Black Bear Value Partners, an investment management firm, published its second quarter 2021 investor letter – a copy of which can be downloaded here. A quarterly portfolio net return of -1.5% was recorded by the fund for the second quarter of 2021, trailing the S&P 500 Index, and the HFRI Index that delivered a +8.3% and +6.2% return respectively 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 Black Bear Value Partners, the fund mentioned Berkshire Hathaway Inc. (NYSE: BRK-B), and discussed its stance on the firm. Berkshire Hathaway Inc. is a Omaha, Nebraska-based multinational conglomerate company, that currently has an $637.9 billion market capitalization. BRK-B delivered a 20.30% return since the beginning of the year, extending its 12-month revenues to 47.03%. The stock closed at $280.11 per share on July 12, 2021.
Here is what Black Bear Value Partners has to say about Berkshire Hathaway Inc. in its Q2 2021 investor letter:
“Please see Q1 letter for our Berkshire on a Napkin investment exercise. We have written on it extensively and will save your eyeballs from extraneous writing.
While Berkshire’s operating businesses saw their profits decline by ~10% in 2020, their long-term positioning at the cross-section of American business remains intact if not stronger.
Berkshire is very cheap for owning such high-quality businesses and will continue to grind higher and compound value for us.”
Based on our calculations, Berkshire Hathaway Inc. (NYSE: BRK-B) ranks 13th in our list of the 30 Most Popular Stocks Among Hedge Funds. Berkshire Hathaway Inc. was in 111 hedge fund portfolios at the end of the first quarter of 2021, compared to 110 funds in the fourth quarter of 2020. BRK-B delivered a 4.45% 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.