Silver Ring Value Partners, an investment management firm, published its fourth-quarter 2021 investor letter – a copy of which can be downloaded here. At the end of the fourth quarter of 2021, the portfolio was very attractively priced, with the Price to Base Case value ratio at 54%. The portfolio had 15 investments plus hedges, cash at 1%, and option-adjusted net exposure at 71% at the end of the quarter. Spare some time to check the fund’s top 5 holdings to have a clue about their top bets for 2022.
Silver Ring Value Partners, in its Q4 2021 investor letter, mentioned PetMed Express, Inc. (NASDAQ: PETS) and discussed its stance on the firm. PetMed Express, Inc. is a Delray Beach, Florida-based online pet pharmacy company with a $544.8 million market capitalization. PETS delivered a -1.89% return since the beginning of the year, while its 12-month returns are up by 33.09%. The stock closed at $25.97 per share on February 19, 2022.
Here is what Silver Ring Value Partners has to say about PetMed Express, Inc. in its Q4 2021 investor letter:
“PETS was one of the original online sellers of pet medication directly to consumers. Once upon a time this was a growing business, given that they offered much lower prices than those which could be obtained at the vet’s office. However, with Chewy’s entry into the pet pharmacy business and Covetrus’s online offering that allows vets to sell drugs online at only a small premium to PETS’s prices, the value of PETS’s customer proposition has greatly diminished.
The company has been squeezed out of obtaining new customers through paid search by Chewy’s massive ad blitz. This is a situation that is likely long-term in nature. As a results, PETS’s business has entered into a decline in terms of both existing and new customers. This is a trend that I view as likely to continue over the long-term. Essentially, there is no longer a strong reason for PETS to exist as a business – it is neither the lowest priced nor the most differentiated, and is facing bigger competitors that are muscling it out of the business.
As a result of these structural changes, I believe the business is going to continue to decline for a long time, resulting in a far smaller business value than the recent price. I purchased a small put option position during the quarter. My plan is to stick to a total budget of no more than 2% cumulatively over the life of the investment. I will be monitoring new information, and if my thesis appears to be validated by the facts, I will likely continue with the position up until the 2% threshold.”
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Our calculations show that PetMed Express, Inc. (NASDAQ: PETS) failed to obtain a mark on our list of the 30 Most Popular Stocks Among Hedge Funds. PETS was in 13 hedge fund portfolios at the end of the third quarter of 2021, compared to 13 funds in the previous quarter. PetMed Express, Inc. (NASDAQ: PETS) delivered a 12.78% return in the past 3 months. You can find other letters from hedge funds and prominent investors on our hedge fund investor letters 2021 Q4 page.
Disclosure: None. This article is originally published at Insider Monkey.
