Rowan Street Capital LLC, an investment management firm, published its “Summers Value Fund” second quarter 2021 investor letter – a copy of which can be seen here. A return of +4.7% net of fees, was recorded by the fund for the second half of 2021, below the +15.2% return of the S&P 500. You can view the fund’s top 5 holdings to have an idea about their top bets for 2021.
In the Q2 2021 investor letter of Rowan Street Capital LLC, the fund mentioned Spotify Technology S.A. (NYSE: SPOT), and discussed its stance on the firm. Spotify Technology S.A. is a Stockholm, Sweden-based music streaming services provider, that currently has a $43.7 billion market capitalization. SPOT delivered a -27.33% return since the beginning of the year, while its 12-month returns are down by -11.31%. The stock closed at $228.67 per share on July 30, 2021.
Here is what Rowan Street Capital LLC has to say about Spotify Technology S.A. in its Q2 2021 investor letter:
“Our biggest contributors to outperformance in 2020, (includes) Spotify (SPOT). How many stocks have you owned in the past, where you liked the underlying company and its management even more after 3 years of holding the stock? My guess is not very many. We want to be clear here that we are talking about Spotify the company, not SPOT the stock. It’s a very important distinction that most “investors” forget, especially those that fall in love with the stock that has momentum and is rapidly going up, a lot of times not necessarily for fundamental reasons. Spotify is one of those rare businesses that, after owning it for 3 years, we actually like it more and like the CEO Daniel Ek more now than when we originally purchased the stock. Our conviction has also grown stronger over the past year since we outlined our investment thesis in the Q2 2021 Letter. For those who are new to the fund, we encourage you to take a look at our write-up.”
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Based on our calculations, Spotify Technology S.A. (NYSE: SPOT) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. SPOT was in 46 hedge fund portfolios at the end of the first quarter of 2021, compared to 48 funds in the fourth quarter of 2020. Spotify Technology S.A. (NYSE: SPOT) delivered a -9.30% 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.
