Wedgewood Partners, an investment management firm, published its “Focused SMID Cap Strategy” fourth-quarter 2021 investor letter – a copy of which can be downloaded here. As capital markets have dramatically expanded against this competitive backdrop, the fund has extended its philosophy and process in launching the Wedgewood Partners Inc’s Focused SMID Cap Strategy and have managed to generate a 21% compounded return over the past 3 years, which places it in the top 1 percentile relative to the PSN SMID Cap Core Universe. Spare some time to check the fund’s top 5 holdings to have a clue about their top bets for 2022.
Wedgewood Partners’ Focused SMID Cap Strategy, in its Q4 2021 investor letter, mentioned First Republic Bank (NYSE: FRC) and discussed its stance on the firm. First Republic Bank is a San Francisco, California-based investment company with a $37.3 billion market capitalization. FRC delivered a 0.77% return since the beginning of the year, while its 12-month returns are up by 29.05%. The stock closed at $208.09 per share on January 12, 2022.
Here is what Wedgewood Partners’ Focused SMID Cap Strategy has to say about First Republic Bank in its Q4 2021 investor letter:
“As we maintain our market cap investment discipline, our Large Cap Focused portfolio typically carries very few holdings under $20 billion in market cap. However, we believe there is a tremendous opportunity for our focused investment philosophy and process to add value at market caps of $20 billion and below. Wedgewood’s Focused SMID Cap portfolio aims to extend our core competency in focused investing by constructing a portfolio of 25-40 stocks with market cap ranges between $500 million and $20 billion. Further, there is the distinct possibility for the Wedgewood SMID Cap portfolio and Wedgewood Large Cap portfolio to both generate significant value-add in their portfolio overlap. Importantly, the Wedgewood Investment Committee has followed many of the holdings in the Wedgewood SMID Cap portfolio for many years as a byproduct of the team’s analysis and due diligence efforts on the Wedgewood Large Cap portfolio. For example, First Republic Bank was on the potential buy list for Wedgewood Large Cap for many years. First Republic Bank’s initial public offering was in December of 2010 at a market cap that was around $4 billion. The Company spent the next 5 years below $10 billion market cap. In mid-2018, Wedgewood incepted its SMID Cap portfolio with a weighting in First Republic Bank. While it was appropriate for the SMID Cap portfolio at the time, the investment team was still not convinced the Company maintained the characteristics necessary to outperform in large cap. However, by the summer of 2020, First Republic Bank was on the cusp of $20 billion market cap and was also sustaining very attractive growth levels even when compared to tech-laden large cap markets3. Subsequent to adding First Republic Bank to the Wedgewood Large Cap Focused portfolio during the third quarter of 2020, the Company’s market cap has increased to $32 billion as of June 30, 2021. Wedgewood’s unique philosophy and process often uncovers attractive opportunities that can add value for clients across the SMID Cap and large cap market spectrums.”
Our calculations show that First Republic Bank (NYSE: FRC) failed to obtain a mark in our list of the 30 Most Popular Stocks Among Hedge Funds. FRC was in 35 hedge fund portfolios at the end of the third quarter of 2021, compared to 34 funds in the previous quarter. First Republic Bank (NYSE: FRC) delivered a 1.58% return in the past 3 months.
In December 2021, we also shared another hedge fund’s views on FRC in another article. You can find other letters from hedge funds and prominent investors on our hedge fund investor letters 2021 Q4 page.
Disclosure: None. This article is originally published at Insider Monkey.
