Hayden Capital, an investment management firm, published its fourth-quarter 2021 investor letter – a copy of which can be downloaded here. A quarterly net return of 27.5% was delivered by the fund for the fourth quarter, compared to the 11.0% and 7.0% respective gains of its benchmarks, the S&P 500 and MSCI World Index for the same period. Spare some time to check the fund’s top 5 holdings to have a clue about their top bets for 2022.
Hayden Capital, in its Q4 2021 investor letter, mentioned Sea Limited (NYSE: SE) and discussed its stance on the firm. Sea Limited is a Tempe, Arizona-based software company with a $71.2 billion market capitalization. SE delivered a -42.92% return since the beginning of the year, while its 12-month returns are down by -54.40%. The stock closed at $127.69 per share on February 19, 2022.
Here is what Hayden Capital has to say about Sea Limited in its Q4 2021 investor letter:
“Sea Ltd represents a substantial portion of our portfolio, and this last market downturn has certainly been painful for shareholders. While I’d estimate (or rather guess?) that ~2/3rd of the stock price decline is due to concerns around the aforementioned rising rate environment hurting most long-duration growth companies, approximately ~1/3rd of the stock decline is likely due to investor’s concerns around Sea Ltd transitioning from “Act 1” to “Act 2”, which I’ll discuss in this section.
Previously, Sea has relied upon the exponential growth of its gaming business, Garena, and in particular that of the worldwide mobile game sensation, Free Fire, to provide the profits to reinvest into the Shopee ecommerce division within Southeast Asia. Between 2018 and 2021, profits from Garena grew over 10x, all of which was reinvested into building out the Shopee ecommerce platform.
This strategy has been tremendously successful, with Shopee now on track to achieve ~$100 Billion in GMV in 2022, making it one of the largest ecommerce companies in the world. More importantly, these new-to-ecommerce customers are extremely sticky (ordering more than 4x per month, logging in several times per day, and spending 30 – 60 minutes inside of the app per day).
This isn’t simply “renting customers” via deeply discounted promo codes. But rather, Shopee has trained a whole new segment of the population to shop online via their addictive & engaging platform. Nowadays, Shopee is definitively the dominant ecommerce leader in Southeast Asia (~55 – 60% market share), and the company feels that it is in a much more stable position versus just a few years ago…” (Click here to see the full text)
Our calculations show that Sea Limited (NYSE: SE) ranks 16th on our list of the 30 Most Popular Stocks Among Hedge Funds. SE was in 108 hedge fund portfolios at the end of the third quarter of 2021, compared to 117 funds in the previous quarter. Sea Limited (NYSE: SE) delivered a -58.81% return in the past 3 months.
In January 2022, we also shared another hedge fund’s views on SE in another article. You can find other letters from hedge funds and prominent investors on our hedge fund investor letters 2021 Q4 page.
Disclosure: None. This article is originally published at Insider Monkey.
