Ensemble Capital, an investment management firm, published its third-quarter 2021 investor letter – a copy of which can be downloaded here. In the letter, the fund discussed why they see so much new value being created in the years ahead, the value that their portfolio of companies is helping to develop. You can take a look at the fund’s top 5 holdings to have an idea about their best picks for 2021.
Ensemble Capital, in its Q3 2021 investor letter, mentioned Mastercard Incorporated (NYSE: MA) and discussed its stance on the firm. Mastercard Incorporated is a Purchase, Harrison, New York-based financial services company with a $351.2 billion market capitalization. MA delivered a -0.26% return since the beginning of the year, while its 12-month returns are up by 7.34%. The stock closed at $356.00 per share on October 15, 2021.
Here is what Ensemble Capital has to say about Mastercard Incorporated in its Q3 2021 investor letter:
“Mastercard: Mastercard’s role as a payment network has seen strong growth as the economic recovery around the world continues, and customers go back to more regular spending habits. Core spending growth of 38% against the highly impacted COVID affected quarter last year and 25% over 2019 levels are fueling revenue growth of 20%+ despite still depressed cross border fees, whose expected recovery from a resumption in travel, has been delayed by the Delta variant waves. In addition, a lot of news flow about potential rival small but fast-growing payment tech firms has dampened sentiment on the stock but we believe the bar is high for firms to compete instead of partnering with Mastercard to transact payments. The stock finished the quarter down 3% and is flat for the year.”
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Based on our calculations, Mastercard Incorporated (NYSE: MA) ranks 6th in our list of the 30 Most Popular Stocks Among Hedge Funds. MA was in 156 hedge fund portfolios at the end of the first half of 2021, compared to 151 funds in the previous quarter. Mastercard Incorporated (NYSE: MA) delivered a -2.59% 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.
