A $13 billion hedge fund says there's an aspect to Jeff Bezos' bid for Whole Foods that is "pure genius" – the fact that Amazon is valued so highly by the market.

Highfields Capital Management, a Boston-based hedge fund that flies under the radar, sent a letter to clients this week that lays out the reasoning. A copy of the letter, which is private, was reviewed by Business Insider.

Here's what the founder, Jonathon S. Jacobson, wrote (emphasis added):

"Amazon's strategy will be to slash Whole Foods' margins by cutting prices drastically. This is the bear case for Target, Walmart, Kroger, AutoZone, O'Reilly, HD Supply, Fastenal, W.W. Grainger, Michaels, Dollar General and Dollar Tree – just to name a handful...

Amazon is paying a huge premium to the current market price for a business where its strategy will be to slash its profitability for the foreseeable future in order to grow market share. That's an awful lot of gross margin dollars to make up, particularly if you have to earn a return on your investment. But get this: Amazon doesn't, because its stock trades at almost 100x earnings and there is no market expectation of current profitability. Given this reality, Amazon can invest for the truly long term and earn its cost of capital – because it is close to zero! That is the true genius of this deal and highly illustrative of one of the most valuable competitive advantages that Jeff Bezos enjoys."

A Highfields spokesperson declined to comment.

Jacobson also highlighted his concerns over quants – one of the biggest trends in investing – in his letter to clients.

The Highfields Capital IV LP fund, the firm's biggest fund with about $5.6 billion under management, returned 1.2% for the first half of the year, according to investor documents. That's compared to a 9.3% gain in the S&P 500 and 11% gain for the MSCI World Index over the same period.