Alger, an investment management firm, published its “Alger Mid Cap Focus Fund” third quarter 2021 investor letter – a copy of which can be downloaded here. During the third quarter, the largest portfolio sector weightings were Information Technology and Health Care. The largest sector overweight was Industrials. The portfolio had no exposure to the Utilities or Energy sectors and negligible exposure to the Real Estate and Materials sectors. You can take a look at the fund’s top 5 holdings to have an idea about their best picks for 2021.
Alger, in its Q3 2021 investor letter, mentioned Genius Sports Limited (NYSE: GENI) and discussed its stance on the firm. Genius Sports Limited is a London, United Kingdom-based sports data and technology company with a $3.6 billion market capitalization. GENI delivered a 3.30% return since the beginning of the year, while its 12-month returns are up by 81.16%. The stock closed at $18.17 per share on October 22, 2021.
Here is what Alger has to say about Genius Sports Limited in its Q3 2021 investor letter:
“Genius Sports Limited was among the top detractors from performance. Genius Sports provides online sportsbooks with data from sports leagues. We view it as a picks-and-shovels sports betting company, so it isn’t dependent on the success of an individual gambling operator. The global online sports betting (OSB) market is forecast to grow from approximately $31 billion in gross gaming revenue (GGR) in 2020 to approximately $65 billion in 2025, which is a compound annual growth rate of 16%, and we believe Genius is positioned to increase its market share. The company has a 40%-50% market share of sports events currently and an ambitious target to reach a 5% take-rate on this global gaming market compared to its current take-rate of
1.75%. The take-rate is the portion of gross revenues generated by online gambling operators that Genius receives. The company also has the potential to benefit from the structuring of legalizing online gambling in New York and Florida. We believe the structuring is unfavorable for online gambling operators, but positive for providers of sports data. In our view, the company is also well positioned to benefit from the increasing importance of official data, a growing ad-tech business and the potential to cross sell additional services to sportsbooks, such as managing risk and trading of betting markets and streaming services.Shares of Genius Sports were volatile during the third quarter due to the expiry of pre-IPO shareholders’ lockup period and an existing competitor, Sportradar, going public via an IPO. A selloff of high-growth stocks in early July also hurt the performance of Genius Sports shares. While Sportradar gives investors another option to invest in sports betting, we believe Genius is well positioned to gain market share due to its exclusive NFL partnership.”
Based on our calculations, Genius Sports Limited (NYSE: GENI) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. GENI was in 39 hedge fund portfolios at the end of the first half of 2021, compared to 1 fund in the previous quarter. Genius Sports Limited (NYSE: GENI) delivered a 13.35% 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.
