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Artisan Partners: “NatWest Group (NWG) was One of the Worst Investments We’ve Ever Made”

This post was originally published on this site

Artisan Partners, a high value-added investment management firm, published its ‘Artisan International Value Fund’ second quarter 2021 investor letter – a copy of which can be downloaded here. A return of 6.20% was recorded by its Investor Class: ARTKX, 6.25% by its Advisor Class: APDKX, and 6.27% by its Institutional Class: APHKX for the second quarter of 2021, all outperforming the MSCI EAFE Index that delivered a 5.17% return and the MSCI All Country World ex USA Index that was up by 5.48% 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 Artisan Partners, the fund mentioned NatWest Group plc (NYSE: NWG) and discussed its stance on the firm. NatWest Group plc is an Edinburgh, United Kingdom-based bank holding company with a $33.9 billion market capitalization. NWG delivered a 30.56% return since the beginning of the year, while its 12-month returns are up by 114.60%. The stock closed at $5.86 per share on September 1, 2021.

Here is what Artisan Partners has to say about NatWest Group plc in its Q2 2021 investor letter:

“It is worth discussing two positions that we sold, (which includes) Natwest Group. Natwest, a majority state-owned British banking and insurance firm, was one of the worst investments we’ve ever made.

Natwest Group was purchased in 2013. Since that initial purchase, the investment’s total return was negative 44% and the largest negative contribution to performance. Over the same time period, the MSCI EAFE Index has increased by 79%. It is important to consider the return of the index, as the damage done by your manager must include both the 44% loss and the opportunity cost of owning an average stock…” (Click here to see the full text)

Finance

Based on our calculations, NatWest Group plc (NYSE: NWG) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. NWG was in 5 hedge fund portfolios at the end of the first half of 2021, compared to 6 funds in the previous quarter. NatWest Group plc (NYSE: NWG) delivered a -1.34% 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.