Ensemble Capital, an investment management firm, published its third-quarter 2021 investor letter – a copy of which can be downloaded here. In the letter, the fund discussed why they see so much new value being created in the years ahead, the value that their portfolio of companies is helping to develop. You can take a look at the fund’s top 5 holdings to have an idea about their best picks for 2021.
Ensemble Capital, in its Q3 2021 investor letter, mentioned Booking Holdings Inc. (NASDAQ: BKNG) and discussed its stance on the firm. Booking Holdings Inc. is a Norwalk, Connecticut-based travel company with a $103 billion market capitalization. BKNG delivered a 12.72% return since the beginning of the year, while its 12-month returns are up by 51.87%. The stock closed at $2,538.34 per share on October 15, 2021.
Here is what Ensemble Capital has to say about Booking Holdings Inc. in its Q3 2021 investor letter:
"Booking : On the March 20, 2020 conference call we referenced at the beginning of this letter, we discussed our assessment of online travel agent Booking Holdings during the initial phase of the pandemic. At that time, we explained why we continued to hold a position in the company. We highlighted that while we fully expected demand to collapse and be slow to recover, our analysis indicated that they were very well positioned to survive the pandemic even if it lasted much longer than expected. And we said that companies that survived the pandemic would be well positioned to thrive on the other side
The key for us to holding the stock was our belief that traveling is hardwired into human DNA. While we could not know how long the pandemic would last, we were certain that when it was once again safe to travel, business would boom once again.
Today, more than 18 months later, travel has come roaring back despite the pandemic still not having come to an end. There continues to be significant barriers to travel, such as severe restrictions on international travel and the general health concerns of travelers. But in areas where people are allowed to travel, such as domestically within the United States, leisure travel has boomed..." (Click here to see the full text)
Based on our calculations, Booking Holdings Inc. (NASDAQ: BKNG) ranks 20th in our list of the 30 Most Popular Stocks Among Hedge Funds. BKNG was in 100 hedge fund portfolios at the end of the first half of 2021, compared to 103 funds in the previous quarter. Booking Holdings Inc. (NASDAQ: BKNG) delivered a 21.42% 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.