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Here’s Why Weitz Investment Disposed its Redwood Trust (RWT) Position

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Jose Karlo Mari Tottoc
·3 min read
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Weitz Investment Management, an investment management firm, published its “Partners III Opportunity Fund” fourth quarter 2020 investor letter – a copy of which can be downloaded here. A return of 8.92% was recorded by the fund’s Institutional Class in the fourth quarter of 2020, below its S&P 500 benchmark that delivered a 12.15% return and Russell 3000 that had a gain of 14.68% in the same period. You can view the fund’s top 5 holdings to have a peek at their top bets for 2021.

Weitz Investment Management, in their Q4 2020 investor letter, mentioned Redwood Trust, Inc. (NYSE: RWT) and emphasized their views on the company. Redwood Trust, Inc. is a Mill Valley, California-based real estate investment trust company that currently has a $1.2 billion market capitalization. Since the beginning of the year, RWT delivered a 19.13% return, impressively extending its 12-month gains to 141.01%. As of March 30, 2021, the stock closed at $10.46 per share.

Here is what Weitz Investment Management has to say about Redwood Trust, Inc. in their Q4 2020 investor letter:

"Long-time holding Redwood Trust was one of our most significantly impacted investments this year, as credit markets seized even more severely than equities in the first quarter, forcing management to take decisive steps to shore up the company’s balance sheet and liquidity. These actions were necessary and well-received, helping shares recover some of the first quarter’s losses. As shares recovered, however, what we considered to be a less favorable risk/reward outlook led us to close our position during the third quarter."

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Our calculations show that Redwood Trust, Inc. (NYSE: RWT) does not belong in our list of the 30 Most Popular Stocks Among Hedge Funds. As of the end of the fourth quarter of 2020, Redwood Trust, Inc. was in 22 hedge fund portfolios, compared to 15 funds in the third quarter. RWT delivered a 19.27% return in the past 3 months.

The top 10 stocks among hedge funds returned 231.2% between 2015 and 2020, and outperformed the S&P 500 Index ETFs by more than 126 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. Here you can watch our video about the top 5 hedge fund stocks right now. All of these stocks had positive returns in 2020.

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 15 best innovative stocks to buy 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 website:

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