Tollymore Investment Partners, a private investment partnership firm that invests in small quantities of publicly listed companies, published its third-quarter 2020 Investor Letter – a copy of which can be downloaded here. A return of 39.5% was recorded by the fund for the 1st 9 months of 2020, way above its MSCI ACWI benchmark that returned 13%. You can view the fund’s top 10 holdings to have a peek at their top bets for 2021.
Tollymore Investment Partners, in their Q3 2020 Investor Letter said that they learned a valuable lesson from their TripAdvisor, Inc. (NASDAQ: TRIP) misassumptions that made them a ‘proverbial frog in the boiling water’. TripAdvisor, Inc. is an online travel company that currently has a $4.4 billion market cap. For the past 3 months, TripAdvisor, Inc. delivered a 71.35% return and settled at $33.43 per share at the closing of January 15th.
Here is what Tollymore Investment Partners has to say about TripAdvisor, Inc. in their Investor Letter:
“We used to believe that buying companies that have attractive long-term prospects, but which are facing short term, but surmountable, business problems was an attractive source of superior investment results. This may still be the case, but our investment history has demonstrated an inability to consistently profit from this.
The investments we made into TripAdvisor was, with hindsight, a bet on a revision of fundamental business progress that did not materialize. In such cases there exist winner take most potential economic outcomes, with demonstrable barriers to entry and an owner-operator business ethos.
It was our misassumption that a monopolistic outcome was unnecessary for outsized value creation. This was a philosophically inconsistent premise.
We considered TRIP part of a global duopoly in hotel meta. And in our view the principal competitor to TRIP’s product offering was the large portion of travel bookings and advertising still taking place offline. But we were too dismissive of the value that Google commands by being right at the top of the funnel for most hotel booking experiences. From this position Google has the power to inflate OTA and meta companies’ customer acquisition costs by replacing their organic results with ads or Google’s own inventory occupying the most valuable top-of-page real estate. As TRIP’s core hotel business stagnated, we were the proverbial frog in the boiling water.
The broader lesson here is that being a long-term investor does not mean you should not quit when you are wrong. The long-term investor badge of honour that many of us self-righteously parade around can really put our investment results in jeopardy by inhibiting the objective reasoning we are so fond of telling people we possess.”
Last December 2020, we published an article telling that TripAdvisor, Inc. (NASDAQ: TRIP) was in 28 hedge funds’ portfolio. Its all time high statistics is 43. TRIP delivered an 8.08% return in the past 12 months.
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Video: Top 5 Stocks Among Hedge Funds
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