Baron Funds, an asset management firm, published its “Baron Small Cap Fund” second quarter 2021 investor letter – a copy of which can be downloaded here. A return of 6.37% was delivered by the fund’s institutional shares for the Q2 of 2021, trailing the S&P 500 Index, which appreciated 8.55% and modestly outperforming the Russell 2000 Growth Index which rose 3.92% 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 Baron Funds, the fund mentioned Vertiv Holdings Co (NYSE: VRT) and discussed its stance on the firm. Vertiv Holdings Co is a Columbus, Ohio-based equipment and services for data centers provider with a $9.9 billion market capitalization. VRT delivered a 51.85% return since the beginning of the year, while its 12-month returns are up by 72.45%. The stock closed at $28.55 per share on August 30, 2021.
Here is what Baron Funds has to say about Vertiv Holdings Co in its Q2 2021 investor letter:
“Vertiv Holdings, LLC is a leading manufacturer of critical digital infrastructure technology for data centers, communication networks, and commercial and industrial environments. Vertiv reported organic sales growth of 19.5% in the last quarter, well above expectations. Orders were up 21% and backlog 31%, which are good indicators of long-term demand for its products. Margins also were much higher than projected leading to a large earnings beat, and we think there is opportunity for continued margin expansion. The company’s balance sheet is much improved, and it has an active acquisitions funnel. We believe that the company will continue to grow nicely and believe its stock still offers great promise, as it is inexpensive on an absolute basis and low relative to its peers.”
Photo by Austin Distel on Unsplash
Based on our calculations, Vertiv Holdings Co (NYSE: VRT) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. VRT was in 36 hedge fund portfolios at the end of the first half of 2021, compared to 39 funds in the previous quarter. Vertiv Holdings Co (NYSE: VRT) delivered a 13.56% 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.
