“Reservation (BKNG) to disproportionately benefit from the reopening of international borders”
Wedgewood Partners, an investment management firm, has released its Q2 2021 letter to investors – a copy of which can be downloaded here. A quarterly portfolio return of 11.8% was recorded by the fund for the first half of 2021, outperforming the S&P 500 which returned 8.6% for the same period, but slightly below the gain of 11.9 % of the Russell 1000 Growth Index. You can look at the top 5 holdings of the fund to get an idea of their best bets for 2021.
In Wedgewood Partners’ Q2 2021 letter to investors, the fund mentioned Booking Holdings Inc. (NASDAQ: BKNG) and discussed its position on the company. Booking Holdings Inc. is a Norwalk, Connecticut-based travel company that currently has a market cap of $ 88.04 billion. BKNG has achieved a -3.71% year-to-date return, while its 12-month revenue is up 23.82%. The stock closed at $ 2,144.72 per share on July 16, 2021.
Here’s what Wedgewood Partners has to say about Booking Holdings Inc. in its Q2 2021 letter to investors:
“Reserve assets reported results down substantially from 2020 as they straddled the later parts of the last quarter unaffected by COVID-19. The Company is more strongly oriented towards European markets which have been slower to reopen compared to the United States and Mexico. In its US market, Booking has already seen a return to growth in overnight stays and has seen the UK approach a flat level with 2019 (before COVID). Looking ahead, we expect Booking to disproportionately benefit from reopening international borders, as travelers have several years of savings and pent-up travel demand waiting to be rolled out. In addition, we believe that the market is not yet appreciating the important and growing alternative accommodation business of Booking, which we consider to be the second in terms of bookings after Airbnb. “
By our calculations, Booking Holdings Inc. (NASDAQ: BKNG) ranks 18th on our list of the 30 most popular stocks among hedge funds. Booking Holdings Inc. was in 103 hedge fund portfolios at the end of the first quarter of 2021, compared to 108 fund in the fourth quarter of 2020. BKNG has generated a return of -13.41% in the last 3 months.
The reputation of hedge funds as savvy investors has been tarnished over the past decade, as their hedged returns could not keep up with the unhedged returns of stock indices. Our research has shown that small cap hedge fund stock selection managed to beat the market by double digits every year between 1999 and 2016, but the margin for outperformance has shrunk in recent years. Nonetheless, we were still able to identify in advance a select group of hedge funds that have outperformed S&P 500 ETFs by 115 percentage points since March 2017 (see details here). We were also able to identify in advance a select group of hedge funds that underperformed the market by 10 percentage points per year between 2006 and 2017. Interestingly, the margin of underperformance of these stocks has increased in recent years. Investors who are long in the market and short on these stocks would have reported more than 27% per year 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 originally appeared on Insider Monkey.