Qualivian Investment Partners, an investment management firm, published its third-quarter 2021 investor letter – a copy of which can be downloaded here. A quarterly portfolio net return of -1.4% was recorded by the fund for the third quarter of 2021, trailing the S&P 500 TR Index which had a 0.6% gain for the same period. You can take a look at the fund’s top 5 holdings to have an idea about their best picks for 2021.
Qualivian Investment Partners, in its Q3 2021 investor letter, mentioned Visa Inc. (NYSE: V) and discussed its stance on the firm. Visa Inc. is a San Francisco, California-based financial services company with a $491.6 billion market capitalization. Visa delivered a 2.43% return since the beginning of the year, while its 12-month returns are up by 10.81%. The stock closed at $224.05 per share on October 12, 2021.
Here is what Qualivian Investment Partners has to say about Visa Inc. in its Q3 2021 investor letter:
“What Attracts Us
• Wide moat business with high barriers to entry:
− Duopoly with top 2 players (Mastercard/VISA) owning 68% share of credit and 94% of debit transactions
− A double sided financial transaction network with scale on each end
• High returns on equity (21.8%) and low levels of capital expenditure compared to sales (3.4%)
• Recurring revenue stream:
⎼ Toll booth based on transaction volumes
• Top security platform versus cyber fraud
Superior Reinvestment Opportunities:
• Long Runway: Secular cash to electronic payment trends supporting double digit growth in demand for the foreseeable future
Superior Management / Capital Allocation:
• Consistent deployment of excess cash flow towards value accretive acquisitions (V Europe), dividends and opportunistic
share repos…” (Click here to see the full text)
Based on our calculations, Visa Inc. (NYSE: V) ranks 5th in our list of the 30 Most Popular Stocks Among Hedge Funds. Visa was in 162 hedge fund portfolios at the end of the first half of 2021, compared to 164 funds in the previous quarter. Visa Inc. (NYSE: V) delivered a -8.92% 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.