Tao Value, an investment management firm, published its second quarter 2021 investor letter – a copy of which can be downloaded here. A return of -2.07% was delivered by the fund for the Q2 of 2021, trailing the MSCI All Country World Index that delivered a +7.11% return for the same period. You can take a look at the fund’s top 5 holdings to have an idea about their top bets for 2021.
In the Q2 2021 investor letter of Tao Value, the fund mentioned Sea Limited (NYSE: SE), and discussed its stance on the firm. Sea Limited is a Singapore-based consumer internet company, that currently has a $158.6 billion market capitalization. SE delivered a 48.78% return since the beginning of the year, extending its 12-month returns to 104.68%. The stock closed at $296.95 per share on August 10, 2021.
Here is what Tao Value has to say about Sea Limited in its Q2 2021 investor letter:
“Sea continued to execute above expectation. The gaming business continued strong momentum, recording bookings of $1.1 billion, growing 117% y-o-y. The major franchise Free Fire showed no sign of slowing down in established ASEAN & LatAm market and received positive reception from new markets
like US. On e-commerce side, Shopee demonstrated early success in expanding to Brazil, by adopting a low-price category & gamification strategy. For 2021, Shopee is now top downloaded e-commerce app in Brazil, almost 2x of the second-place local leader Mercado Libre (MELI). I also see the most promising development is in its FinTech business – SeaMoney, which more than doubled its revenue in Q1 2021 from the previous quarter! With online lending products rolling out, SeaMoney is poised to grow rapidly, becoming the 3rd growth curve for Sea.”
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Based on our calculations, Sea Limited (NYSE: SE) ranks 22nd in our list of the 30 Most Popular Stocks Among Hedge Funds. SE was in 98 hedge fund portfolios at the end of the first quarter of 2021, compared to 115 funds in the fourth quarter of 2020. Sea Limited (NYSE: SE) delivered a 22.56% 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.
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, pet market is growing at a 7% annual rate and is expected to reach $110 billion in 2021. So, we are checking out the 5 best stocks for animal lovers. We go through lists like the 10 best battery stocks 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 homepage.
Disclosure: None. This article is originally published at Insider Monkey.
