Third Avenue Management, an investment management firm, published its “Value Fund” third quarter 2021 investor letter – a copy of which can be downloaded here. A portfolio return of -1.89% was recorded by the fund for the third quarter of 2021, compared to the MSCI World Index, which returned 0.09% 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.
Third Avenue Management, in its Q3 2021 investor letter, mentioned Daimler AG (NYSE: DDAIF) and discussed its stance on the firm. Daimler AG is a Stuttgart, Germany-based automotive manufacturing company with a $107.6 billion market capitalization. DDAIF delivered a 43.20% return since the beginning of the year, while its 12-month returns are up by 80.61%. The stock closed at $100.67 per share on November 2, 2021.
Here is what Third Avenue Management has to say about Daimler AG in its Q3 2021 investor letter:
“Daimler AG (3.1% portfolio weight) – Daimler’s Mercedes-Benz automobile unit is grappling with a very similar set of issues to BMW and is similarly expected to show that high prices for its vehicles outweighed the impact of reduced volumes. Daimler is also extremely well-capitalized and producing unusually high levels of free cash flow as margins are high and inventories have been sold down to levels well below normal. Interestingly, Daimler management has been one of the first to indicate that some of the industry changes experienced recently may be incorporated into normal business practices going forward. Specifically, management suggested that carrying large amounts of inventory to enable very rapid delivery of a new Mercedes to a buyer may have more cost than benefit in terms of leading to higher levels of price discounting when inventories swell and in terms of the working capital consumption of the business. The explicit message was that the company and its peers may work to change their behavior in a way that produces higher prices and higher margins going forward while imposing somewhat longer wait times on customers. We will be looking for confirming data points as/when chip and shipping challenges abate. In the near term however, Daimler shareholders recently approved Daimler’s plan to spin-off its Daimler Truck unit by the end of 2021 and rename the remaining auto business MercedesBenz Group AG. A possible separation of trucks from cars was a component of our original investment thesis and we expect that the spin-off process will continue to surface value.”
Based on our calculations, Daimler AG (NYSE: DDAIF) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. Daimler AG (NYSE: DDAIF) delivered a 12.03% 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.
