Old West Investment Management, an investment management firm, published its first-quarter 2021 investor letter – a copy of which can be downloaded here. The fund’s performance in the second quarter was in line with the S&P 500 gains of 8.4%, but its year-to-date numbers were very strong. The fund’s long-only separate accounts were up approximately 45% for the first half of the year, compared to the S&P’s 15% return. 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 Old West Investment Management, the fund mentioned Rafael Holdings, Inc. (NYSE: RFL), and discussed its stance on the firm. Rafael Holdings, Inc. is a Newark, New Jersey-based cancer therapies developer, that currently has an $890.1 million market capitalization. RFL delivered a 115.48% return since the beginning of the year, while its 12-month returns are up by 185.67%. The stock closed at $48.97 per share on August 11, 2021.
Here is what Old West Investment Management has to say about Rafael Holdings, Inc. in its Q2 2021 investor letter:
“In my most recent letter, we wrote about one of our biggest positions, Rafael Holdings. Old West Partner Joe Boskovich Jr. offers this update:
In our Q1 2021 letter, we described Rafael Holding’s obscure ownership structure as a main reason for the company being hidden from a broader investment universe, and we speculated that such complexity would be addressed in the future. As predicted, on June 21st, Rafael Holdings announced a strategic merger with privately held Rafael Pharmaceutical to form a focused late-stage clinical oncology company that is positioned to synergistically
leverage the assets of both companies.The merged company will retain the Rafael Pharmaceuticals name and Rafael Holdings’ listing on the New York Stock Exchange, and will continue to advance its lead drug, CPI613, through two Phase III clinical trials in Pancreatic Cancer and AML, and several Phase I and Phase II clinical trials in other indications. In addition to CPI-613, the company will also continue to advance its early-stage pipeline, Barer Institute, as well as other pharma ventures like Rafael Medical Devices, LipoMedix and Levco Pharmaceutical through multiple important milestones over the next eighteen months as the company evolves towards a fully integrated oncology company.”
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Based on our calculations, Rafael Holdings, Inc. (NYSE: RFL) does not belong in our list of the 30 Most Popular Stocks Among Hedge Funds. RFL was in 8 hedge fund portfolios at the end of the first quarter of 2021, compared to 7 funds in the fourth quarter of 2020. Rafael Holdings, Inc. (NYSE: RFL) delivered a 15.94% 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.
