Tao Value, an investment management firm, published its first quarter 2021 investor letter – a copy of which can be downloaded here. A return of +3.96% was delivered by the fund for the Q1 of 2021, below the MSCI All Country World Index that delivered a +4.88% return for the same period. You can view the fund’s top 5 holdings to have a peek at their top bets for 2021.
Tao Value, in their Q1 2021 investor letter, mentioned Futu Holdings Limited (NASDAQ: FUTU), and shared their insights on the company. Futu Holdings Limited is an Admiralty, Hong Kong-based brokerage & wealth management platform that currently has a $22 billion market capitalization. Since the beginning of the year, FUTU delivered an impressive 227.19% return, massively extending its 12-month gains to 1,333.81%. As of April 29, 2021, the stock closed at $149.23 per share.
Here is what Tao Value has to say about Futu Holdings Limited in their Q1 2021 investor letter:
“Futu is a new “Opportunistic” position. It is an HK based online brokerage & wealth management platform with deep root in technology. Futu sits in the confluence of 3 strong favorable forces of Meteorology, Topography & Commander, yet was underpriced at the time of our entry. In terms of Meteorology, there is a huge addressable market of Chinese domestic middle to upper classes’ wealth being deployed to overseas assets allocation in the next decade. Additionally, the incumbents being disrupted are extremely weak in their digital transformation. On Topography, Futu’s user-centric product design built an intuitive front end and great user experience, while the digital native development framework built solid & reliable back end (including a self-developed order routing & execution system for HK market). This is a rare combination compared to both offline incumbents (who lack flashy front end & UX) & other new online disrupters (who lack solid infrastructure). On Commander factor, founder CEO Li Hua was a Tencent engineer in its early days with deep knowledge in product design and development. Li is said to be a fanatic product manager, to this day still at the front-line, alpha testing any new features. Based on analyses of these factors, I think Futu could compound its revenue at a very high rate with very high certainty and with strong operating leverage, putting our entry price very attractive compared to earning power in 3-5 years. Yet just as we finished building a small position, the price started to take off and more than tripled in a month. When such price action happens, it is obvious that Mr. Market has turned very euphoric to this name. I decided to trim but kept a reasonable position given its growth certainty.”
Our calculations show that Futu Holdings Limited (NASDAQ: FUTU) does not belong in our list of the 30 Most Popular Stocks Among Hedge Funds. As of the end of the fourth quarter of 2020, Futu Holdings Limited was in 17 hedge fund portfolios, compared to 15 funds in the third quarter. FUTU delivered a 50.58% return in the past 3 months.
The top 10 stocks among hedge funds returned 231.2% between 2015 and 2020, and outperformed the S&P 500 Index ETFs by more than 126 percentage points. We know it sounds unbelievable. You have been dismissing our articles about top hedge fund stocks mostly because you were fed biased information by other media outlets about hedge funds’ poor performance. You could have doubled the size of your nest egg by investing in the top hedge fund stocks instead of dumb S&P 500 ETFs. Here you can watch our video about the top 5 hedge fund stocks right now. All of these stocks had positive returns in 2020.
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