In this article, we discuss the 5 best performing hedge funds of 2021. If you want to read our detailed analysis of these hedge funds, go directly to the 10 Best Performing Hedge Funds of 2021.
5. Citadel Investment Group
YTD Gain as of December 27, 2021: 24.3%
Citadel Investment Group is one of the most famous multi-strategy funds. It operates from Chicago and is chaired by billionaire Ken Griffin. Griffin has a personal net worth of over $26 billion. His fund, as of the end of September 2021, managed over $481 billion in assets, one of the largest portfolios in the US. According to LCH data, Griffin made over $8.2 billion for investors in 2021, behind only Chris Hohn of TCI Fund Management who earned $9.5 billion for investors. Citadel made gains of close to 4% in December 2021 alone.
Ken Griffin of Citadel Investment Group
Citadel Investment Group has invested a lot of money in Tesla, Inc. (NASDAQ:TSLA), the California-based EV maker. At the end of the third quarter of 2021, 60 hedge funds in the database of Insider Monkey held stakes worth $10 billion in Tesla, Inc. (NASDAQ:TSLA), compared to the same number of funds as in the previous quarter, with stakes equalling $9 billion.
Here is what Baron Partners Fund has to say about Tesla, Inc. (NASDAQ:TSLA) in its Q1 2021 investor letter:
“Tesla, Inc. (NASDAQ:TSLA) designs, manufactures, and sells fully electric vehicles, solar products, energy storage solutions, and battery cells. Tesla, Inc. (NASDAQ:TSLA) stock fell during the quarter as a result of general market dynamics and a potential production slowdown due to parts shortages. A refreshed S/X and China Model Y ramp could also have a negative impact on margins in early 2021. We anticipate strong growth and improved margins driven by new production capacity, manufacturing efficiencies, localization of its manufacturing and supply chain, and maturation of Tesla’s full self-driving technology.”
4. Third Point
YTD Gain as of November 2021: 25.7%
Third Point is a New York-based hedge fund founded and led by Daniel Loeb. At the end of the third quarter of 2021, it managed more than $18 billion in assets. Loeb has pioneered an “activist” investment strategy and is famous for pressuring firms to divest off assets or consolidate operations for success. The fund beat the benchmark S&P 500 by around a third in terms of overall returns through the year. Third Point has had a rough start to 2022 with the flagship Third Point Offshore fund losing 7.6% in January.
Dan Loeb of Third Point
One of the top investments of Third Point is The Walt Disney Company (NYSE:DIS), a diversified entertainment company. At the end of the third quarter of 2021, 101 hedge funds in the database of Insider Monkey held stakes worth $9.4 billion in The Walt Disney Company (NYSE:DIS), compared to 112 in the preceding quarter worth $10.8 billion.
In its Q4 2020 investor letter, Harding Loevner, an asset management firm, highlighted a few stocks and The Walt Disney Company (NYSE:DIS) was one of them. Here is what the fund said:
“One of the original constituents of the Nifty Fifty holds a place in our portfolio today. When we bought Disney three years ago, we wrote that “we view Disney theme parks in the US, Europe, and China as resistant to online substitution.” We did not reckon on a pandemic, which closed all of them, and sent all of us to our couches. Disney, however, wasready for us, brilliantly illustrating the importance of management foresight and change management. Or, as Louis Pasteur said, “chance favors the prepared mind.
A century after its founding in 1923, Disney is in the middle of a bold shift from its legacy media networks & entertainment model—with cable TV, theme parks, and theater films dominating its earnings—to a direct-to-consumer streaming media model. The keys to Disney’s transition: matchless storytelling, coupled with financial strength. The company reliably creates content that people all over the world are eager to consume. It also hastened spending on original content to attract subscribers to its new streaming platform. These factors have allowed Disney to weather the pandemic having expanded its direct engagement with customers. Such connections yield a rich harvest of insights used to customize offerings on a mass scale, reinforcing that engagement in a virtuous circle and thereby raising the lifetime value of each customer. Subscribers to Disney+ reached 86.8 million one year after launch, compared to the 60 – 90 million management projected to reach in 2024. To be sure, Netflix, Apple, and Amazon remain formidable competitors in new-era streaming entertainment (mind what we said about everyone standing up at once), but there’s fight left in this old dog.”
3. SRS Investment Management
YTD Gain as of November 2021: 46%
SRS Investment Management is an employee-owned hedge fund led by Karthik Sarma. It operates from New York. One of the primary reasons for the success of the fund in 2021 was the incredible performance of Avis Budget Group, a mobility solutions provider in which SRS owns a large stake. The jump in the share price of Avis alone was responsible for around $5 billion in gains in a single day for SRS in November 2021. The fund has a portfolio value of over $7 billion, with investments concentrated in the services and tech sectors.
One of the biggest holdings of SRS Investment Management is Netflix, Inc. (NASDAQ:NFLX), the company that owns and runs a streaming platform. Among the hedge funds being tracked by Insider Monkey in Q3 2021, Chicago-based firm Citadel Investment Group is a leading shareholder in Netflix, Inc. (NASDAQ:NFLX), with 4.3 million shares worth more than $2.6 billion.
