Baron Funds, an asset management firm, published its “Baron Health Care Fund” third quarter 2021 investor letter – a copy of which can be downloaded here. A return of 1.18% was delivered by the fund’s institutional shares for the third quarter of 2021, outperforming both its S&P 500 and Russell 3000 Health Care benchmarks that delivered 0.58% and 0.17% returns respectively for the same period. 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 Thermo Fisher Scientific Inc. (NYSE: TMO) and discussed its stance on the firm. Thermo Fisher Scientific Inc. is a Waltham, Massachusetts-based scientific instrumentation, reagents and consumables, and software services provisioner with a $243 billion market capitalization. TMO delivered a 32.42% return since the beginning of the year, while its 12-month returns are up by 16.89%. The stock closed at $616.80 per share on November 5, 2021.
Here is what Baron Funds has to say about Thermo Fisher Scientific Inc. in its Q3 2021 investor letter:
“We added to our position in Thermo Fisher Scientific Inc., a leading provider of life sciences tools & services. Thermo Fisher is a well-managed business with secular tailwinds in attractive life sciences end markets. At the company’s annual investor day, management provided long-term financial targets consisting of 7% to 9% core organic revenue growth and mid-teens annual earnings and free cash flow growth. We continue to like Thermo Fisher as a long-term earnings compounder.”
Photo by National Cancer Institute on Unsplash
Based on our calculations, Thermo Fisher Scientific Inc. (NYSE: TMO) ranks 29th in our list of the 30 Most Popular Stocks Among Hedge Funds. TMO was in 87 hedge fund portfolios at the end of the first half of 2021, compared to 79 funds in the previous quarter. Thermo Fisher Scientific Inc. (NYSE: TMO) delivered a 14.60% 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.
