Change of Digital Initiative Head Prompted Greenhaven Road Capital to Exit Nautilus Inc. (NLS)

Greenhaven Road Capital, an investment management firm, published its fourth-quarter 2020 Investor Letter – a copy of which can be downloaded here. A spectacular net return of 105% was recorded by the fund for the year end 2020, outperforming its Russell 2000 benchmark that returned 9.4%. You can view the fund’s top 5 holdings to have a peek at their top bets for 2021.

Greenhaven Road Capital, in their Q4 2020 Investor Letter said that they sold their positions in Nautilus, Inc. (NYSE: NLS) the company changed its head of digital initiatives. Nautilus, Inc. is a fitness equipment brand  company that currently has a $741.6 million market cap. For the past 3 months, NLS delivered a 9.22% return and settled at $24.51 per share at the closing of January 29th.

Here is what Greenhaven Road Capital has to say about Nautilus, Inc. in their investor letter:

“We owned shares of Nautilus Fitness (NLS), which I wrote about in the last letter, as part of a Covid recovery-themed basket of stocks. The valuation was reasonable, and they have been migrating towards selling exercise equipment – such as stationary bikes and Bowflex exercise machines – that is increasingly “connected” and therefore has the potential to add streaming subscriptions. Selling a bike with a high-margin subscription revenue stream attached is a much more interesting business than selling just the low-margin hardware. When I made the investment in Nautilus, I knew that they had under-invested in their technology platform and were playing catchup, but I believed they had excellent distribution, solid brands, and would continue benefiting from changes in consumer behaviors (e.g., not going to gyms). I sold the shares when Nautilus announced their new head of digital initiatives. The gentleman hired came from Dell, which is the source of several of my worst customer experiences. Going up against Peleton or Tonal with their product leads and balance sheet strength was going to be hard, but when I envisioned the fight led by this digital leader, all I could see was a lot of blood on a ratty Dell t-shirt. I hate to generalize and promote stereotypes, but our investment was predicated on being able to increasingly capture high-margin digital revenue streams, and going into a consumer-focused fight club with a Dell guy leading the charge made me nauseous. Since we typically own 15 companies, we have the luxury of being able to pick our fights. I sold and went searching for a better one.”

Last December 2020, we published an article telling that Nautilus, Inc. (NYSE: NLS) was in 17 hedge fund portfolios. Its all time high statistics is 27. NLS delivered a massive 784.84% return in the past 12 months.

Our calculations show that Nautilus, Inc. (NYSE: NLS) does not belong in our list of the 30 most popular stocks among hedge funds.

The top 10 stocks among hedge funds returned 216% since the end of 2014 and outperformed the S&P 500 Index ETFs by more than 121 percentage points. We know it sounds unbelievable. You have been dismissing our articles about top hedge fund stocks mostly because you were fed biased information by other media outlets about hedge funds’ poor performance. You could have doubled the size of your nest egg by investing in the top hedge fund stocks instead of dumb S&P 500 ETFs. Below you can watch our video about the top 5 hedge fund stocks right now. All of these stocks had positive returns in 2020.

Video: Top 5 Stocks Among Hedge Funds

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Disclosure: None. This article is originally published at Insider Monkey.