Polen Capital, an investment management firm, published its “Polen Focus Growth” second quarter 2021 investor letter – a copy of which can be downloaded here. A quarterly return of 13.25% was delivered by the fund for the Q2 of 2021, outperforming both its Russell 1000 Growth benchmark that delivered an 11.93% return, and the S&P 500 Index that had an 8.55% gain 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 Polen Capital, the fund mentioned Alphabet Inc. (NASDAQ: GOOG) and discussed its stance on the firm. Alphabet Inc. is a Mountain View, California-based multinational conglomerate company with a $1.8 trillion market capitalization. GOOG delivered a 63.20% return since the beginning of the year, extending its 12-month returns to 74.93%. The stock closed at $2,859.00 per share on August 25, 2021.
Here is what Polen Capital has to say about Alphabet Inc. in its Q2 2021 investor letter:
“Alphabet was the top contributor to our return for the second consecutive quarter. The company has over $1 trillion market capitalizations. Yet, based on first quarter 2021 results, GOOG is currently still growing revenue at over 30% organically! Alphabet has generated earnings and intrinsic value growth for many years, driven largely by the mostly free services the company provide to people who can easily choose to stop using them and spend their time elsewhere.
That said, we are regularly asked about the perceived high regulatory risk around Alphabet. We examine risks to businesses and, in particular, regulatory risks through a lens of risk exposure versus actual risk. However, we do not believe risk exposure is the same as actual risk…” (Click here to see the full text)
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Based on our calculations, Alphabet Inc. (NASDAQ: GOOG) ranks 7th in our list of the 30 Most Popular Stocks Among Hedge Funds. GOOG was in 155 hedge fund portfolios at the end of the first half of 2021, compared to 159 funds in the previous quarter. Alphabet Inc. (NASDAQ: GOOG) delivered a 19.00% 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.
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage.
Disclosure: None. This article is originally published at Insider Monkey.
