Longleaf Partners Fund, a Memphis-based fund under Southeastern Asset Management, published its “Longleaf Partners Small-Cap Fund” third quarter 2021 investor letter – a copy of which can be downloaded here. Longleaf Partners Small-Cap Fund fell 4.20% in the third quarter, narrowly ahead of the Russell 2000 Index’s 4.36% decline in the period. The Fund has delivered positive absolute returns year-to-date, adding 9.10%, but it trails the Index’s 12.41% return for the year. You can take a look at the fund’s top 5 holdings to have an idea about their best picks for 2021.
Longleaf Partners Small-Cap Fund, in its Q3 2021 investor letter, mentioned RenaissanceRe Holdings Ltd. (NYSE: RNR) and discussed its stance on the firm. RenaissanceRe Holdings Ltd. is a Pembroke Parish, Bermuda-based insurance company with a $7.1 billion market capitalization. RNR delivered a -5.69% return since the beginning of the year, while its 12-month returns are down by -15.41%. The stock closed at $156.38 per share on November 12, 2021.
Here is what Longleaf Partners Small-Cap Fund has to say about RenaissanceRe Holdings Ltd. in its Q3 2021 investor letter:
“We made a swap in the insurance world – buying a position in RenaissanceRe (RenRe) and selling our position in Everest Re at a 30% gain. We believe this was an upgrade on Business, People and Price. We prefer how RenRe has built a growing fee business that will continue to improve return on equity (ROE) and reduce volatility going forward. We also prefer RenRe management’s capital allocation, which is much more focused on discounted buybacks at the moment. All this is for a better price-to-value than Everest Re, which has been a solid performer since we purchased it for a second time in 2020. We believe the next several years will be bright for RenRe, even if fears about near-term losses due to floods and hurricane moved the stock this quarter.”
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Based on our calculations, RenaissanceRe Holdings Ltd. (NYSE: RNR) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. RNR was in 31 hedge fund portfolios at the end of the first half of 2021, compared to 30 funds in the previous quarter. RenaissanceRe Holdings Ltd. (NYSE: RNR) delivered a -3.08% 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.
