U.S. Markets open in 5 hrs 58 mins

Baron Funds: “Marriott (MAR) Remains a Strong Free Cash Flow Business”

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

Baron Funds, an asset management firm, published its “Baron Growth Fund” second quarter 2021 investor letter – a copy of which can be downloaded here. A quarterly return of 7.80% was delivered by the fund’s institutional shares for the Q2 of 2021, outperforming its primary benchmark, the Russell 2000 Growth Index, which rose to 4.88%, but below the S&P 500 Index that delivered an 8.55% return for the same period. 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 Baron Funds, the fund mentioned Marriott International, Inc. (NASDAQ: MAR) and discussed its stance on the firm. Marriott International, Inc. is a Bethesda, Maryland-based lodging facility and vacation timesharing operator with a $43.9 billion market capitalization. MAR delivered a 2.27% return since the beginning of the year, while its 12-month returns are up by 30.88%. The stock closed at $135.10 per share on August 30, 2021.

Here is what Baron Funds has to say about Marriott International, Inc. in its Q2 2021 investor letter:

"Marriott Vacations Worldwide Corp., a developer and seller of timeshares, detracted in the quarter on investor concerns about how the Delta variant of COVID-19 would impact leisure travel. Shares were also pressured by the possibility of higher mortgage rates. While both developments are shortterm concerns, Marriott Vacations has seen no impact from either as its business is recovering quickly and the securitization market is at its best levels ever. Marriott Vacations remains a strong free cash flow business."

becky-phan-n7kVILbNnNU-unsplash

Based on our calculations, Marriott International, Inc. (NASDAQ: MAR) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. MAR was in 49 hedge fund portfolios at the end of the first half of 2021, compared to 58 funds in the previous quarter. Marriott International, Inc. (NASDAQ: MAR) delivered a -6.76% 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.