In its Q1 2021 investor letter, Polen Capital, an asset management firm, highlighted a few stocks and Netflix, Inc. (NASDAQ:NFLX) was one of them. Here is what the fund said:
“We purchased Netflix in March, initiating a 3% position in the Portfolio. We believe Netflix is a highly competitively advantaged company. It has recently met all our investment guardrails, and we anticipate it will remain sustainably above our guardrails over the next five years and beyond. We know Netflix for its ubiquitous streaming service and deep library of owned content. The company has made investments in this content (currently running at nearly $20 billion/year), generally keeping subscribers highly engaged and loyal to their service. The company has number one market share in 99% of markets globally, but it is our view that video streaming on-demand is still an underpenetrated space with many years of attractive growth likely ahead. The service is also relatively affordable at roughly $11/month on average globally.
We believe Netflix’s growth in content spend is beginning to moderate, which could allow margin expansion to continue for many years when paired with ongoing subscriber growth and price increases. While there is competition from the likes of Apple (Apple TV+), Amazon (Prime Video), Disney (Disney+ and Hulu), and others, we believe there can be a handful of winners in this industry. Already, we see many people subscribe to multiple streaming video services, with Netflix being their “anchor” service. That said, the barriers to entry are high, and we believe they are getting higher given the substantial amount of capital and size of the subscriber base required to maintain a competitive service for both viewers and content producers. Over the next five years, we expect Netflix’s earnings growth to be approximately 30% annualized and free cash flow to grow at an even higher rate.”
2. Impala Asset Management
YTD Gain as of December 23, 2021: 55.5%
Impala Asset Management is an investment firm headquartered in Connecticut. It is chaired by Robert Bishop and also has offices in Florida and New York. Bishop has had an illustrious career in finance and was previously the chief investment officer at Soros Fund Management, one of the most successful hedge funds of all time. Between 2015 and 2017, Impala delivered an average annual return of around 29% to investors. The fund focuses on investments in basic materials and services, offering a healthy mix of value and growth to investors.
A top holding of Impala Asset Management is Devon Energy Corporation (NYSE:DVN), an independent oil and gas firm. Among the hedge funds being tracked by Insider Monkey, Florida-based investment firm GQG Partners is a leading shareholder in Devon Energy Corporation (NYSE:DVN) as of Q3 2021, with 13.9 million shares worth more than $493 million.
In its Q4 2020 investor letter, GoodHaven Capital Management, an asset management firm, highlighted a few stocks and Devon Energy Corporation (NYSE:DVN) was one of them. Here is what the fund said:
“After a rough start to the year our two biggest energy holdings – WPX Energy rebounded materially in the last six months though energy was still our biggest detractor for the year. I’ve previously written about deciding earlier this year to direct new capital towards better businesses versus adding more to the energy sector, but given the material optionality at WPX, we opted to maintain a material exposure. Recently WPX announced an all stock merger with a larger competitor – Devon Energy – which will leave the new company with plenty of cash flow at lower oil prices, less leverage, and material upside to higher commodity prices.”
1. Rima Senvest Management
YTD Gain as of November 2021: 75%
Rima Senvest Management is a hedge fund led by Richard Mashaal and is based in New York. The fund managed to be one of the top performing money managers of the year due to a shrewd bet it made on GameStop at the beginning of the year, as well as smart investments in Canadian energy companies through the rest of 2021. Mashaal also profited by shorting Chinese firm Gaotu Techedu Inc. At the end of the third quarter of 2021, the fund had a portfolio value of around $3.5 billion.
One of the top holdings of Rima Senvest Management is eBay Inc. (NASDAQ:EBAY), the firm that owns and runs an internet platform that connects buyers with sellers. Among the hedge funds being tracked by Insider Monkey, United Kingdom-based investment firm Ako Capital is a leading shareholder in eBay Inc. (NASDAQ:EBAY), with 7.3 million shares worth more than $512 million.
In its Q4 2020 investor letter, Steel City Capital, an asset management firm, highlighted a few stocks and eBay Inc. (NASDAQ:EBAY) was one of them. Here is what the fund said:
“eBay (Long): EBAY continues to be a core holding in the Partnership’s long book despite not having any “sexy” attributes or unknown catalysts. I like EBAY because it checks the boxes of being both capital light and priced as a value stock (low multiple of free cash flow), factors which are attractive in a potentially inflationary environment.
In 3Q’20 the company printed $2.6 billion of revenue vs. guidance of $2.4 billion (a $200 million beat) while full year revenue guidance was taken up by $400 million, implying 4Q’20 would be higher by $200 million as well. Free cash flow from continuing ops was guided to $2.3 billion for the full year, slightly above the $2.0 billion the business regularly generated before getting a Covid/stimulus related boost.
EBAY will have about $4.6 billion of cash on hand at year end5 and should receive another $2.0 billion in after-tax proceeds this quarter related to the sale of its Classifieds portfolio6 . Additionally, the company will receive 540 million shares from Adevinta which are currently valued at ~$8.3 billion, and also holds a warrant to purchase a 5.0% stake in payment processor Adyen which was last valued at ~$775 million. Additional asset sales are also not out of the question7 . Backing everything out at today’s market cap of $38.2 billion gives a clean market cap for the core marketplace of $22.6 billion. At a minimum, I expect $2.0 billion of free cash flow in FY’21, with the potential for a higher figure to the extent the incoming administration is successful in cutting additional stimulus checks. By FY’22, free cash flow should ramp to $2.3 billion after incorporating a full year’s contribution from the managed payments initiative. This values EBAY at 9.6x free cash flow, or 11.7x excluding stock-based comp.”
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