0.10% and 0.75%, respectively. You can take a look at the fund’s top 5 holdings to have an idea about their best picks for 2021.
Baron Funds, in its Q3 2021 investor letter, mentioned Red Rock Resorts, Inc. (NASDAQ: RRR) and discussed its stance on the firm. Red Rock Resorts, Inc. is a Las Vegas, Nevada-based gaming, development, and management company with a $3.7 billion market capitalization. RRR delivered a 114.46% return since the beginning of the year, while its 12-month returns are up by 169.71%. The stock closed at $53.70 per share on November 2, 2021.
Here is what Baron Funds has to say about Red Rock Resorts, Inc. in its Q3 2021 investor letter:
“The shares of Red Rock Resorts, Inc., a real estate gaming, development, and management company that generates 100% of its cash flow in the Las Vegas Locals market continued to perform well in the most recent quarter. We remain optimistic about the long-term prospects for the company given the quality of its 100% owned real estate assets, the attractive and expanding Las Vegas Locals market (strong population growth), and the company’s impressive growth and free cash flow prospects. We believe the shares could appreciate by approximately 50% in the next few years.”
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Based on our calculations, Red Rock Resorts, Inc. (NASDAQ: RRR) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. RRR was in 26 hedge fund portfolios at the end of the first half of 2021, compared to 28 funds in the previous quarter Red Rock Resorts, Inc. (NASDAQ: RRR) delivered a 35.88% 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.
