As per Choice Equities Capital Management’s Q1 2019 Investor Letter, the fund returned 10.5% in the quarter. If you are interested you can track down a copy of the letter here. The fund, which mainly focuses on small cap stocks, posted comments on several stocks in its portfolio, including its largest position – Rubicon Project, Inc. (NYSE:RUBI).
“Rubicon Project, Inc. (RUBI), our largest position in the quarter, performed well contributing ~7% to gross returns for the quarter. The Q4 report marked the first “clean” year over year comparison since the company became a one-sided supply-focused platform and featured strong 25% level revenue growth and impressive incremental margins in the ~90% range. The outlook, which includes continued mid-20s revenue growth and steady progress to a mid-20s EBITDA margin was equally strong. With new products soon to rollout to enable continued share gains against an industry backdrop that has advertisers focused on consolidating to fewer and more trustworthy platforms, the company appears well positioned to become the preeminent independent supply side platform in an industry featuring attractive mid-teens expected growth rates.”
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Rubicon Project, Inc. (RUBI) is a Los Angeles-based online advertising technology company with a market cap of $330.24 million. Year-to-date, the company’s stock gained 69.23%, and on May 14th it had a closing price of $6.38.
At Q4’s end, a total of 22 of the hedge funds tracked by Insider Monkey were long this stock, a change of 29% from the second quarter of 2018. On the other hand, there were a total of 10 hedge funds with a bullish position in RUBI a year ago. With the smart money’s sentiment swirling, there exists an “upper tier” of key hedge fund managers who were upping their stakes considerably (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Chuck Royce’s Royce & Associates has the most valuable position in The Rubicon Project Inc (NYSE:RUBI), worth close to $6.8 million, corresponding to 0.1% of its total 13F portfolio. The second largest stake is held by Raymond J. Harbert of Harbert Management, with a $6 million position; the fund has 6.2% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors that are bullish encompass Jim Roumell’s Roumell Asset Management, D. E. Shaw’s D E Shaw and Jim Simons’ Renaissance Technologies.
Warren Buffett never mentions this but he is one of the first hedge fund managers who unlocked the secrets of successful stock market investing. He launched his hedge fund in 1956 with $105,100 in seed capital. Back then they weren’t called hedge funds, they were called “partnerships”. Warren Buffett took 25% of all returns in excess of 6 percent.
For example S&P 500 Index returned 43.4% in 1958. If Warren Buffett’s hedge fund didn’t generate any outperformance (i.e. secretly invested like a closet index fund), Warren Buffett would have pocketed a quarter of the 37.4% excess return. That would have been 9.35% in hedge fund “fees”.
Actually Warren Buffett failed to beat the S&P 500 Index in 1958, returned only 40.9% and pocketed 8.7 percentage of it as “fees”. His investors didn’t mind that he underperformed the market in 1958 because he beat the market by a large margin in 1957. That year Buffett’s hedge fund returned 10.4% and Buffett took only 1.1 percentage points of that as “fees”. S&P 500 Index lost 10.8% in 1957, so Buffett’s investors actually thrilled to beat the market by 20.1 percentage points in 1957.
Between 1957 and 1966 Warren Buffett’s hedge fund returned 23.5% annually after deducting Warren Buffett’s 5.5 percentage point annual fees. S&P 500 Index generated an average annual compounded return of only 9.2% during the same 10-year period. An investor who invested $10,000 in Warren Buffett’s hedge fund at the beginning of 1957 saw his capital turn into $103,000 before fees and $64,100 after fees (this means Warren Buffett made more than $36,000 in fees from this investor).
As you can guess, Warren Buffett’s #1 wealth building strategy is to generate high returns in the 20% to 30% range.
We see several investors trying to strike it rich in options market by risking their entire savings. You can get rich by returning 20% per year and compounding that for several years. Warren Buffett has been investing and compounding for at least 65 years.
So, how did Warren Buffett manage to generate high returns and beat the market?
In a free sample issue of our monthly newsletter we analyzed Warren Buffett’s stock picks covering the 1999-2017 period and identified the best performing stocks in Warren Buffett’s portfolio. This is basically a recipe to generate better returns than Warren Buffett is achieving himself.
You can enter your email below to get our FREE report. In the same report you can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12-24 months. We initially share this idea in October 2018 and the stock already returned more than 150%. We still like this investment.
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