Polen Capital Management, an funding administration agency, revealed its “Polen International Rising Markets Development Fund” second-quarter 2021 investor letter – a replica of which might be downloaded here. The Polen International Rising Markets Development Composite Portfolio (the “Portfolio”) was largely flat for the quarter, returning 0.17% gross of charges. This trailed the MSCI Rising Markets Index (the “Index”) return of two.29%. You’ll be able to check out the fund’s high 5 holdings to have an concept about their high bets for 2021.
Within the Q2 2021 investor letter of Polen Capital Administration, the fund talked about Tencent Music Leisure Group (NYSE: TME) and mentioned its stance on the agency. Tencent Music Leisure Group is a Nanshan, Shenzhen-based music firm with an $11.6 billion market capitalization. TME delivered a -63.67% return for the reason that starting of the yr, whereas its 12-month returns are down by -52.02%. The inventory closed at $7.13 per share on October 1, 2021.
Here’s what Polen Capital Administration has to say about Tencent Music Leisure Group in its Q2 2021 investor letter:
“One holding that skilled vital share value dislocation was Tencent Music, which carried out favorably for a lot of the quarter, earlier than being caught up within the well-publicized pressured deleveraging of 1 giant shareholder in late March. In simply three days the share value of Tencent Music fell by 50%. So far as we are able to collect, no elementary information stream was related to this decline. We consider its sell-off was pushed by the identical aggressive promoting strain that pressured comparable drops to the share costs of corporations akin to Baidu, Vipshop, Discovery Communications, and Viacom.
Our underlying view of the corporate’s prospects are unchanged. With the valuation halved, we thought of this non-fundamentally pushed fire-sale as a chance to purchase extra of an incredible asset at a beautiful value, and accordingly, added to our place. We have been happy to look at that Tencent Music administration probably reached an analogous conclusion, because it shortly reacted with a $1 billion USD buyback program.
Tencent Music might be regarded as the Spotify of China with just a few variations. The principle distinction is the bargaining energy dynamic. Tencent Music is the dominant audio streaming platform in China with over 600 million month-to-month customers, and roughly 80% market share by way of listeners. Within the West, three large file labels—Warner Music, Sony Music, and Common Music—management virtually the entire recording artists. In China, the market is rather more fragmented with just a few scaled Chinese language artist file labels, and the share of Warner, Sony, and Common in China stays low. For us, which means Tencent Music is a vital accomplice for any file label (or artist) that desires to succeed in music followers in China. Seemingly, it is a worth chain that favours Tencent Music in China in a means that we expect is materially extra enticing than it’s for Spotify’s/Apple Music’s/Amazon Music’s companies in different elements of the world. Tencent Music is extremely worthwhile with internet margins of roughly 14% versus Spotify, which has been loss making since 2015.”
Primarily based on our calculations, Tencent Music Leisure Group (NYSE: TME) was not capable of clinch a spot in our checklist of the 30 Most Popular Stocks Among Hedge Funds. TME was in 35 hedge fund portfolios on the finish of the primary half of 2021, in comparison with 63 funds within the earlier quarter. Tencent Music Leisure Group (NYSE: TME) delivered a -54.56% return up to now 3 months.
Hedge funds’ fame as shrewd buyers has been tarnished within the final decade as their hedged returns couldn’t sustain with the unhedged returns of the market indices. Our analysis has proven that hedge funds’ small-cap inventory picks managed to beat the market by double digits yearly between 1999 and 2016, however the margin of outperformance has been declining lately. Nonetheless, we have been nonetheless capable of determine prematurely a choose group of hedge fund holdings that outperformed the S&P 500 ETFs by 115 share factors since March 2017 (see the details here). We have been additionally capable of determine prematurely a choose group of hedge fund holdings that underperformed the market by 10 share factors yearly between 2006 and 2017. Curiously the margin of underperformance of those shares has been growing lately. Traders who’re lengthy the market and brief these shares would have returned greater than 27% yearly between 2015 and 2017. Now we have been monitoring and sharing the checklist of those shares since February 2017 in our quarterly e-newsletter.
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