Is it Time to Let Go of Your Greenidge Generation Holdings (GREE) Position?

1 Main Capital, an investment management firm, published its third-quarter 2021 investor letter – a copy of which can be downloaded here. A  quarterly net return of 9.7% was delivered by the fund for the third quarter of 2021, bringing the year-to-date return to 53.9%, compared to its benchmarks, through the first nine months of the year, the S&P 500 (SPX) and Russell 2000 (RTY) Indexes returned 15.9% and 12.4%, respectively. You can take a look at the fund’s top 5 holdings to have an idea about their best picks for 2021.

1 Main Capital, in its Q3 2021 investor letter, mentioned Greenidge Generation Holdings Inc. (NASDAQ: GREE) and discussed its stance on the firm. Greenidge Generation Holdings Inc. is a United States-based vertically integrated bitcoin mining and power generation facility operator, with a $980.6 million market capitalization. GREE delivered a 32.56% return since the beginning of the year, while its 12-month returns are up by 50.33%. The stock closed at $25.36 per share on November 12, 2010.

Here is what 1 Main Capital has to say about Greenidge Generation Holdings Inc. in its Q3 2021 investor letter:

“During the third quarter, the Fund was able to exit the opportunistic investment that was discussed in the Q1’21 and Q2’21 letters. As a reminder, the investment was made in January in the form of convertible preferred instrument in a bitcoin miner named Greenidge Generation, which was meant to be a bridge to the company coming public later in the year. As is typical with our opportunistic investments, we made this one with the expectation that we could make multiples of our capital within a relatively short period. After making the investment, the price of bitcoin increased significantly, while at the same time miners were forced out of China causing the difficulty of mining to decline. Thus, when Greenidge announced a go-public transaction it temporarily became a meme stock. Upon the closing of the transaction, we exited the investment with a gain of approximately 10x in less than a year. While this outcome was better than we were expecting when I made the initial investment, it is a good representation of the asymmetry we look for in our typical opportunistic investments.”

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Based on our calculations, Greenidge Generation Holdings Inc. (NASDAQ: GREE) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. Greenidge Generation Holdings Inc. (NASDAQ: GREEdelivered a -64.00% 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.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. Recently we came across a high-growth stock that has tons of hidden assets and is trading at an extremely cheap valuation. We go through lists like the 10 best growth stocks to buy to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage.

Disclosure: None. This article is originally published at Insider Monkey.