Third Avenue Management, an investment management firm, published its “Real Estate Value Fund” third quarter 2021 investor letter – a copy of which can be downloaded here. Through the first nine months of the calendar year, the Fund generated a return of +17.02% (after fees) versus +15.26% (before fees) for the Fund’s most relevant benchmark, the FTSE EPRA NAREIT Developed Index. 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 Lennar Corporation (NYSE: LEN) and discussed its stance on the firm. Lennar Corporation is a Miami, Florida-based home construction company with a $31.6 billion market capitalization. LEN delivered a 77.70% return since the beginning of the year, while its 12-month returns are down by 120.27%. The stock closed at $104.29 per share on November 5, 2021.
Here is what Third Avenue Management has to say about Lennar Corporation in its Q3 2021 investor letter:
“In addition to these changes, the Fund also exited its position in the Class A shares of Lennar Corp. (the leading home-builder in North America by revenues) while retaining its much-more significant investment in the company’s Class B shares (which trade at more than a 15% discount to the A shares despite equal economics). Fund Management anticipates that Lennar will further outline its plans to split-off its ancillary businesses and other strategic investments in the months ahead. Estimated to include $5 to $6 billion of assets at book value (implying $16-19 per Lennar share), such a development would mark a significant transformation for this long-time holding.”
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Based on our calculations, Lennar Corporation (NYSE: LEN) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. LEN was in 50 hedge fund portfolios at the end of the first half of 2021, compared to 49 funds in the previous quarter. Lennar Corporation (NYSE: LEN) delivered a 1.05% 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.
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. Lithium prices have more than doubled over the past year, so we are checking out this emerging lithium stock. We go through lists like the 10 best growth stocks to buy to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage.
Disclosure: None. This article is originally published at Insider Monkey.
