Miller Value Partners, an investment management firm, published its “Miller Opportunity Equity” third quarter 2021 investor letter – a copy of which can be seen here. A quarterly net decline of 14.2% has been recorded by the fund for the third quarter of 2021, compared to the S&P 500 that rose 0.6% in 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.
Miller Value Partners, in its Q3 2021 investor letter, mentioned Alibaba Group Holding Limited (NYSE: BABA) and discussed its stance on the firm. Alibaba Group Holding Limited is a Hangzhou, China-based e-commerce company with a $446.7 billion market capitalization. BABA delivered a -29.19% return since the beginning of the year, while its 12-month returns are down by -45.06%. The stock closed at $164.79 per share on November 4, 2021.
Here is what Miller Value Partners has to say about Alibaba Group Holding Limited in its Q3 2021 investor letter:
“Alibaba Group Holding Ltd. ADS (BABA) dropped 34.22% during the quarter, along with most Chinese stocks as increased regulatory scrutiny pressured the market. Chinese regulators asked all companies in the industry to stop blocking links from competitors, rumors circulated that Alibaba, and Tencent would be opening up their platforms to one another. During the period, Alibaba reported mixed 1Q Fiscal Year 2022 (FY22) earnings with revenue coming in below expectations due to slower core commerce growth while adjusted earnings before income, taxes, depreciation and amortization (EBITDA) beat. Total revenue of Rmb 205.8B (34% YoY), came in below consensus of Rmb 209.4B with Alibaba Cloud revenue growing 29% YoY to reach Rmb 16.1B. Adjusted EBITDA margin came in at 23.6% versus consensus of 22.5%. The company announced an increase in its share buyback program to $15B from $10B previously while reiterating their original FY22 guidance of revenue of Rmb 930B (30% YoY). Alibaba also announced its plans to invest Rmb 100B by 2025 to support the government’s goal of “Common Prosperity”. Their investments will include tech investments in underdeveloped areas, overseas expansion, agricultural investments, high-quality employment for young adults, and facilitating digital equality between urban and rural areas among others.”
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Based on our calculations, Alibaba Group Holding Limited (NYSE: BABA) ranks 8th in our list of the 30 Most Popular Stocks Among Hedge Funds. BABA was in 146 hedge fund portfolios at the end of the first half of 2021, compared to 135 funds in the previous quarter. Alibaba Group Holding Limited (NYSE: BABA) delivered a -16.09% 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.
