Is Sea Limited (SE) A Great Investment Choice?

ClearBridge Investments, an investment management firm, published its “International Growth ADR Strategy” second quarter 2021 investor letter – a copy of which can be downloaded here. The ClearBridge International Growth ADR Strategy outperformed its MSCI EAFE Index benchmark. The Strategy delivered gains across seven of the 10 sectors in which it was invested (out of 11 total), with the consumer staples, IT and consumer discretionary sectors the primary contributors. You can view the fund’s top 5 holdings to have a peek at their top bets for 2021.

In the Q2 2021 investor letter of ClearBridge Investments, the fund mentioned Sea Limited (NYSE: SE), and discussed its stance on the firm. Sea Limited is a Singapore-based technology conglomerate, that currently has a $145.5 billion market capitalization. SE delivered a 39.41% return since the beginning of the year, extending its 12-month revenues to 145.12%. The stock closed at $280.94 per share on July 13, 2021.

Here is what ClearBridge Investments has to say about Sea Limited in its Q2 2021 investor letter:

“We have also been active in managing our growth exposure in the IT and Internet sectors. In addition to sales of several emerging growth names, we added a new emerging growth company in Sea Limited. Sea operates a leading global video game platform (Garena), the leading e-commerce platform in Southeast Asia (Shopee) and an emerging payments/digital banking segment (SeaMoney). While the company is investing heavily into e-commerce and payments, we like the fact that this growth is being funded by its highly profitable gaming segment. We see a long runway for growth across Sea’s businesses with multiple opportunities like e-commerce expansion in Latin America not fully factored into the valuation today. The company also has a well-respected management team that has successfully executed in expanding its total addressable market.”


Based on our calculations, Sea Limited (NYSE: SE) ranks 22nd in our list of the 30 Most Popular Stocks Among Hedge Funds. Sea Limited was in 98 hedge fund portfolios at the end of the first quarter of 2021, compared to 115 funds in the fourth quarter of 2020. SE delivered a 13.01% 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.