Perpetual Limited, an investment management firm, published its “Perpetual Global Innovation Fund” second quarter 2021 investor letter – a copy of which can be downloaded here. A quarterly portfolio return of 6.9% was recorded by the fund for the second quarter of 2021, and 38.2% for the financial year. You can view the fund’s top 5 holdings to have an idea about their top bets for 2021.
In the Q2 2021 investor letter of Perpetual Limited, the fund mentioned Twist Bioscience Corporation (NASDAQ: TWST), and discussed its stance on the firm. Twist Bioscience Corporation is a South San Francisco, California-based synthetic DNA and DNA products manufacturer, that currently has a $5.8 billion market capitalization. TWST delivered a -14.92% return since the beginning of the year, while its 12-month returns are up by 103.81%. The stock closed at $123.05 per share on July 30, 2021.
Here is what Perpetual Limited has to say about Twist Bioscience Corporation in its Q2 2021 investor letter:
“Twist Bioscience was the second biggest contributor during the quarter and the biggest contributor over the financial year. This was a position we actually exited in the March quarter at $192.50, a price we felt didn’t offer compelling value. We were lucky that Twist got caught up in the broader sell-off of high growth stocks earlier this year, giving us the opportunity to re-enter the position in May and June at an average price of $97.61. Often volatility works in your favour if you’re an active investor with the capability to act on the new opportunities being created by the market every day.
While Twist was the biggest contributor to fund performance over the year, it contributed just 12% of the fund’s return, with 88% of the fund’s return coming from other stocks. This is by design as what we’re aiming to do is build a portfolio containing a large number of high-returning but hopefully uncorrelated ideas. We think this is the best way to build a portfolio that’s both high-returning and resilient.”
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Based on our calculations, Twist Bioscience Corporation (NASDAQ: TWST) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. TWST was in 24 hedge fund portfolios at the end of the first quarter of 2021, compared to 23 funds in the fourth quarter of 2020. Twist Bioscience Corporation (NASDAQ: TWST) delivered a -0.46% 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.
