O’Keefe Stevens Advisory Inc., an asset management firm, published its first-quarter 2021 investor letter – a copy of which can be downloaded here. At the end of Q1 22, the fund’s top 5 holdings represented ~38% of assets. The concentration at the top of the portfolio declined slightly as some lower weighted positions have increased significantly to start the year. These names were primarily in the commodity space, which has seen strong price appreciation due to supply constraints. Try to spend some time taking a look at the fund’s top 5 holdings to be informed about their best picks for 2022.
In its Q1 2022 investor letter, O’Keefe Stevens Advisory mentioned Newmark Group, Inc. (NASDAQ:NMRK) and explained its insights for the company. Founded in 1929, Newmark Group, Inc. (NASDAQ:NMRK) is a United States-based commercial real estate advisory and services firm with a $2.5 billion market capitalization. Newmark Group, Inc. (NASDAQ:NMRK) delivered a -28.34% return since the beginning of the year, while its 12-month returns are up by 23.73%. The stock closed at $13.40 per share on April 19, 2022.
Here is what O’Keefe Stevens Advisory has to say about Newmark Group, Inc. (NASDAQ:NMRK) in its Q1 2022 investor letter:
“On 12/30/2021, at 4:04 pm, NMRK put out a press release saying, “On December 28, 2021, Newmark Group, Inc. awarded to Howard W. Lutnick, the Company’s Chairman and principal executive officer, a one-time $50 million bonus award (the “Lutnick Award”) in consideration of his efforts in delivering superior financial results. These efforts included his management of the company and success in creating value for the company’s stockholders in connection with structuring, hedging, and monetizing the Nasdaq, Inc. common stock (the “Nasdaq Shares”) held by the company and the significant amount of income earned by the company related to these activities and the significant increase in value of such Nasdaq Shares over time.
In 2013, BGCP sold their ESpeed trading platform to Nasdaq for $750m in cash and ~1m shares of NDAQ stock per year for 15 years. A clause in the sale agreement stated if Nasdaq were to sell the ESpeed platform, the remaining shares would immediately be granted to BGCP. In 2018 Newmark was spun-off from BGCP and was given the remaining shares of NDAQ to be received. In 2021, Nasdaq sold ESpeed to Tradeweb. Instead of receiving 1 million shares of NDAQ for the next seven years, they received ~7m shares at once. As mentioned above, hedging instruments were used; nonetheless, it was a significant windfall for NMRK.
A retroactive, one-time bonus was given to Howard because of the transaction. To clarify, NMRK’s Board of Directors gave Howard a bonus because Nasdaq sold the Espeed platform. Howard was not a part of the conversation between Nasdaq and Tradeweb and undoubtedly did not influence the transaction. $50m was approximately 1.3% of the market cap of NMRK at the time, and the value of the NDAQ stock received was ~$650m after taxes and forward agreements were settled. Roughly 8% of that value was given to Howard. When the original Espeed sale to Nasdaq occurred, NDAQ stock was trading in the $30’s, putting the original value of the shares to be received in the $450-500m range. From 2014-to 2021, NDAQ’s stock rose from $40 to $200. Did Howard have anything to do with this price appreciation? I think not. Did Espeed lead to value creation for NDAQ shareholders and potentially a source for the stock appreciation? Nasdaq paid $750m in cash + 15m shares of NDAQ and subsequently sold ESpeed to Tradeweb for $190m. Howard deserves some credit because he clearly got a phenomenal price for ESpeed…'” (Click here to see the full text)
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Our calculations show that Newmark Group, Inc. (NASDAQ:NMRK) fell short and didn’t make it on our list of the 30 Most Popular Stocks Among Hedge Funds. Newmark Group, Inc. (NASDAQ:NMRK) was in 17 hedge fund portfolios at the end of the fourth quarter of 2021, compared to 20 funds in the previous quarter. Newmark Group, Inc. (NASDAQ:NMRK) delivered a -13.49% return in the past 3 months. You can find other investor letters from hedge funds and prominent investors on our hedge fund investor letters 2022 Q1 page.
Disclosure: None. This article is originally published at Insider Monkey.
