Oakmark Funds, an investment management firm, published its “Oakmark Fund” second quarter 2021 investor letter – a copy of which can be seen here. A return of 8.9% was reported by the fund in the Q2 of 2021, outperforming its benchmark by 25 percentage points. You can take a look at the fund’s top 5 holdings to have an idea about their top bets for 2021.
In the Q2 2021 investor letter of Oakmark Funds, the fund mentioned Intercontinental Exchange, Inc. (NYSE: ICE) and discussed its stance on the firm. Intercontinental Exchange, Inc. is an Atlanta, Georgia-based technology company with a $66.1 billion market capitalization. ICE delivered a 1.96% return since the beginning of the year, extending its 12-month returns to 11.36%. The stock closed at $117.55 per share on August 26, 2021.
Here is what Oakmark Funds has to say about ASML Holding N.V. in its Q2 2021 investor letter:
“Intercontinental Exchange is one of the largest and, in our view, most successful financial exchange operators in the world. The company was created through a series of shrewd acquisitions executed by their founder and CEO Jeff Sprecher. Sprecher is one of the more capable CEOs we’ve evaluated, having demonstrated a long history of astute capital allocation and a willingness to act and adapt rapidly to new opportunities and competitive threats. Today, Intercontinental Exchange competes in three primary business segments: exchanges, fixed income/data services and mortgage technology. We believe each of these businesses exhibits attractive economic characteristics and that each should grow earnings well in excess of GDP over the long term. Despite this favorable long-term outlook, the company currently trades at a P/E ratio that is roughly in line with the S&P 500. We believe a business with Intercontinental Exchange’s strong competitive position, excellent management team and attractive growth outlook deserves to trade well above a market multiple. We like buying great businesses at average prices and believe Intercontinental Exchange represents a compelling opportunity to do just that.”
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Based on our calculations, Intercontinental Exchange, Inc. (NYSE: ICE) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. ICE was in 47 hedge fund portfolios at the end of the first half of 2021, compared to 58 funds in the previous quarter. Intercontinental Exchange, Inc. (NYSE: ICE) delivered a 4.14% 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.
