Ensemble Capital, an investment management firm, published its third-quarter 2021 investor letter – a copy of which can be downloaded here. In the letter, the fund discussed why they see so much new value being created in the years ahead, the value that their portfolio of companies is helping to develop. You can take a look at the fund’s top 5 holdings to have an idea about their best picks for 2021.
Ensemble Capital, in its Q3 2021 investor letter, mentioned Illumina, Inc. (NASDAQ: ILMN) and discussed its stance on the firm. Illumina, Inc. is a San Diego, California-based biotechnology company with a $64.1 billion market capitalization. ILMN delivered a 27.72% return since the beginning of the year, while its 12-month returns are up by 60.81%. The stock closed at $409.93 per share on October 15, 2021.
Here is what Ensemble Capital has to say about Illumina, Inc. in its Q3 2021 investor letter:
“Illumina: While the stock has had quite the turbulent year so far, the company’s fundamentals have been persistently improving as demand for its sequencing instruments and consumables continues to grow in a robust manner with estimated revenue growth over 30% in 2021, after a decline of 9% in 2020. The growth is being spurred by increasing use of sequencing in applications spanning cancer treatment and screening, prenatal testing, population health studies, and tracking new Coronavirus variants. However, its recent acquisition of GRAIL, which Illumina had previously founded and spun out for development, has presented legal challenges from the competition monitoring authorities in the US and EU. GRAIL has recently begun commercializing the only non-invasive 50 cancer screening test leveraging Illumina’s gene sequencing technology which we believe will be immensely beneficial in finding and treating cancers early and will be very valuable for shareholders in the long term given the large market opportunity. Despite the
opportunity ahead, the uncertainty around GRAIL caused the stock to sell off by 13% in the third quarter, but the stock is still up 11% for the year.”
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Based on our calculations, Illumina, Inc. (NASDAQ: ILMN) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. ILMN was in 51 hedge fund portfolios at the end of the first half of 2021, compared to 52 funds in the previous quarter. Illumina, Inc. (NASDAQ: ILMN) delivered a -12.73% 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.
