Baron Funds, an asset management firm, published its “Baron FinTech Fund” second quarter 2021 investor letter – a copy of which can be downloaded here. A return of 16.79% was delivered by the fund’s institutional shares for the Q2 of 2021, outperforming the S&P 500 Index, which appreciated 8.55%, and the FactSet Global FinTech Index which rose 5.40% 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 EPAM Systems, Inc. (NYSE: EPAM) and discussed its stance on the firm. EPAM Systems, Inc. is a Newtown, Pennsylvania-based software engineering company with a $36.4 billion market capitalization. EPAM delivered a 79.54% return since the beginning of the year, while its 12-month returns are up by 103.41%. The stock closed at $643.39 per share on September 3, 2021.
Here is what Baron Funds has to say about EPAM Systems, Inc. in its Q2 2021 investor letter:
“EPAM Systems, Inc. provides outsourced software development to business customers. Shares increased after the company reported quarterly results that beat Street estimates and raised full-year guidance. Client demand has quickly rebounded after last year’s slowdown as the pandemic has highlighted the need for greater investment in digital transformation. Management expects organic revenue growth to exceed 20%, with upside from accretive acquisitions. We continue to own the stock due to EPAM’s long runway for growth and strong execution.”
Photo by Austin Distel on Unsplash
Based on our calculations, EPAM Systems, Inc. (NYSE: EPAM) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. EPAM was in 33 hedge fund portfolios at the end of the first half of 2021, compared to 24 funds in the previous quarter. EPAM Systems, Inc. (NYSE: EPAM) delivered a 33.40% 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.
