Stewart Asset Management, an investment management firm, published its first quarter 2021 investor letter – a copy of which can be seen here. A net return of 1.38% was reported by the fund for the Q1 of 2021, below its S&P 500 benchmark that delivered a 6.17% return for the same period. You can view the fund’s top 5 holdings to have a peek at their top bets for 2021.
Stewart Asset Management, in their Q1 2021 investor letter, mentioned Match Group, Inc. (NASDAQ: MTCH) and shared their insights on the company. Match Group, Inc. is a Dallas, Texas-based online dating service company that currently has a $39.3 billion market capitalization. Since the beginning of the year, MTCH delivered a -3.12% return, while its 3-month gains are also down by -2.90%. As of April 15, 2021, the stock closed at $146.47 per share.
Here is what Stewart Asset Management has to say about Match Group, Inc. in their Q1 2021 investor letter:
“During the first quarter, we initiated a new investment. We bought shares in Match Group, which is the leading global provider of online dating services. Match operates both a free service and a paid subscription service. It offers its services via mobile apps like Tinder and Hinge, as well as legacy services like Match.com. Match Group has tailored apps that cater to many demographic groups both in the U.S. and internationally.
The online dating market has grown in the U.S., from a single-digit percentage of new relationships in the 2000s to about forty percent today, according to the Pew Research Center, an independent social research organization. The company’s addressable market is large. In the U.S. there are about 50 million singles under 40 years of age and there are 600 million singles globally who have smartphones. Match currently has just 11 million paying subscribers globally. As the stigma towards online dating diminishes worldwide, subscribers and utilization should continue to grow.
Despite spending little on advertising, the company’s user and subscriber base has grown. As this base expands, its network effect strengthens. Once Match gains a new subscriber there is clear lifetime value at very little additional cost. This incremental profitability affords Match a wide operating margin and strong free cash flow. Worth noting is that the largest cost to acquire a new subscriber is the app store fee. This fee may decline over the next five years.
This enviable business model has grown its earnings 30% per year for the last five years. Our research leads us to believe that this growth is sustainable for the next half-decade and perhaps longer. Lastly, given Match’s low incremental cost of servicing an additional subscriber and its proven ability to introduce higher-priced services, we would expect that Match will be relatively shielded from any negative inflationary effects and any accompanying higher costs.”
George Rudy/Shutterstock.com
Our calculations show that Match Group, Inc. (NASDAQ: MTCH) 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, Match Group, Inc. was in 72 hedge fund portfolios, compared to 61 funds in the third quarter. MTCH delivered a -4.08% return in the past month.
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.
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best innovative stocks to buy to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website:
Disclosure: None. This article is originally published at Insider Monkey.
