Here’s Why Draco Global Became Bullish on SEI Investments (SEIC)

Draco Global, an investment management firm, published its first quarter 2021 investor letter – a copy of which can be downloaded here. A return of +6.7% was delivered by the fund for the first quarter of 2021, and since the beginning, it was + 8%. You can view the fund’s top 5 holdings to have a peek at their top bets for 2021.

Draco Global, in its Q1 2021 investor letter, mentioned SEI Investments Company (NASDAQ: SEIC), and shared their insights on the company. SEI Investments Company is an Oaks, Pennsylvania-based financial services company that currently has a $9 billion market capitalization. Since the beginning of the year, SEIC delivered a 9.65% return, extending its 12-month gains to 18.34%. As of May 24, 2021, the stock closed at $62.89 per share.

Here is what Draco Global has to say about SEI Investments Company in its Q1 2021 investor letter:

SEIC (EUR 7,573m) is a financial company that offers asset management, back and midlle office services mainly to banks, insurers, fund managers, investment advisers, and family offices. Its competitive advantage comes from its software and its platform through a SaSS business via subscriptions that provide recurring income.

SEIC managed more than $ 786m and collected $ 370 at the end of 2020 (before LSV). Since it charges a fee on the assets managed and administered, part of the sales presents a high recurring revenue.

In essence, SEIC helps its clients with accounting, reporting, regulatory and CRM tasks all through its proprietary platform. Once the customer integrates into the SEIC interface, there is a high changeover cost that provides high customer retention.

We believe that the outsourcing of fund management presents a good business opportunity for SEIC. A more demanding regulatory environment and the needs of Capex in technology and people make outsourcing a structural trend of long-term growth in the sector. The expansionary policies of central banks also benefit the appreciation of financial assets, attracting higher assets under Management that increase future commissions.

We calculate a 2023e target value of $ 80 per share, upside potential at the current price of + 25%, and an IRR of 7%. Our average purchase price is $ 60 per share.”

Pixabay/Public Domain

Our calculations show that SEI Investments Company (NASDAQ: SEIC) does not belong in our list of the 30 Most Popular Stocks Among Hedge Funds. As of the end of the first quarter of 2021, SEI Investments Company was in 27 hedge fund portfolios, compared to 33 funds in the fourth quarter of 2020. SEIC delivered a 9.30% return in the past 3 months.

The top 10 stocks among hedge funds returned 231.2% between 2015 and 2020, and outperformed the S&P 500 Index ETFs by more than 126 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. Here you can watch our video about the top 5 hedge fund stocks right now. All of these stocks had positive returns in 2020.

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