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 FirstService Corporation (NASDAQ: FSV), and discussed its stance on the firm. FirstService Corporation is a Toronto, Canada-based residential property managers company, that currently has an $8.3 billion market capitalization. FSV delivered a 39.12% return since the beginning of the year, extending its 12-month returns to 64.65%. The stock closed at $189.70 per share on August 11, 2021.
Here is what Alger Weatherbie Specialized Growth Fund has to say about FirstService Corporation in its Q2 2021 investor letter:
“FirstService Corp. was among the top contributors to performance. FirstService is a leading provider of property management services to owners and homeowners associations of community and high-rise properties, as well as branded services such as California Closets and CertaPro Painters for homeowners. FirstService continues to extend its significant scale advantage by using its free cash flow and strong balance sheet to complete value-enhancing acquisitions within the property management industry. We believe its ability to provide a greater breadth of higher quality services has positioned the company to gain significant market share.
The company reported another quarter with mid single-digit revenue growth as expected, while its profit margin improvement exceeded expectations, a result of strong results for its services that support transfer of property ownership during a time period when the company’s amenities services experienced seasonal weakness. Additionally, the company has been building momentum with its branded services such as California Closets as homeowners increasingly embrace do it for me rather than do it yourself. The company also united its restoration subsidiaries under a single brand called ‘First Onsite.'”
Photo by Blake Wheeler on Unsplash
Based on our calculations, FirstService Corporation (NASDAQ: FSV) does not belong in our list of the 30 Most Popular Stocks Among Hedge Funds. FSV was in 17 hedge fund portfolios at the end of the first quarter of 2021, compared to 16 funds in the fourth quarter of 2020. FirstService Corporation (NASDAQ: FSV) delivered a 22.71% 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.
