Here’s Why Booking Holdings (BKNG) Landed in Ensemble Capital’s Detractor List

Ensemble Capital, an investment management firm, published its “Ensemble Fund” second quarter 2021 investor letter – a copy of which can be seen here.  A quarterly portfolio net return of 6.93% was recorded by the fund for the second quarter of 2021, below the S&P Midcap 500 Index that delivered an 8.55% gains for the same period. 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 Ensemble Capital, the fund mentioned Booking Holdings Inc. (NASDAQ: BKNG), and discussed its stance on the firm. Booking Holdings Inc. is a Norwalk, Connecticut-based travel company, that currently has an $89.2 billion market capitalization. BKNG delivered a -2.25% return since the beginning of the year, while its 12-month revenues are up by 26.54%. The stock closed at $2,130.43 per share on July 19, 2021.

Here is what Ensemble Capital has to say about Booking Holdings Inc. in its Q2 2021 investor letter:

Booking Holdings: This dominant online travel company saw its stock plummet during the early stages of the pandemic, but then came roaring back as it became clear that highly effective vaccines would be developed in record time. After performing about in line with the market until late April, the stock price weakened, finishing the quarter down 6%, as it became clear that a full reopening of European travel this summer is in jeopardy due to the continent’s difficulties with their vaccine rollout. But while this means that summer 2021 results may not rebound as much as we hoped, it is now clear from travel patterns in the US and China that people will return to travel with a vengeance as soon as it is feasible. Long-term demand for Booking’s services is not in doubt.”

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Based on our calculations, Booking Holdings Inc. (NASDAQ: BKNG) ranks 18th in our list of the 30 Most Popular Stocks Among Hedge Funds. Booking Holdings Inc. was in 103 hedge fund portfolios at the end of the first quarter of 2021, compared to 108 funds in the fourth quarter of 2020. BKNG delivered a  -7.49% return in the past 3 months.

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.