U.S. markets open in 8 hours 41 minutes
  • S&P Futures

    4,360.50
    -43.25 (-0.98%)
     
  • Dow Futures

    34,002.00
    -251.00 (-0.73%)
     
  • Nasdaq Futures

    14,318.50
    -182.50 (-1.26%)
     
  • Russell 2000 Futures

    2,007.90
    -23.80 (-1.17%)
     
  • Crude Oil

    83.64
    +0.33 (+0.40%)
     
  • Gold

    1,842.50
    +0.80 (+0.04%)
     
  • Silver

    23.84
    +0.05 (+0.19%)
     
  • EUR/USD

    1.1325
    -0.0005 (-0.05%)
     
  • 10-Yr Bond

    1.7350
    -0.0120 (-0.69%)
     
  • Vix

    29.90
    +1.05 (+3.64%)
     
  • GBP/USD

    1.3481
    -0.0009 (-0.07%)
     
  • USD/JPY

    113.9060
    -0.0540 (-0.05%)
     
  • BTC-USD

    36,087.52
    +109.62 (+0.30%)
     
  • CMC Crypto 200

    821.53
    +10.93 (+1.35%)
     
  • FTSE 100

    7,297.15
    -196.98 (-2.63%)
     
  • Nikkei 225

    27,113.13
    -475.24 (-1.72%)
     

Arquitos Capital on Nam Tai (NTP): “We Missed Out Massively by Selling Out When We Did”

  • Oops!
    Something went wrong.
    Please try again later.
·4 min read
In this article:
  • Oops!
    Something went wrong.
    Please try again later.
  • NTP

Arquitos Capital, an investment management firm, published its second-quarter 2021 investor letter – a copy of which can be downloaded here. A quarterly net return of 7.2% was delivered by the fund for the Q2 of 2021, bringing the year-to-date return to 51.3%. You can take a look at the fund’s top 5 holdings to have an idea about their top bets for 2021.

In the Q2 2021 investor letter of Arquitos Capital, the fund mentioned Nam Tai Property Inc. (NYSE: NTP) and discussed its stance on the firm. Nam Tai Property Inc. is a China-based holding company with a $951.4 million market capitalization. NTP delivered a 314.28% return since the beginning of the year, while its 12-month returns are up by 183.46%. The stock closed at $23.23 per share on August 23, 2021.

Here is what Arquitos Capital has to say about Nam Tai Property Inc. in its Q2 2021 investor letter:

"For the portfolio, despite the great recent performance, I made two mistakes that significantly affected results. One mistake involved Nam Tai Property (NTP), which was a more recent holding. Last quarter, I wrote about how we had trimmed our position in NTP. A chunk of NTP’s cash was caught in the Credit Suisse Greensill scandal; and it is likely the company will suffer some sort of permanent loss from it. The decision to invest company cash into Greensill Capital highlighted decision-making issues with the NTP management that activist investors are attempting to dislodge.

I sold out for that reason, and the fact that the special meeting that had previously been scheduled—and in which the activists were likely to prevail—was postponed.

I thought this would provide an opportunity to reinvest at a lower price. We did make a nearly 200% return in the equity and an even higher return in options. But we never had the chance to reinvest as I had intended. We sold out in the $14 range. Shares then began a rapid ascent, hitting a peak of $37.88 before coming back down to the mid $20s where they are now. Ouch.

In hindsight, it should have been obvious to me that investors friendly to both the entrenched management and to the activists would bid up shares. We missed out massively by selling out when we did."

Real Estate, Construction
Real Estate, Construction

youssef-abdelwahab-qyzo7TDSVQs-unsplash

Based on our calculations, Nam Tai Property Inc. (NYSE: NTP) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. NTP was in 3 hedge fund portfolios at the end of the first half of 2021, compared to 4 funds in the previous quarter. Nam Tai Property Inc. (NYSE: NTP) delivered a -8.23% 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.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage.

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