Perpetual Limited, an investment management firm, published its “Perpetual Global Innovation Fund” second quarter 2021 investor letter – a copy of which can be downloaded here. A quarterly portfolio return of 6.9% was recorded by the fund for the second quarter of 2021, and 38.2% for the financial year. You can view the fund’s top 5 holdings to have an idea about their top bets for 2021.
In the Q2 2021 investor letter of Perpetual Limited, the fund mentioned Opendoor Technologies Inc. (NASDAQ: OPEN), and discussed its stance on the firm. Opendoor Technologies Inc. is a San Francisco, California-based residential real estate digital platform, that currently has a $9.06 billion market capitalization. OPEN delivered a -34.00% return since the beginning of the year, while its 12-month returns are up by 38.39%. The stock closed at $14.82 per share on July 30, 2021.
Here is what Perpetual Limited has to say about Opendoor Technologies Inc. in its Q2 2021 investor letter:
“We bought a new position in Opendoor Technologies (OPEN) during the quarter. We have been following the iBuying sector for some time and bought in on recent share price weakness. OPEN is an online real estate company in the USA that aims to streamline the process of buying and selling residential homes into a seamless digital experience. The customer completes all the details relating to their home online and OPEN will make an offer instantly. Once accepted the funds are transferred within a couple of days and this gives convenience, certainty and quick settlement to the consumer. OPEN makes its money by charging the seller a service fee, currently 5% across markets, which replaces the average 6% fee they’d pay to list a home. Homes are typically held for 90-110 days before being resold and are largely funded by a non-recourse credit facility.
To us, OPEN seems like a real disruptor in a sector that has traditionally seen minimal digital disruption. They are currently operating in 21 markets with plans to grow to 100 markets. To date they have been able to show really strong market share gains in their most mature markets with 3.2% share in their first six markets, and within this 4-6% share in core markets of Raleigh-Durham and Atlanta. They are beginning to expand into horizontal verticals such as Title & Escrow and are seeing strong attachment rates of >80%.
Nearly 70% of Americans are homeowners with U$1.6tr/year transacted, which is 2x auto spend and 60% higher than spend on food. If OPEN is able to grow into their new markets and replicate the successes they have seen in some of their first markets, then we believe there is meaningful upside to the stock.”
Photo by Breno Assis on Unsplash
Based on our calculations, Opendoor Technologies Inc. (NASDAQ: OPEN) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. OPEN was in 33 hedge fund portfolios at the end of the first quarter of 2021, compared to 28 funds in the fourth quarter of 2020. Opendoor Technologies Inc. (NASDAQ: OPEN) delivered a -23.20% 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.
