Artko Capital, an investment management company, recently released its second quarter 2022 investor letter. A copy of the same can be downloaded here. In the second quarter, an average partnership interest in the fund was down 26.03% net of fees; to date, it is down 33.4% net of fees. However, investments in comparable indexes like Russell 2000, Russell Microcap, and the S&P 500 were down 17.2%, 19.0%, and 16.1%, respectively, in the second quarter. The majority of the fund’s performance was contributed by Currency Exchange International. For more information on the fund’s top picks in 2022, please check its top five holdings.
Artko Capital discussed companies like Potbelly Corporation (NASDAQ:PBPB). Headquartered in Chicago, Illinois, Potbelly Corporation (NASDAQ:PBPB) is a chain of restaurants specializing in Potbelly sandwiches. The stock of Potbelly Corporation (NASDAQ:PBPB) closed at $6.35 per share on August 18, 2022. In one month the stock returned 19.14% and its shares lost 0.63% of their value over the last 52 weeks. Potbelly Corporation (NASDAQ:PBPB) has a market capitalization of $182.252 million.
Here is what Artko Capital specifically said about Potbelly Corporation (NASDAQ:PBPB):
“Potbelly Corporation (NASDAQ:PBPB) – delivered 17.2% same-store sales (SSS) and 19% revenue growth in 2Q22, including record Average Unit Volume (AUV) at shop levels. The company reaffirmed its 2022 guidance which should result in nearly 20% revenue growth and sustainable cash flow generation. More importantly, the company’s continued commitment to having at least 25% of its locations be refranchised in the next couple of years while growing the overall location base, should result in substantial cash inflows and business model profitability. This was reaffirmed with the signing of a major delivery partnership with REEF, the largest operation of virtual restaurants, and reporting a healthy pipeline of new franchise candidates.”
Pixabay/Public Domain
Potbelly Corporation (NASDAQ:PBPB) is not on the list of 30 Most Popular Stocks Among Hedge Funds. As per our database, Potbelly Corporation (NASDAQ:PBPB) was held by 6 hedge fund portfolios at the end of the first quarter, and 7 in the previous quarter.
We discussed Potbelly Corporation (NASDAQ:PBPB) in another article and shared Artko Capital’s views about the company in the previous quarter. For more investor letters from hedge funds and other prominent investors, you can check our hedge fund investor letters Q2 2022 page.
Disclosure: 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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