Guardian Fund on Roblox (RBLX): “The Opportunity for this Platform is Massive”

Guardian Fund, an investment management firm, published its second quarter 2021 investor letter – a copy of which can be downloaded here.  A quarterly portfolio return of +16.85% measured in euros, net of fees and expenses was recorded by the fund for the first half of 2021. You can view the fund’s top 5 holdings to have an idea about their top bets for 2021.

In the Q2 2021 investor letter of Guardian Fund, the fund mentioned Roblox Corporation (NYSE: RBLX), and discussed its stance on the firm. Roblox Corporation is a San Mateo, California-based video game developer, that currently has a $49.1 billion market capitalization. RBLX delivered a -7.07% return in the past month, while its 12-month revenues are up by 20.09%. The stock closed at $86.26 per share on July 09, 2021.

Here is what Guardian Fund has to say about Roblox Corporation in its Q2 2021 investor letter:

“The wonder-tale stories of children’s books show us that there are infinite possibilities of stories and worlds. The metaverse, the idea that describes the shared 3D spaces in a virtual universe, is enabling people to create fiction. Over the past six months, we initiated a new investment in Roblox. The firm was founded in 1989 by David Baszucki and Erik Kassel when they programmed a physics lab where students could study how cars would crash.

Today, Roblox has become a leading platform with a mission to build a human co-experience that enables billions of users to play, learn, and build friendships in the metaverse. Recent advances in cloud computing, computing devices, and machine learning, enable the materialization of the metaverse. Take what we have in virtual reality today and fast-forward a few decades. Humans will be able to experience unimaginable things and in a couple of millennia virtual economies are likely to become bigger than the physical trade on planet Earth.

Over the first quarter of 2021, Roblox reported 140% revenue growth, 42.1 million daily active users, and 9.7 billion engaged hours. The opportunity for this platform is massive.”

Based on our calculations, Roblox Corporation (NYSE: RBLX) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. Roblox Corporation was in 46 hedge fund portfolios at the end of the first quarter of 2021. RBLX delivered a 0.07% return in the past 5 days.

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.