Polen Capital, an investment management firm, published its “Polen U.S. SMID Company Growth Composite” first quarter 2021 investor letter – a copy of which can be downloaded here. A return of 2.35% was delivered by the fund for the first quarter of 2021, trailing its Russell 2500 Growth benchmark that delivered a 2.49% gain for the same period. You can view the fund’s top 5 holdings to have a peek at their top bets for 2021.
Polen Capital, in its Q1 2021 investor letter, mentioned Lending Tree (NASDAQ: TREE), and shared their insights on the company. Lending Tree is a Charlotte, North Carolina-based online lending marketplace that currently has a $2.7 billion market capitalization. Since the beginning of the year, TREE delivered a -25.38% return, while its 12-month returns are down by -24.16%. As of May 26, 2021, the stock closed at $204.31 per share.
Here is what Polen Capital has to say about Lending Tree in its Q1 2021 investor letter:
“We also exited our position in LendingTree. LendingTree is a two-sided marketplace in the consumer financial services vertical that connects borrowers with lenders. The company has built a brand over more than 15 years that offers savings to borrowers by having banks compete. The company had been acquired by IAC before the financial crisis and then was spun out in the worst of the global financial crisis (GFC). The company had a resurgence following the GFC by adding value in the mortgage market. The company used the strong cash flow generation in the model to expand into adjacencies and diversify the revenue base. The product offering has expanded over the years mostly through acquisition and includes credit cards, personal loans, and insurance.
This diversified strategy had paid dividends amid demand shocks, like the decline in demand for mortgages 18 months ago and then the demand destruction caused by the pandemic. However, diversification has some downsides. While it protects the company from major demand destruction shocks, in our opinion, it has made it hard to drive consistent long-term compounding as products have come in and out of favor due to macro factors. While we think that LendingTree has solved a unique problem, we do not believe it has the same compounding potential going forward and have exited the position in accordance with our process.”
Our calculations show that Lending Tree (NASDAQ: TREE) 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, Lending Tree was in 25 hedge fund portfolios, compared to 26 funds in the fourth quarter of 2020. TREE delivered a -26.80% return in the past 3 months.
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Disclosure: None. This article is originally published at Insider Monkey.