Alger, an investment management firm, published its “Alger Mid Cap Focus Fund” third quarter 2021 investor letter – a copy of which can be downloaded here. During the third quarter, the largest portfolio sector weightings were Information Technology and Health Care. The largest sector overweight was Industrials. The portfolio had no exposure to the Utilities or Energy sectors and negligible exposure to the Real Estate and Materials sectors. You can take a look at the fund’s top 5 holdings to have an idea about their best picks for 2021.
Alger, in its Q3 2021 investor letter, mentioned Renalytix Plc (NASDAQ: RNLX) and discussed its stance on the firm. Renalytix Plc is a United Kingdom-based artificial intelligence-enabled in vitro diagnostics company with a $902.2 million market capitalization. RNLX delivered a 56.13% return since the beginning of the year, while its 12-month returns are up by 121.06%. The stock closed at $24.98 per share on October 22, 2021.
Here is what Alger has to say about Renalytix Plc in its Q3 2021 investor letter:
“Renalytix Plc was among the top detractors from performance. Renalytix is an artificial intelligence-enabled diagnostics company focused on optimizing clinical management of chronic kidney disease to drive improved patient outcomes and reduce health care costs. Renalytix is in the early stages of its U.S. launch of KidneylIntelX, a proprietary artificial intelligenceenabled algorithm that combines diverse data inputs (including validated blood-based biomarkers, inherited genetics and patient data from electronic health records) to predict progressive kidney function decline in patients with diabetic kidney disease and chronic kidney disease. Shares of Renalytix underperformed during the third quarter due to a recent decision to repeal the Centers for Medicare & Medicaid Services’ draft rule called Medicare Coverage of Innovative Technology (MCIT). Renalytix would benefit from the implementation of this rule, but we believe a new version of this rule will be introduced. Additionally, Renalytix has been successful with signing up several large health care systems to use KidneyIntelx.”
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Based on our calculations, Renalytix Plc (NASDAQ: RNLX) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. RNLX was in 10 hedge fund portfolios at the end of the first half of 2021, compared to 7 funds in the previous quarter. Renalytix Plc (NASDAQ: RNLX) delivered a -18.82% 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.
