Horizon Kinetics, an investment management firm, published its second quarter 2021 investor letter – a copy of which can be downloaded here. In its second-quarter letter, the fund talked about money supply, and inflation, debt vs GDP, ESG investing, and other related topics. You can view the fund’s top 5 holdings to have an idea about their top bets for 2021.
In the Q2 2021 investor letter of Horizon Kinetics, the fund mentioned Texas Pacific Land Corporation (NYSE: TPL), and discussed its stance on the firm. Texas Pacific Land Corporation is a Dallas, Texas-based land trust, that currently has an $11.3 billion market capitalization. TPL delivered a 100.14% return since the beginning of the year, while its 12-month returns are up by 165.03%. The stock closed at $1,496.20 per share on July 26, 2021.
Here is what Horizon Kinetics has to say about Texas Pacific Land Corporation in its Q2 2021 investor letter:
“Also shown was the highest form of asset-light business, which is a hard-asset company, like Texas Pacific Land Corp; its revenues come directly from the asset itself, as processed by third parties. With no operating expenditures required, they are passive beneficiaries of any increase in the price of the commodity and any increase in production volumes by the third parties that bear the capital investment and operating costs. No other business model can replicate that level of profitability.”
Photo by Scott Blake on Unsplash
Based on our calculations, Texas Pacific Land Corporation (NYSE: TPL) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. TPL was in 17 hedge fund portfolios at the end of the first quarter of 2021, compared to 11 funds in the fourth quarter of 2020. Texas Pacific Land Corporation (NYSE: TPL) delivered a -9.32% 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.
