Bonsai Partners recently released its Q1 2021 Investor Letter, a copy of which you can download here. The fund posted a return of -0.8% for the quarter (net of fees), underperforming their benchmark, the S&P 500 Index which returned 6.2% in the same quarter. You should check out Bonsai Partners’ top 5 stock picks for investors to buy right now, which could be the biggest winners of this year.
In the Q1 2021 Investor Letter, the fund highlighted a few stocks and LKQ Corp (NASDAQ:LKQ) is one of them. LKQ Corp (NASDAQ:LKQ) is the largest supplier of used auto parts in the United States. In the last three months, LKQ Corp (NASDAQ:LKQ) stock gained 29%. Here is what the fund said:
“LKQ is the largest provider of alternative collision and mechanical automotive parts in the United States. In Europe, they are the leading distributor of general automotive maintenance parts and supplies. Its shares appreciated 20.1% during the quarter.
During the quarter, LKQ shared its fourth-quarter results: showing a slight revenue decline and a nearly 30% increase in quarterly profit Vs. the same period last year. COVID has proved a surprising catalyst for my investment thesis which revolves around optimizing their recent large acquisitions that were never efficiently integrated.
Admittedly, in addition to LKQ’s quarterly performance, thematically, there has been broad enthusiasm for “re-opening” trades, of which, LKQ has been a beneficiary. Most importantly, the prior overhang related to LKQ’s debt burden is now all but behind us. Their net debt to EBITDA ratio now sits below 2x, a stark change from the near 3x leverage ratio before the pandemic. At that time, LKQ’s leverage had the potential to spiral upward to nearly 4-5x if the business experienced a prolonged shutdown. It’s good to be past this issue.”
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Bonsai Partners has been a long time LKQ Corp (NASDAQ:LKQ) bull. In August 2020, we shared Bonsai Partners LKQ’s thesis in this article.
In Q4 2020, the number of bullish hedge fund positions on LKQ Corp (NASDAQ:LKQ) stock decreased by about 2% from the previous quarter (see the chart here), so a number of other hedge fund managers don’t believe in LKQ’s growth potential. Our calculations showed that LKQ Corp (NASDAQ:LKQ) isn’t ranked among the 30 most popular stocks among hedge funds.
The top 10 stocks among hedge funds returned 231.2% between 2015 and 2020, and outperformed the S&P 500 Index ETFs by more than 126 percentage points. We know it sounds unbelievable. You have been dismissing our articles about top hedge fund stocks mostly because you were fed biased information by other media outlets about hedge funds’ poor performance. You could have doubled the size of your nest egg by investing in the top hedge fund stocks instead of dumb S&P 500 ETFs. Here you can watch our video about the top 5 hedge fund stocks right now. All of these stocks had positive returns in 2020.
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Disclosure: None. This article is originally published at Insider Monkey.
