Should You Now Consider Disposing Your Block (SQ) Stake?

Farrer Wealth Advisors, an investment management firm, published its “Farrer Wealth Managed Solution” first quarter 2022 investor letter – a copy of which can be downloaded here. This quarter was tough on the managed solution, and while the fund always expected its portfolio would suffer 30%+ drawdowns at some stage, they never thought it would be in the first nine months of launching. The benchmark bottomed on 8th March, and since then has returned 8.90% whereas our Managed Solution has returned 15.67% (the below in USD; 8th March to 1st April 2022). Try to spend some time taking a look at the fund’s top 5 holdings to be informed about their best picks for 2022.

In its Q1 2022 investor letter, Farrer Wealth Advisors mentioned Block, Inc. (NYSE:SQ) and explained its insights for the company. Founded in 2009, Block, Inc. (NYSE:SQ)  is a San Francisco, California-based financial services and digital payments company with a $57.9 billion market capitalization. Block, Inc. (NYSE:SQ)  delivered a -35.21% return since the beginning of the year, while its 12-month returns are down by -57.26%. The stock closed at $104.64 per share on April 28, 2022.

Here is what Farrer Wealth Advisors has to say about Block, Inc. (NYSE:SQ) in its Q1 2022 investor letter:

Block (formerly Square): We ‘adopted’ Block’s stock after the company bought Afterpay, which we were investors in. We had been trimming the Afterpay position throughout 2021 and trimmed again after the acquisition, so the position was quite small. We held onto that small portion, as we did think the acquisition made sense and were excited to see the two companies integrate and for Block to create a closed loop network between merchants and consumers. However, the market punished most highly valued tech stocks over the last months, and we saw the position move against us by over 50%. We are firm believers that when a stock goes against you by 50%+, you need to do something about it. Either trim/sell and reinvest or buy more. In the case of Block, the original reason for holding was to see how the acquisition and integration with Afterpay panned out. The market did not give us the time to see this play out, thus we were not comfortable adding more to the position. Further for the stock to recover to our purchase price, we felt the company’s valuation would need to command a future exit multiple that the market would be unlikely to pay in this environment. Given this, we exited the remainder of the position.”

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Our calculations show that Block, Inc. (NYSE:SQ) ranks 21st on our list of the 30 Most Popular Stocks Among Hedge Funds. Block, Inc. (NYSE:SQ) was in 96 hedge fund portfolios at the end of the fourth quarter of 2021, compared to 98 funds in the previous quarter. Block, Inc. (NYSE:SQ) delivered a -5.20% return in the past 3 months.

In March 2022, we also shared another hedge fund’s views on Block, Inc. (NYSE:SQ) in another article. You can find other investor letters from hedge funds and prominent investors on our hedge fund investor letters 2022 Q1 page.

Disclosure: None. This article is originally published at Insider Monkey.