Investment management company LVS Advisory, a New York City-based full-service investment firm, recently released its first-quarter 2023 investor letter. A copy of the same can be downloaded here. The defensive portfolio of the fund gained 0.6% (net of all fees and expenses) in the first quarter compared to the 4.2% gain for its benchmark the High-Yield Bond Index. On the other hand, its Growth Portfolio gained 8.1% in the quarter compared to 7.5% for its benchmark, S&P 500 Total Return Index. For more information on the fund’s top picks in 2023, please check its top five holdings.
LVS Advisory highlighted stocks like Interactive Brokers Group, Inc. (NASDAQ:IBKR) in the first quarter 2023 investor letter. Headquartered in Greenwich, Connecticut, Interactive Brokers Group, Inc. (NASDAQ:IBKR) provides an automated electronic brokerage platform. On April 13, 2023, Interactive Brokers Group, Inc. (NASDAQ:IBKR) stock closed at $82.04 per share. One-month return of Interactive Brokers Group, Inc. (NASDAQ:IBKR) was 8.25%, and its shares gained 25.65% of their value over the last 52 weeks. Interactive Brokers Group, Inc. (NASDAQ:IBKR) has a market capitalization of $34.194 billion.
LVS Advisory made the following comment about Interactive Brokers Group, Inc. (NASDAQ:IBKR) in its Q1 2023 investor letter:
“We invested in Charles Schwab during the summer of 2022 (discussed in our Q3 2022 letter) shortly after making our investment in Interactive Brokers Group, Inc. (NASDAQ:IBKR). While Interactive Brokers is focused on faster-growing international markets and more sophisticated traders, Charles Schwab is a more mature US business focused on retirement accounts and wealth managers.
My view changed when it became clear that liquidity would become a greater issue for all banks in early March. We believe Schwab has enough liquidity to operate its business, but we no longer believe the company is in a position to return capital. Furthermore, Schwab saw a higher degree of deposit flight in Q4 than we expected leading us to believe the problem could get worse before it gets better. Schwab may even need to raise additional equity capital to reassure the market of its liquidity position which would drastically change the risk/reward calculation of investing in the stock. While we realized a ~6% loss on our investment, our ability to quickly recalibrate our views during the early stages of the March banking crisis prevented us from losing an additional 20%+ if we had held on until today.
This episode strengthened our conviction in Interactive Brokers (our largest holding), which we view as having a superior business model. Schwab’s model relies on capturing a disproportionate share of the upside from higher interest rates because it does not charge additional fees. Interactive Brokers shares most of the upside from higher interest rates because it primarily monetizes accounts with low-cost commission revenue. IB is now offering an industry-leading rate of 4.33% on uninvested cash which they are proudly advertising on TV and radio. The cherry on top is that Interactive Brokers does all this while taking virtually zero risk with its balance sheet. This allows Interactive Brokers to play offense and take market share while its competitors scramble to preserve liquidity.”
Creative Collage Of Business Team Working On Project And Stock Markets Data On Trasparent Screen, Financial Statistics Layered Over Man Using Laptop For Trading On Forex, Panorama
Interactive Brokers Group, Inc. (NASDAQ:IBKR) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 42 hedge fund portfolios held Interactive Brokers Group, Inc. (NASDAQ:IBKR) at the end of the fourth quarter which was 35 in the previous quarter.
We discussed Interactive Brokers Group, Inc. (NASDAQ:IBKR) in another article and shared Heartland Mid Cap Value Fund’s views on the company. In addition, please check out our hedge fund investor letters Q1 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.
