Here is how one top hedge fund beat the market in 2020.
Prentice Capital was up 3% net in December, bringing its full-year return to 53.6% net for 2020. In their December email to investors, which was reviewed by ValueWalk, the Prentice team noted that they have protected capital during recent down markets.
Things are looking up
They also noted that the market ended 2020 strong. The S&P 50 was up 3.71%, while other indices also gained. Fears about the Georgia Senate runoff, the possibility of disruption from President Donald Trump, and spiking virus numbers didn't impact the market's climb.
The Prentice team noted that the consumer has been resilient and had money to spend on items rather than experiences or travel. They predicted that the Christmas season would be "surprisingly good" with a positive setup for 2021. The Prentice team also said companies that made it through the pandemic would be in a much better situation with less competition, cheaper rents, and "a consumer anxious to get out and about."
They also predict that the summer will be one of the best for the general entertainment sector. Further, the Prentice team noted that many stocks already reflect that sense of optimism, driven by the rollout of the COVID-19 vaccine. The stocks of profitless companies soared, lie cruise lines, movie theaters and other entertainment industries.
As a result, the expect this to be a good year for stock picking, adding that "the one-way trade of 2020 is over, and stocks will be discerning, with the critical focus being on results relative to expectations."The Prentice team also listed their five highest conviction longs. They are GoPro, Advantage Solutions, Coty, Fisker and United Natural Foods. As of December, they had 27 long positions and 43 shorts. Prentice is a low net long/ short equity manager that focuses on the U.S. consumer sector.
