Rhizome Partners, an investment management firm, published its second-quarter 2022 investor letter – a copy of which can be downloaded here. For the second quarter of 2022, Rhizome Partners generated a net loss of 9.1% versus a 16.1% loss for the Standard & Poor’s 500 Index and a 14.7% loss for the National Association of Real Estate Investment Trusts (NAREIT) Index. During the quarter, the fund’s hedging efforts generated about 5.5% of gains. The hedging gains were the primary contributor to Rhizome’s outperformance in the S&P 500 and the NAREIT. Go over the fund’s top 5 positions to have a glimpse of its finest picks for 2022.
In its Q2 2022 investor letter, Rhizome Partners mentioned Prologis, Inc. (NYSE:PLD) and explained its insights for the company. Founded in 1983, Prologis, Inc. (NYSE:PLD) is a San Francisco, California-based real estate investment trust company with a $93.0 billion market capitalization. Prologis, Inc. (NYSE:PLD) delivered a -25.37% return since the beginning of the year, while its 12-month returns are down by -6.69%. The stock closed at $125.65 per share on August 30, 2022.
Here is what Rhizome Partners has to say about Prologis, Inc. (NYSE:PLD) in its Q2 2022 investor letter:
“We initiated a short position in Prologis. Prologis now routinely touts how it adds value by managing third-party warehouses and installing solar panels on warehouse roofs. We believe Prologis was trading at roughly 2.5% current cap rate and around 3.7- 3.8% cap rate on full mark-to-market rents. Prologis was priced to perfection, given the backdrop of a higher interest rate environment combined with potentially rising vacancy rates due to recessions. Given our seven years of experience investing in warehouses, we thought we should leverage that knowledge on the short side. We promptly shorted 1% in Prologis common shares and allocated 50 basis points toward Prologis puts, with 20% out-of-the-money strikes that expire in November of 2022. Shortly after, Prologis sold off from $163 to $122 per share and our puts have tripled in value. Our short position and puts in Prologis have added roughly 2% gross return to the fund this year. We will continue to monitor the warehouse space and may initiate long positions in the future.”
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Prologis now routinely touts how it adds value by managing third-party warehouses and installing solar panels on warehouse roofs. We believe Prologis was trading at roughly 2.5% current cap rate and around 3.7- 3.8% cap rate on full mark-to-market rents. Prologis was priced to perfection, given the backdrop of a higher interest rate environment combined with potentially rising vacancy rates due to recessions. Given our seven years of experience investing in warehouses, we thought we should leverage that knowledge on the short side. We promptly shorted 1% in Prologis common shares and allocated 50 basis points toward Prologis puts, with 20% out-of-the-money strikes that expire in November of 2022. Shortly after, Prologis sold off from $163 to $122 per share and our puts have tripled in value. Our short position and puts in Prologis have added roughly 2% gross return to the fund this year. We will continue to monitor the warehouse space and may initiate long positions in the future.
Our calculations show that Prologis, Inc. (NYSE:PLD) fell short and didn’t make it on our list of the 30 Most Popular Stocks Among Hedge Funds. Prologis, Inc. (NYSE:PLD) was in 49 hedge fund portfolios at the end of the second quarter of 2022, compared to 37 funds in the previous quarter. Prologis, Inc. (NYSE:PLD) delivered a -1.44% return in the past 3 months.
In May 2021, we also shared another hedge fund’s views on Prologis, Inc. (NYSE:PLD) in another article. You can find other investor letters from hedge funds and prominent investors on our hedge fund investor letters 2022 Q2 page.
Disclosure: None. This article is originally published at Insider Monkey.
