Boyar Value Group, an investment management firm, published its first quarter 2021 investor letter – a copy of which can be downloaded here. In its Q1 letter, the fund talked about the speculations that abounds cryptocurrencies, the signs of hope for value-oriented investors, the fund also talked about the interest rates & inflation, and the importance of taking a long-term view. You can view the fund’s top 5 holdings to have a peek at their top bets for 2021.
Boyar Value Group, in its Q1 2021 investor letter, mentioned GameStop Corp. (NYSE: GME), and shared their insights on the company. GameStop Corp. is a Grapevine, Texas-based electronics retail company that currently has a $15.2 billion market capitalization. Since the beginning of the year, GME delivered an impressive 1,069.85% return, massively extending its 12-month gains to 4,897.73%. As of June 22, 2021, the stock closed at $220.40 per share.
Here is what Boyar Value Group has to say about GameStop Corp. in its Q1 2021 investor letter:
“Then the Reddit/WallStreetBets crowd burst on the scene, with nonprofessional investors informally banding together to buy stocks that in many cases were heavily shorted (presumably by hedge funds), causing a “short squeeze” in certain stocks, most notably mall-based video game retailer GameStop. At one point during January, GameStop shares had advanced 1,741% for the year! This short squeeze destroyed some hedge funds and left former star hedge fund manager Gabe Plotkin of Melvin Capital nursing a 53% loss for January, causing him to seek a capital injection from his former boss, Steven Cohen, and Citadel Securities’ Ken Griffin.”
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Our calculations show that GameStop Corp. (NYSE: GME) does not belong in our list of the 30 Most Popular Stocks Among Hedge Funds. As of the end of the first quarter of 2021, GameStop Corp. was in 13 hedge fund portfolios, compared to 27 funds in the fourth quarter of 2020. GME delivered an 83.15% 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.
