Giverny Capital: “Autohome (ATHM) Inc. is A Terrific Business”

Giverny Capital Asset Management LLC, an investment management firm, published its fourth-quarter 2020 Investor Letter – a copy of which can be downloaded here. A net return of 15.39% was recorded by the fund for the Q4 of 2020, above its S&P 500 benchmark that returned 12.15%. You can view the fund’s top 10 holdings to have a peek at their top bets for 2021.

Giverny Capital, in their Q4 2020 Investor Letter said that they trimmed some of their positions and used the proceeds to acquire a position in Autohome Inc. (NYSE: ATHM), since according to them, ATHM is a terrific business. Autohome Inc. is an automotive internet platform company that currently has a $13.6 billion market cap. For the past 3 months, ATHM delivered a decent 21.68% return and settled at $114.94 per share at the closing of January 26th.

Here is what Giverny Capital Asset Management has to say about Autohome Inc. in their Investor Letter:

“Nevertheless, our partners at Giverny Capital Inc. in Montreal have owned Autohome for some time and we’re persuaded they’ve identified a terrific business. Autohome operates the leading auto information and listings website in China. The Chinese new car market is considerably larger than the US market in terms of units. Plus, there are more car brands in China than in the West and consumers are less familiar with them, as many households are just now buying their first car. That creates great demand for unbiased information about cars. Autohome has 39 million average daily users, and more 90 carmakers pay to advertise on its sites.

While the primary business is information about new cars, the used car market could become very important over time. In the US, roughly 2.5 used cars are sold each year for every new car. In China, the ratio is the opposite. As more people own cars in China, and as the country gets wealthier, the used car market should grow rapidly. Bloomberg estimates the used car market in China should double in size over the next five years. We think Autohome should be the leader there, too.

Finally, Autohome is majority-owned and managed by the Ping An insurance company. We view Ping An as one of the best companies in China and among the most reliable fiduciaries we could choose there. Autohome grew earnings by 26% per year from 2016-2019. The business is growing a bit slower during the pandemic, but earnings should rise about 12% in 2021, per Wall Street consensus. The company earns high returns on capital and has roughly $2 billion in net cash, or one-sixth of its market capitalization. We paid a high-teens multiple of 2021 earnings estimates for our shares.”

Last December 2020, we published an article telling that Autohome Inc. (NYSE: ATHM) was in 17 hedge fund portfolios. Its all time high statistics is 24. ATHM delivered a 41.50% return in the past 12 months.

Our calculations shows that Autohome Inc. (NYSE: ATHM) 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.