In a recently published Midwood Capital Management‘s Q1 2019 Investor Letter, the fund disclosed a return of 10.6% for the quarter. If you are interested you can download a copy of the letter here. Aside from reporting about its quarterly performance, Midwood Capital Management also shared its latest thought on several companies in its equity portfolio. Among those stocks was Nexstar Media Group, Inc. (NASDAQ:NXST), which was also the top contributor to the fund’s positive quarterly performance.
•Nexstar Media Group, Inc. (NXST; $115.30; $5.3billion market cap)3: This stalwart of our portfolio was the top contributor to Q1’s performance, adding over 430 bps to our gross return. The stock delivered a total return of 38.5% in the first quarter as the market digested the planned acquisition of Tribune Media Company (which will make it the nation’s largest independent broadcaster), the company delivered record financial results for the fourth quarter of 2018 and reiterated its forward free cash flow guidance, and the company announced proceeds from station divestitures (a requirement for approval of the Tribune deal) that were 30% higher than consensus expectations. We have owned NXST for nearly eight years and have watched it grow from approximately $200 million in market cap to over $5 billion. NXST remains the Fund’s second largest position as we continue to see compelling value”
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Nexstar Media Group the biggest TV station operator in the US, providing its professional services to almost 39% of homes. It has a market cap of $5.07 billion while trading at a price-to-earnings ratio of 13.41. Year-to-date, the company’s stock gained 37.75%, having a closing price of $110.08 on May 7th.
At the end of the fourth quarter, a total of 34 of the hedge funds tracked by Insider Monkey were long this stock, a change of -8% from the previous quarter. On the other hand, there were a total of 40 hedge funds with a bullish position in NXST a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were upping their holdings significantly (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Snehal Amin’s Windacre Partnership has the largest position in Nexstar Media Group, Inc. (NASDAQ:NXST), worth close to $198.6 million, corresponding to 11.4% of its total 13F portfolio. The second largest stake is held by Hound Partners, managed by Jonathan Auerbach, which holds a $178.3 million position; 5.7% of its 13F portfolio is allocated to the stock. Some other members of the smart money with similar optimism comprise Claus Moller’s P2 Capital Partners, Parag Vora’s HG Vora Capital Management and Peter S. Park’s Park West Asset Management.
Dislcosure: None.
This article is originally published at Insider Monkey.
Warren Buffett never mentions this but he is one of the first hedge fund managers who unlocked the secrets of successful stock market investing. He launched his hedge fund in 1956 with $105,100 in seed capital. Back then they weren’t called hedge funds, they were called “partnerships”. Warren Buffett took 25% of all returns in excess of 6 percent.
For example S&P 500 Index returned 43.4% in 1958. If Warren Buffett’s hedge fund didn’t generate any outperformance (i.e. secretly invested like a closet index fund), Warren Buffett would have pocketed a quarter of the 37.4% excess return. That would have been 9.35% in hedge fund “fees”.
Actually Warren Buffett failed to beat the S&P 500 Index in 1958, returned only 40.9% and pocketed 8.7 percentage of it as “fees”. His investors didn’t mind that he underperformed the market in 1958 because he beat the market by a large margin in 1957. That year Buffett’s hedge fund returned 10.4% and Buffett took only 1.1 percentage points of that as “fees”. S&P 500 Index lost 10.8% in 1957, so Buffett’s investors actually thrilled to beat the market by 20.1 percentage points in 1957.
Between 1957 and 1966 Warren Buffett’s hedge fund returned 23.5% annually after deducting Warren Buffett’s 5.5 percentage point annual fees. S&P 500 Index generated an average annual compounded return of only 9.2% during the same 10-year period. An investor who invested $10,000 in Warren Buffett’s hedge fund at the beginning of 1957 saw his capital turn into $103,000 before fees and $64,100 after fees (this means Warren Buffett made more than $36,000 in fees from this investor).
As you can guess, Warren Buffett’s #1 wealth building strategy is to generate high returns in the 20% to 30% range.
We see several investors trying to strike it rich in options market by risking their entire savings. You can get rich by returning 20% per year and compounding that for several years. Warren Buffett has been investing and compounding for at least 65 years.
So, how did Warren Buffett manage to generate high returns and beat the market?
In a free sample issue of our monthly newsletter we analyzed Warren Buffett’s stock picks covering the 1999-2017 period and identified the best performing stocks in Warren Buffett’s portfolio. This is basically a recipe to generate better returns than Warren Buffett is achieving himself.
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