Polen Capital, an investment management firm, published its “Polen Focus Growth” third quarter 2021 investor letter – a copy of which can be downloaded here. A quarterly gross return of 2.78% was delivered by the fund for the third quarter of 2021, outperforming both its Russell 1000 Growth benchmark that delivered a 1.16% return, and the S&P 500 Index that had a 0.59% gain 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.
Polen Capital, in its Q3 2021 investor letter, mentioned Airbnb, Inc. (NASDAQ: ABNB) and discussed its stance on the firm. Airbnb, Inc. is a San Francisco, California-based vacation rental company with a $107.6 billion market capitalization. ABNB delivered a 16.62% return since the beginning of the year and it closed at $169.24 per share on October 25, 2021.
Here is what Polen Capital has to say about Airbnb, Inc. in its Q3 2021 investor letter:
“We believe Airbnb has substantial competitive advantages in a large, fast-growing, and global market. Airbnb acts as a “System of Trust” in the private rental accommodations market, removing a considerable amount of friction so hosts can trust unknown guests and guests can trust unknown hosts/properties.
We believe Airbnb has an attractive growth runway given its unique inventory, powerful platform, and system enhancements that further reduce user friction.
We see Airbnb as well-positioned to benefit from secular growth in travel, the increasingly mainstream nature of private rentals, and as hybrid work/travel can lead to more frequent and longer stays. Unlike traditional online travel agencies like Booking.com and Expedia, Airbnb’s user traffic comes almost entirely directly, which speaks to the brand’s strength. This also means that Airbnb does not need to pay Google or other meta-search engines nearly as much money for generating booking leads, which is a favorable structural business model advantage in our view. We expect the company’s bookings and revenue to compound at a high-teens rate or better over the next five years and margins to expand by thousands of basis points as it scales its fixed costs base, leading to 40%+ earnings per share growth over that period.”
Photo by Karsten Winegeart on Unsplash
Based on our calculations, Airbnb, Inc. (NASDAQ: ABNB) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. ABNB was in 58 hedge fund portfolios at the end of the first half of 2021, compared to 52 funds in the previous quarter. Airbnb, Inc. (NASDAQ: ABNB) delivered a 20.92% 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.
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest-growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage.
Disclosure: None. This article is originally published at Insider Monkey.
