Artisan Partners, a high value-added investment management firm, published its ‘Artisan Small Cap Fund’ second quarter 2021 investor letter – a copy of which can be downloaded here. A return of 4.36% was recorded by its Investor Class: ARTSX, 4.40% by its Advisor Class: APDSX, and 4.41% by its Institutional Class: APHSX for the second quarter of 2021, all above the Russell 2000® Growth Index that delivered a 3.92% return and the Russell 2000® Index that was up by 4.29% for the same period. 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 Artisan Partners, the fund mentioned Veracyte, Inc. (NASDAQ: VCYT) and discussed its stance on the firm. Veracyte, Inc. is a South San Francisco, California-based genomic diagnostics company with a $3.6 billion market capitalization. VCYT delivered a 4.74% return since the beginning of the year, while its 12-month returns are up by 61.55%. The stock closed at $52.97 per share on September 3, 2021.
Here is what Artisan Partners has to say about Veracyte, Inc. in its Q2 2021 investor letter:
“Among our bottom contributors in Q2 (includes) Veracyte. Veracyte develops and markets molecular tests designed to minimize ambiguity in the treatment of patients with cancer. These tests reduce unnecessary surgeries and help put cancer patients at ease when the decision is to “watch and wait.” Shares have been pressured amid a recent investment cycle (acquired Decipher and HalioDX) and a resurgence of the pandemic earlier this year weighing on testing volumes. In addition, the company’s founder and CEO recently announced she was moving to Executive Chair. Her replacement is the former CFO of Illumina, who is very knowledgeable in invitro diagnostics and played a critical role in the company’s international expansion efforts (which we expect him to pursue at Veracyte). We are maintaining our position as patients return to the clinic for testing and as management executes on its strong R&D pipeline, including an upcoming launch of a nasal swab lung cancer test. Longer term, the company is well-positioned to expand internationally as it ports its growing menu of tests onto the recently acquired nCounter instrument.”
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Based on our calculations, Veracyte, Inc. (NASDAQ: VCYT) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. VCYT was in 22 hedge fund portfolios at the end of the first half of 2021, compared to 19 funds in the previous quarter. Veracyte, Inc. (NASDAQ: VCYT) delivered a 55.62% 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.
