In a recently released The Vilas Fund‘s Q1 2019 Investor Letter, the fund disclosed 34.4% return for the quarter. You can download a copy of the letter here. When it comes to the fund’s comment on stocks in its portfolio, for Honda Motor Co., Ltd. (NYSE:HMC), the fund said the following:
“Honda (HMC)
Honda makes the best cars on the planet, from a reliability and cost of ownership perspective, and is trading at a 20% discount to the level it bottomed at in the 2008 financial crisis when car sales fell 40%. Unlike the US majors, Honda earned a profit every year during the financial crisis and, therefore, should trade at much higher levels than its competitors. With over 40% of its market capitalization in cash, a 3.5% dividend, earnings that have grown 6.2% annually over the last decade, and a large retained earnings position (they only pay out 25% of earnings in dividends), Honda should produce a 20% return without valuation expansion. Given that it is trading at only ⅔ of book value (which consists of cash and plant and equipment), we believe that expected returns will be significantly higher as the valuation expands to 1.2 times book value, a level more consistent with its average post the financial crisis.”
Pixabay/Public Domain
Honda Motor Company, Ltd. is a Japanese conglomerate corporation mostly known for its car and motorcycle manufacturing. YTD, the stock is down by 1.47%, and on May 10th it had a closing price of $26.09. Its market cap is of $44 billion, and P/E trading rate is 4.41.
At Q4’s end, a total of 13 of the hedge funds tracked by Insider Monkey were long this stock, a change of 18% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards HMC over the last 14 quarters. With hedgies’ capital changing hands, there exists a select group of key hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).
Among these funds, Renaissance Technologies held the most valuable stake in Honda Motor Co Ltd (NYSE:HMC), which was worth $34.1 million at the end of the third quarter. On the second spot was Arrowstreet Capital which amassed $28.5 million worth of shares. Moreover, D E Shaw, Millennium Management, and Marshall Wace LLP were also bullish on Honda Motor Co Ltd (NYSE:HMC), allocating a large percentage of their portfolios to this stock.
Before you make your next trade, you’ll want to know this.
Insider Monkey keeps track of top-rated corporate insiders and best performing hedge funds and the stocks they buy on a daily basis.
Our team has identified the five stocks that insiders and hedge funds are quietly accumulating before the broader market catches on… and none of the usual big name stocks were on the list.
They believe these five stocks are the five best companies for investors to buy now…
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.
Free Report Reveals
Warren Buffet's Secret Recipe
Our Price: $199FREE
We may use your email to send marketing emails about our services. Click here to read our privacy policy.
