Baron Funds, an asset management firm, published its “Baron Asset Fund” fourth quarter 2021 investor letter – a copy of which can be downloaded here. Against this backdrop, Baron Asset Fund (the “Fund”) gained 5.04% (Institutional Shares), while the Russell Midcap Growth Index (the “Index”) gained 2.85%, and the S&P 500 Index gained 11.03%. The Fund’s outperformance was attributable to favorable stock selection and tailwinds from certain style biases, notably its underexposure to the poor performing residual volatility and beta factors. Spare some time to check the fund’s top 5 holdings to have a clue about their top bets for 2022.
Baron Asset Fund, in its Q4 2021 investor letter, mentioned Zillow Group, Inc. (NASDAQ: Z) and discussed its stance on the firm. Zillow Group, Inc. is a Seattle, Washington-based online real estate marketplace company with a $14.0 billion market capitalization. Z delivered a -13.31% return since the beginning of the year, while its 12-month returns are down by -59.75%. The stock closed at $55.35 per share on January 17, 2022.
Here is what Baron Asset Fund has to say about Zillow Group, Inc. in its Q4 2021 investor letter:
“Real Estate investments detracted the most from relative performance, with real estate marketplace Zillow Group, Inc. accounting for all of the weakness. Zillow unexpectedly announced that it was exiting its homebuying business, as it became apparent that the company had overpaid for many homes. We were surprised and disappointed by these developments and decided to exit our position in the company.
Zillow Group, Inc. operates the leading residential real estate websites in the U.S. In 2018, Zillow entered the iBuying market through its Zillow Offers unit, which purchased and resold homes, while also providing title, escrow, and mortgage services. By 2020, Zillow Offers had grown rapidly, was available in 25 markets and generated $1.7 billion in revenues. We were excited by the rapid growth in this business segment, and we believed that it could become a significant contributor to Zillow’s overall profitability. In November 2021, Zillow unexpectedly announced that it was exiting the home business, as it became apparent that the company had overpaid for a large number of homes, leading to a $500 million write-off. Their explanation for this shocking development was that the valuation
algorithms they had developed had made dramatic errors. We were surprised and disappointed by these developments, which caused us to lose conviction in the company’s management and strategy. We exited the position during the quarter.”
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Our calculations show that Zillow Group, Inc. (NASDAQ: Z) failed to obtain a mark on our list of the 30 Most Popular Stocks Among Hedge Funds. Z was in 67 hedge fund portfolios at the end of the third quarter of 2021, compared to 76 funds in the previous quarter. Zillow Group, Inc. (NASDAQ: Z) delivered a -41.72% return in the past 3 months.
In December 2021, we also shared another hedge fund’s views on Z in another article. You can find other letters from hedge funds and prominent investors on our hedge fund investor letters 2021 Q4 page.
Disclosure: None. This article is originally published at Insider Monkey.
