Baron Funds, an asset management firm, published its “Baron Discovery Fund” third quarter 2021 investor letter – a copy of which can be downloaded here. A decline of 5.02% was delivered by the fund’s institutional shares for the third quarter of 2021, which was 0.63% better than the Russell 2000 Growth Index (the “Benchmark”). You can take a look at the fund’s top 5 holdings to have an idea about their best picks for 2021.
Baron Funds, in its Q3 2021 investor letter, mentioned The Beauty Health Company (NASDAQ: SKIN) and discussed its stance on the firm. The Beauty Health Company is a Long Beach, California-based beauty health platform with a $4.2 billion market capitalization. SKIN delivered a 26.41% return since the beginning of the year, while its 12-month returns are up by 147.57%. The stock closed at $28.02 per share on November 16, 2021.
Here is what Baron Funds has to say about The Beauty Health Company in its Q3 2021 investor letter:
“The Beauty Health Company is an innovative skin care and aesthetics company providing consumers the benefits of a professional medical treatment with the experience of a consumer brand. Shares outperformed in the third quarter following better-than-expected earnings results and the announcement of two new retail partnerships with Nordstrom and Ulta, where the company expects to sell an aesthetics device that customers can use in their home. We continue to be attracted to the company’s assetlight, recurring revenue business model and see the company doubling its revenues organically over the next few years. We also believe that Beauty Health will boost shareholder value over time through accretive acquisitions.”
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Based on our calculations, The Beauty Health Company (NASDAQ: SKIN) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. SKIN was in 33 hedge fund portfolios at the end of the first half of 2021. The Beauty Health Company (NASDAQ: SKIN) delivered a 30.26% 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.
