Bireme Capital, an investment management firm, published its third-quarter 2021 investor letter – a copy of which can be seen here. Fundamental Value had its best year ever in 2021, returning 48.5% net of fees vs 28.7% for the S&P 500. The fund has now compounded at 25.9% net of fees since inception in June of 2016, beating the market by 800 bps annually over more than half a decade. While this level of absolute returns is unlikely to be sustainable, Bireme Capital is as confident as ever in its ability to significantly outperform a still richly-valued equity market. Spare some time to check the fund’s top 5 holdings to have a clue about their top bets for 2022.
Bireme Capital, in its Q4 2021 investor letter, mentioned Tencent Music Entertainment Group (NYSE: TME) and discussed its stance on the firm. Founded in 2016, Tencent Music Entertainment Group is a Shenzhen, China-based online music entertainment platform with a $5.8 billion market capitalization, and is currently spearheaded by its CEO, Zhu Liang. TME delivered a -49.78% return since the beginning of the year, while its 12-month returns are down by -87.01%. The stock closed at $3.44 per share on March 11, 2022.
Here is what Bireme Capital has to say about Tencent Music Entertainment Group in its Q4 2021 investor letter:
“We initiated one material long position during Q4, in a Chinese company called Tencent Music (TME).
One of the largest positions of the since-imploded Archegos fund, TME has fallen from $20 in Jan 2021 to less than $7 today, implying an enterprise value (net of cash) of less than $8b. We think this is extremely cheap for the dominant online music platform in China that currently generates $5b in revenue and $570m of trailing net profits.
With over 800m users across its many apps, Tencent Music is the primary way that people in China interact with online music. Today, the majority of revenue comes from virtual gifts sent to streamers in its “Social Entertainment” segment, which has grown revenue from $300m in 2016 to $2.9b in 2020. Within this segment, the most popular app is WeSing, a karaoke app with hundreds of millions of users in China. While competition from platforms such as Douyin (the Chinese version of TikTok) is increasing, WeSing continues to generate substantial profits for TME.”
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Our calculations show that Tencent Music Entertainment Group (NYSE: TME) failed to obtain a mark on our list of the 30 Most Popular Stocks Among Hedge Funds. TME was in 18 hedge fund portfolios at the end of the fourth quarter of 2021, compared to 24 funds in the previous quarter. Tencent Music Entertainment Group (NYSE: TME) delivered a -49.26% return in the past 3 months.
In February 2022, we also shared another hedge fund’s views on TME 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.
