Third Point Management, an investment management firm, published its third-quarter 2021 investor letter – a copy of which can be downloaded here. A portfolio return of +12.5% was delivered by the flagship Offshore Fund, bringing year-to-date returns to +29.5%. You can take a look at the fund’s top 5 holdings to have an idea about their best picks for 2021.
Third Point Management, in its Q3 2021 investor letter, mentioned Dell Technologies Inc. (NYSE: DELL) and discussed its stance on the firm. Dell Technologies Inc. is a Round Rock, Texas-based computer software company with an $85.3 billion market capitalization. DELL delivered a 52.15% return since the beginning of the year, while its 12-month returns are up by 84.96%. The stock closed at $111.51 per share on October 29, 2021.
Here is what Third Point Management has to say about Dell Technologies Inc. in its Q3 2021 investor letter:
“Michael Dell has created substantial value for shareholders since re-listing the company several years ago. Earlier this year, Dell Technologies announced that it would be spinning its $50 billion stake in VMWare, which we believe will unlock the underappreciated value of the Dell server and PC businesses. Dell’s best attribute has been strong free cash flow generation, which the company has used to de-lever and create significant latent value for equity holders. Looking ahead, we believe this core Dell business, which still trades at a discount to its hardware peer group, should instead command a premium multiple thanks to its leading market share, profitability, and impressive execution. There are few large cap companies which possess a nearly 10% FCF yield, 2.5% dividend yield and 1.5x leverage ratio; Dell is one of them.”
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Based on our calculations, Dell Technologies Inc. (NYSE: DELL) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. DELL was in 62 hedge fund portfolios at the end of the first half of 2021, compared to 54 funds in the previous quarter. Dell Technologies Inc. (NYSE: DELL) delivered a 15.81% 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.
