Rhizome Partners, an investment management firm, published its first quarter 2021 investor letter – a copy of which can be downloaded here. A return of 11.5% was recorded by the fund, outperforming the S&P 500 Index that delivered a +6.2% return and the FTSE NAREIT All Equity REIT Total Return Index that was up by 8.3% for the same period. You can view the fund’s top 5 holdings to have a peek at their top bets for 2021.
Rhizome Partners, in its Q1 2021 investor letter, mentioned GameStop Corp. (NYSE: GME), and shared their insights on the company. GameStop Corp. is a Grapevine, Texas-based electronics retail company that currently has an $11.9 billion market capitalization. Since the beginning of the year, GME delivered an impressive 796.13% return, massively extending its 12-month gains to 3,702.48%. As of May 19, 2021, the stock closed at $168.83 per share.
Here is what Rhizome Partners has to say about GameStop Corp. in its Q1 2021 investor letter:
“The first quarter saw some bizarre market reactions. Game Stop is a heavily shorted legacy video game retailer that saw its stock price rise from $17 to a peak of $483 within a month. It appears that retail investors on a Reddit.com forum called WallStreetBets used memes to create a viral feedback loop of forced buying. Game Stop reached $20 billion in market cap and had more daily trading volume than Apple at one point. The Game Stop short squeeze became a black swan event for the short sellers. Large hedge funds such as Melvin Capital suffered 50% losses during a short period and required emergency capital injections that resulted in costly dilution. Shorting is difficult and introduces a risk of ruin. This is especially true in situations where a large percentage of the float is shorted. We want to remind you that we hedge our portfolio via index puts, sector puts, and sometimes buying puts directly in our own portfolio companies. However, we rarely short because 1) we are not good at it 2) the potential for brain damage is too high and 3) we want to avoid the risk of ruin.”
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Our calculations show that GameStop Corp. (NYSE: GME) does not belong in our list of the 30 Most Popular Stocks Among Hedge Funds. As of the end of the fourth quarter of 2020, GameStop Corp. was in 27 hedge fund portfolios, compared to 28 funds in the third quarter. GME delivered a 314.92% return in the past 3 months.
The top 10 stocks among hedge funds returned 231.2% between 2015 and 2020, and outperformed the S&P 500 Index ETFs by more than 126 percentage points. We know it sounds unbelievable. You have been dismissing our articles about top hedge fund stocks mostly because you were fed biased information by other media outlets about hedge funds’ poor performance. You could have doubled the size of your nest egg by investing in the top hedge fund stocks instead of dumb S&P 500 ETFs. Here you can watch our video about the top 5 hedge fund stocks right now. All of these stocks had positive returns in 2020.
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Disclosure: None. This article is originally published at Insider Monkey.
