Right Tail Capital, an investment management company, released its third-quarter 2024 investor letter. A copy of the same can be downloaded here. Right Tail aims to generate high after-tax returns and compound wealth over multiple years by investing in a concentrated portfolio of undervalued, high-quality firms and thinking long-term. Also, the firm believes that market declines will bring great opportunities to invest in high-quality businesses with a long-term mindset. In addition, you can check the fund’s top 5 holdings to determine its best picks for 2024.
Right Tail Capital highlighted stocks like Insight Enterprises, Inc. (NASDAQ:NSIT), in the third quarter 2024 investor letter. Insight Enterprises, Inc. (NASDAQ:NSIT) offers information technology, hardware, software, and services. The one-month return of Insight Enterprises, Inc. (NASDAQ:NSIT) was 1.07%, and its shares gained 43.52% of their value over the last 52 weeks. On October 11, 2024, Insight Enterprises, Inc. (NASDAQ:NSIT) stock closed at $214.43 per share with a market capitalization of $6.987 billion.
Right Tail Capital stated the following regarding Insight Enterprises, Inc. (NASDAQ:NSIT) in its Q3 2024 investor letter:
“In the spirit of long-term investing, let’s discuss our investment in technology resellers CDW and Insight Enterprises, Inc. (NASDAQ:NSIT). In 2022, I noticed that peer company NSIT had been purchased by ValueAct. At the time, NSIT had a much more attractive valuation at 10-12x P/E. The company has a history of success but not nearly as much as CDW. I thought if Value Act could have a slightly positive influence on NSIT, the investment returns could be dramatic. I’d watched Value Act influence other distribution businesses like LKQ and also figured they might know something about NSIT, given its long term partnership with former ValueAct holding Microsoft. Our earliest purchases of NSIT have more than doubled and outperformed CDW.
I find these investments particularly compelling now. The companies have struggled to grow the last 2 years after tech spending significantly ramped during Covid. Fundamentals could worsen in a recession though these businesses do not seem to be over-earning today. In a recession, I would also expect these companies to emerge stronger as they have in the past. Another mitigant is that cash flow is typically counter-cyclical as some working capital would unwind. At some point IT spending should grow faster, and these companies will be there to help their customers navigate complex decisions. I would not be surprised to see these investments double over the next five years driven primarily by earnings growth.
With any of our investments, poor capital allocation is one potential reason we could sell our shares. CDW has allocated capital well through its history and NSIT has become more focused on returns which helps mitigate that risk. I also will monitor the value these companies provide to their customers. They seem to be as, if not more, important to their customers and will be mindful of any changes that simplify IT decision-making.”
A professional at a computerscreen, working on a complex hardware solution.
Insight Enterprises, Inc. (NASDAQ:NSIT) is not on our list of 31 Most Popular Stocks Among Hedge Funds. As per our database, 28 hedge fund portfolios held Insight Enterprises, Inc. (NASDAQ:NSIT) at the end of the second quarter which was 26 in the previous quarter. Insight Enterprises, Inc.’s (NASDAQ:NSIT) net revenue was $2.2 billion in the second quarter of 2024, down 8% year-over-year in U.S. dollars and also in constant currency. While we acknowledge the potential of Insight Enterprises, Inc. (NASDAQ:NSIT) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as NVIDIA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
In another article, we discussed Insight Enterprises, Inc. (NASDAQ:NSIT) and shared the list of small-cap stocks Jim Cramer is talking about amid latest market rotation. In addition, please check out our hedge fund investor letters Q3 2024 page for more investor letters from hedge funds and other leading investors.
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Disclosure: None. This article is originally published at Insider Monkey.