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A Valuable Lesson Learned from TripAdvisor (TRIP)

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Jose Karlo Mari Tottoc
·4 min read
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Tollymore Investment Partners, a private investment partnership firm that invests in small quantities of publicly listed companies, published its third-quarter 2020 Investor Letter – a copy of which can be downloaded here. A return of 39.5% was recorded by the fund for the 1st 9 months of 2020, way above its MSCI ACWI benchmark that returned 13%. You can view the fund’s top 10 holdings to have a peek at their top bets for 2021.

Tollymore Investment Partners, in their Q3 2020 Investor Letter said that they learned a valuable lesson from their TripAdvisor, Inc. (NASDAQ: TRIP) misassumptions that made them a 'proverbial frog in the boiling water'. TripAdvisor, Inc. is an online travel company that currently has a $4.4 billion market cap. For the past 3 months, TripAdvisor, Inc. delivered a 71.35% return and settled at $33.43 per share at the closing of January 15th.

Here is what Tollymore Investment Partners has to say about TripAdvisor, Inc. in their Investor Letter:

"We used to believe that buying companies that have attractive long-term prospects, but which are facing short term, but surmountable, business problems was an attractive source of superior investment results. This may still be the case, but our investment history has demonstrated an inability to consistently profit from this.

The investments we made into TripAdvisor was, with hindsight, a bet on a revision of fundamental business progress that did not materialize. In such cases there exist winner take most potential economic outcomes, with demonstrable barriers to entry and an owner-operator business ethos.

It was our misassumption that a monopolistic outcome was unnecessary for outsized value creation. This was a philosophically inconsistent premise.

We considered TRIP part of a global duopoly in hotel meta. And in our view the principal competitor to TRIP’s product offering was the large portion of travel bookings and advertising still taking place offline. But we were too dismissive of the value that Google commands by being right at the top of the funnel for most hotel booking experiences. From this position Google has the power to inflate OTA and meta companies’ customer acquisition costs by replacing their organic results with ads or Google’s own inventory occupying the most valuable top-of-page real estate. As TRIP’s core hotel business stagnated, we were the proverbial frog in the boiling water.

The broader lesson here is that being a long-term investor does not mean you should not quit when you are wrong. The long-term investor badge of honour that many of us self-righteously parade around can really put our investment results in jeopardy by inhibiting the objective reasoning we are so fond of telling people we possess."

Przemek Klos/Shutterstock.com

Last December 2020, we published an article telling that TripAdvisor, Inc. (NASDAQ: TRIP) was in 28 hedge funds’ portfolio. Its all time high statistics is 43. TRIP delivered an 8.08% return in the past 12 months.

Our calculations showed that TripAdvisor, Inc. (NASDAQ: TRIP) does not belong to the 30 most popular stocks among hedge funds.

The top 10 stocks among hedge funds returned 216% since the end of 2014 and outperformed the S&P 500 Index ETFs by more than 121 percentage points. We know it sounds unbelievable. You have been dismissing our articles about top hedge fund stocks mostly because you were fed biased information by other media outlets about hedge funds’ poor performance. You could have doubled the size of your nest egg by investing in the top hedge fund stocks instead of dumb S&P 500 ETFs. Below you can watch our video about the top 5 hedge fund stocks right now. All of these stocks had positive returns in 2020.

Video: Top 5 Stocks Among Hedge Funds

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 most profitable companies in the world to pick the best large-cap stocks to buy. 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 website.

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