Alger, an investment management firm, published its “Alger Weatherbie Specialized Growth Fund” second quarter 2021 investor letter – a copy of which can be downloaded here. During the quarter, the largest portfolio sector weightings were Financials and Health Care. The largest sector overweight was Financials. Class A shares of the Alger Weatherbie Specialized Growth Fund outperformed the Russell 2500 Growth Index during the second quarter of 2021.. 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 Alger Weatherbie Specialized Growth Fund, the fund mentioned Chegg, Inc. (NYSE: CHGG), and discussed its stance on the firm. Chegg, Inc. is a Santa Clara, California-based education technology company, that currently has an $11.8 billion market capitalization. CHGG delivered a -9.27% return since the beginning of the year, while its 12-month returns are up by 6.64%. The stock closed at $83.16 per share on August 11, 2021.
Here is what Alger Weatherbie Specialized Growth Fund has to say about Chegg, Inc. in its Q2 2021 investor letter:
“Chegg, Inc. was among the top detractors from performance. Chegg provides online textbook rentals and other internet delivered services, such as homework help, tutoring and assistance with obtaining scholarships and finding internships. The company has been acquiring customers at low cost, in part because it is a leader in providing supplementary educational services to college students. Its Chegg Services offering helps students master subjects, get better grades, graduate and pursue careers. After posting a very strong 2020, the stock has experienced a general pullback based on the market perception that Chegg was simply a “Covid-19 beneficiary” and now with a reopening economy will experience weakness. We believe, however, that the company’s recent inroads to previously untapped international markets and new controls on shared password/account access are positive developments for Chegg.”
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Based on our calculations, Chegg, Inc. (NYSE: CHGG) does not belong in our list of the 30 Most Popular Stocks Among Hedge Funds. CHGG was in 33 hedge fund portfolios at the end of the first quarter of 2021. Chegg, Inc. (NYSE: CHGG) delivered a 7.70% 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.
