Longleaf Partners Fund, a Memphis-based fund under Southeastern Asset Management, published its “Longleaf Partners International Fund” third quarter 2021 investor letter – a copy of which can be downloaded here. Longleaf Partners International Fund fell 9.59% in the third quarter vs. the MSCI EAFE Index’s 0.45% decline, taking the Fund’s year-to-date figure to -2.36% vs. the EAFE Index at 8.35%. You can take a look at the fund’s top 5 holdings to have an idea about their best picks for 2021.
Longleaf Partners International Fund, in its Q3 2021 investor letter, mentioned Alibaba Group Holding Limited (NYSE: BABA) and discussed its stance on the firm. Alibaba Group Holding Limited is a Hangzhou, China-based E-commerce company with a $452.2 billion market capitalization. BABA delivered a -28.32% return since the beginning of the year, while its 12-month returns are up by -35.42%. The stock closed at $166.81 per share on November 12, 2021.
Here is what Longleaf Partners International Fund has to say about Alibaba Group Holding Limited in its Q3 2021 investor letter:
“Alibaba has non-earning assets which are still in money-losing investment mode (including the cloud business and community group buying), so returns and profitability are deeply understated. As these businesses grow and scale up, they should generate high margins that will accelerate profitability and return on equity (ROE) going forward, despite regulatory pressures at the margin. In the meantime, Alibaba bought $3.7 billion (bn) discounted shares since April 2021, and the company upsized its approved buyback plan, first from $6bn to $10bn in December 2020, and again to $15bn in August 2021.”
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Based on our calculations, Alibaba Group Holding Limited (NYSE: BABA) ranks 8th in our list of the 30 Most Popular Stocks Among Hedge Funds. BABA was in 146 hedge fund portfolios at the end of the first half of 2021, compared to 135 funds in the previous quarter. Alibaba Group Holding Limited (NYSE: BABA) delivered a -8.70% 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.
