Rowan Street Capital, an investment management company, released its first half 2023 investor letter. A copy of the same can be downloaded here. The fund gained +78.5% in the first half compared to a +16.8% gain for the S&P 500 Index. The fund’s portfolio is dominated by digital platform businesses. In addition, you can check the top 5 holdings of the fund to know its best picks in 2023.
Rowan Street Capital highlighted stocks like Novo Nordisk A/S (NYSE:NVO) in the Q2 2023 investor letter. Headquartered in Bagsvaerd, Denmark, Novo Nordisk A/S (NYSE:NVO) is a healthcare company. On July 12, 2023, Novo Nordisk A/S (NYSE:NVO) stock closed at $154.75 per share. One-month return of Novo Nordisk A/S (NYSE:NVO) was -4.79%, and its shares gained 41.39% of their value over the last 52 weeks. Novo Nordisk A/S (NYSE:NVO) has a market capitalization of $ 346.745 billion.
Rowan Street Capital made the following comment about Novo Nordisk A/S (NYSE:NVO) in its second quarter 2023 investor letter:
“Our current portfolio is made up of just 10 companies — we are very focused! We described our ‘10-Player All-Star Team’ philosophy in our Q1 2018 Letter (we encourage you to review it). We have been building this portfolio since our founding in 2015. In total, over the past 8 years, we bought stock in 47 different companies (that’s ~6 per year), and obviously, for anyone who is good at arithmetic, we sold 37 of them (~4.6 per year). We are constantly trying to learn from every decision (good or bad) that we make. We went through every position that we’ve sold since 2015 and analyzed how we would have done had we held on to those positions. The top 3 performing positions would have been: Chipotle (CMG) +630%, Tractor Supply (TSCO) +315% and Novo Nordisk A/S (NYSE:NVO) +387%. Your managers are at fault here because we sold all of these (in 2017-18) for non-fundamental reasons. All of these continued to be great businesses and management has executed at very high levels. In all three cases, we made a decision to sell because we thought the stock price got way ahead of itself.
Our main take-away lesson has to be Do NOT sell your winners and avoid adding more to your losers. Or as Peter Lynch once famously put it: “Selling your winners and holding your losers is like cutting the flowers and watering the weeds.”
We were fortunate to purchase CMG, TSCO and NVO at very attractive prices when these companies hit a temporary speed bump in their business. These were businesses that were simple to understand and we knew them very well as we had a chance to study them thoroughly for some time prior to our purchase. However, when you choose to sell you get the cash proceeds. First, you have to pay the capital gains tax and then you have to make another ‘buy decision’ or, in a lot of cases, a number of them. The more decisions you make, the higher probability that you will make mistakes. More often than not, you end up buying a business that you know less well and end up partnering with the management team, whose character, management and capital allocation abilities may still be somewhat moot to you. These things take time to get comfortable with! As we have learned many times over throughout our investing careers, it is usually significantly more profitable and also more enjoyable to stay with the great business that you know very well and have a high confidence level in their management team. And this is exactly what happened with CMG, TSCO and NVO. It was a costly mistake for our investors and it’s an extremely valuable lesson that we have learned.”
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Novo Nordisk A/S (NYSE:NVO) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 46 hedge fund portfolios held Novo Nordisk A/S (NYSE:NVO) at the end of first quarter which was 41 in the previous quarter.
We discussed Novo Nordisk A/S (NYSE:NVO) in another article and shared the list of most profitable pharmaceutical companies in the world. In addition, please check out our hedge fund investor letters Q2 2023 page for more investor letters from hedge funds and other leading investors.
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Disclosure: None. This article is originally published at Insider Monkey.
