Bireme Capital, an investment management firm, published its third-quarter 2021 investor letter – a copy of which can be seen here. A portfolio net return of 9.1% was delivered by the fund for the third quarter of 2021, handily eclipsing the S&P 500’s return of 0.6%. You can take a look at the fund’s top 5 holdings to have an idea about their best picks for 2021.
Bireme Capital, in its Q3 2021 investor letter, mentioned Skillz Inc. (NYSE: SKLZ) and discussed its stance on the firm. Skillz Inc. is a San Francisco, California-based online mobile multiplayer video game competition platform with a $4.6 billion market capitalization. SKLZ delivered a -41.95% return since the beginning of the year, while its 12-month returns are down by -0.17%. The stock closed at $12.04 per share on November 1, 2021.
Here is what Bireme Capital has to say about Skillz Inc. in its Q3 2021 investor letter:
“Another short position we initiated was in Skillz (SKLZ), a mobile game publisher with $230m in 2020 revenue, and $98m of 2020 EBITDA losses. When we shorted it, SKLZ had a ~$6b valuation; it is now down to $4.5b, and we believe it has much more room to fall.
SKLZ is a great example of investors getting hyped up over a quickly-growing company employing misleading industry jargon. In this case, the jargon is “eSports.” eSports is, in fact, a large and growing industry, and the term describes the business of competitive video games. Typically, this involves hosting tournaments, either live or online, where spectators can watch professional gamers compete at high levels. Prize pools are often in the millions. Ticket sales, sponsorships, and advertising revenue from such events totaled over $1b in 2020…” (Click here to see the full text)
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Based on our calculations, Skillz Inc. (NYSE: SKLZ) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. SKLZ was in 20 hedge fund portfolios at the end of the first half of 2021, compared to 26 funds in the previous quarter. Skillz Inc. (NYSE: SKLZ) delivered a -4.37% 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.
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. Recently we came across a high-growth stock that has tons of hidden assets and is trading at an extremely cheap valuation. We go through lists like the 10 best growth stocks to buy to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage.
Disclosure: None. This article is originally published at Insider Monkey.
