East 72, an investment management firm, published its third-quarter 2021 investor letter – a copy of which can be downloaded here. A quarterly portfolio gross return of 2.1% was recorded by the fund for the third quarter of 2021 and a +36.7% gross return over the fiscal year. You can take a look at the fund’s top 5 holdings to have an idea about their best picks for 2021.
East 72, in its Q3 2021 investor letter, mentioned BowX Acquisition Corp. (NASDAQ: BOWX) and discussed its stance on the firm. BowX Acquisition Corp. is a Menlo Park, California-based special purpose acquisition company with a $603.1 million market capitalization. BOWX delivered a -2.63% return for the past month and it closed at $9.99 per share on October 13, 2021.
Here is what East 72 has to say about BowX Acquisition Corp. in its Q3 2021 investor letter:
“In this respect, we have a small position in BOWX Acqusition Corp, the SPAC11 which is acquiring WeWork at an implied enterprise valuation of US$8.6billion ($6.55bn equity; $2.07bn debt12); this compares to the postulated IPO in Q3 2019 of US$47 billion. Whilst the delta variant has pushed back earnings forecasts in the current and 2022 year, on a pro-forma basis, we are paying a 6.25x EV/EBITDA multiple of current CY2023 estimates and around 4.4x for CY2024 for a preeminent franchise in the sector. These numbers will likely be adjusted downwards, the day after this quarterly is released given WeWork is holding an investor presentation on 7th October US time. We may take a larger position once the de-SPAC13is complete after 19th October.”
Based on our calculations, BowX Acquisition Corp. (NASDAQ: BOWX) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. BOWX was in 61 hedge fund portfolios at the end of the first half of 2021, compared to 63 funds in the previous quarter. BowX Acquisition Corp. (NASDAQ: BOWX) delivered a -6.90% 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.
