Is DBS Group Holdings (DBSDY) a worthy equity investment?
Fiduciary management, an investment management company, has published its letter to investors “International Equity Fund” for the second quarter of 2021 – a copy of which can be found downloaded here. The IMF International portfolios gained approximately 4.7% (currency hedged) and 4.8% (unhedged currency) during the period, respectively, which compares to a gain in the MSCI EAFE index of 4 , 79% in local currency (LOC) and 5.17% in US dollars (USD). You can check out the top 5 holdings of the fund to get an idea of their top bets for 2021.
In Fiduciary Management’s Q2 2021 letter to investors, the fund mentioned DBS Group Holdings Ltd (NYSE: DBSDY), and discussed his position on the company. DBS Group Holdings Ltd is a Singapore-based banking and financial services company, which currently has a market capitalization of $ 58.6 billion. DBSDY has generated a return of 20.54% year-to-date, extending its 12-month returns to 53.35%. The stock closed at $ 90.57 per share on August 4, 2021.
Here’s what Fiduciary Management has to say about DBS Group Holdings Ltd in its Q2 2021 letter to investors:
“We have also initiated a new position in DBS Group Holdings Ltd., Singapore’s largest bank. CEO Piyush Gupta is considered one of the best banking CEOs in Asia and is known for investing early and aggressively in technology capabilities, which we see as a competitive advantage. The bank has an attractive growth track in the region (double-digit compound annual growth rate of earnings per share over the past decade) and has won numerous awards and accolades, including ‘Best Bank in the World’ and “The safest bank in Asia”. We view the business as a high quality franchise with a conservative underwriting culture, which trades at an undemanding valuation. “
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Based on our calculations, DBS Group Holdings Ltd (NYSE: DBSDY) was unable to secure a spot on our list of the 30 most popular stocks among hedge funds. DBS Group Holdings Ltd (NYSE: DBSDY) has generated a return of 3.01% in the past 3 months.
The reputation of hedge funds as savvy investors has been tarnished over the past decade, as their hedged returns could not keep up with the unhedged returns of stock indices. Our research has shown that small cap hedge fund stock selection managed to beat the market by double digits every year between 1999 and 2016, but the margin for outperformance has shrunk in recent years. Nonetheless, we were still able to identify in advance a select group of hedge funds that have outperformed S&P 500 ETFs by 115 percentage points since March 2017 (see details here). We were also able to identify in advance a select group of hedge funds that underperformed the market by 10 percentage points per year between 2006 and 2017. Interestingly, the margin of underperformance of these stocks has increased in recent years. Investors who are long in the market and short on these stocks would have reported more than 27% per year 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 was originally published on Monkey initiate.