Horizon Kinetics, an investment management firm, published its third-quarter 2021 investor letter – a copy of which can be downloaded here. In its second-quarter letter, the fund talked about inflation, commodities, crypto mining, and other related topics. You can take a look at the fund’s top 5 holdings to have an idea about their best picks for 2021.
Horizon Kinetics, in its Q3 2021 investor letter, mentioned Cheniere Energy, Inc. (NYSE: LNG) and discussed its stance on the firm. Cheniere Energy, Inc. is a Houston, Texas-based natural gas company with a $26.9 billion market capitalization. LNG delivered a 24.70% return since the beginning of the year, while its 12-month returns are up by 37.44%. The stock closed at $106.24 per share on November 16, 2021.
Here is what Horizon Kinetics has to say about Cheniere Energy, Inc. in its Q3 2021 investor letter:
“Cheniere Energy, from this list, shows our time frame approach in action. The share price is up very substantially from when we initially bought it 2 ½ years ago, and it reaches new all-time highs almost monthly. The stock dropped by 50% early last year, and the entire return occurred this year. You might think, ‘Ok, 3 years, excellent performance, that’s it.’ That’s not why we bought it. We bought a certain business model, a value development pattern on a massive dormant asset, and a valuation discount.
We bought Cheniere because it was exceedingly cheap as it transitioned from a development stage operating company stage, having just turned profitable a year after completing its basic plant construction and selling its first shipload of liquified natural gas (LNG): 2017 loss of $(390) million vs. 2018 earnings of $470 million…” (Click here to see the full text)
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Based on our calculations, Cheniere Energy, Inc. (NYSE: LNG) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. LNG was in 49 hedge fund portfolios at the end of the first half of 2021, compared to 40 funds in the previous quarter. Cheniere Energy, Inc. (NYSE: LNG) delivered a 23.43% 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. Recently we came across a high-growth stock that has tons of hidden assets and is trading at an extremely cheap valuation. We go through lists like the 10 best growth stocks to buy 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.
