LRT Capital Management, an investment management firm, published its second-quarter 2021 investor letter – a copy of which can be downloaded here. A return of +29.68% was recorded by the LRT Economic Moat strategy for the Q2 of 2021, extending its 12-month returns to +42.18%. 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 LRT Capital, the fund mentioned Marriott International, Inc. (NASDAQ: MAR), and discussed its stance on the firm. Marriott International, Inc. is a Bethesda, Maryland-based hotel, residential, and timeshare properties operator, that currently has a $45.01 billion market capitalization. MAR delivered a 4.74% return since the beginning of the year, extending its 12-month returns to 42.43%. The stock closed at $138.23 per share on August 09, 2021.
Here is what LRT Capital has to say about Marriott International, Inc. in its Q2 2021 investor letter:
“Marriott is the world’s largest hotel company followed closely by Hilton (HLT) and Intercontinental Hotels Group plc (IHG). The company owns a portfolio of brands from the low end (Courtyard, SpringHill Suites, Aloft), through the mid-tier (Marriott, Sheraton, Westin, Renaissance Hotels), to the luxury high end (JW Marriot, Ritz-Carlton, St. Regis). In total the company had 7,642 properties with over 1.4 million rooms as of the end of Q1 2021.
The majority (85%) of Marriott’s revenue comes from hotels in the United States, with the rest almost evenly split between Asia Pacific and Europe. Like it’s smaller peer, Hilton, the company today is almost exclusively a manager and franchisor of hotels, not a hotel owner. The company owns 66 hotels, manages 2,083 and franchises 5,493. Like all franchise-based businesses Marriott requires very little capital to grow as it utilizes the investment capital of its hotel-owners/partners to expand. Marriott currently faces a difficult operating environment due to the Covid-19 pandemic and uncertainty about the future of business travel. However, the company is an excellent operator with a somewhat leveraged capital structure (the company acquired Starwood Properties in late 2016) – if pent-up demand for travel materializes post-Covid, as we expect it will, the company will quickly go from losing money to raking in profits.
Shares are +10.66% year-to-date and +70.72% over the past twelve months.”
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 58 hedge fund portfolios at the end of the first quarter of 2021. Marriott International, Inc. (NASDAQ: MAR) delivered a -2.46% 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.
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Disclosure: None. This article is originally published at Insider Monkey.