Baron Funds, an asset management firm, published its “Baron Real Estate Fund” second quarter 2021 investor letter – a copy of which can be downloaded here. A quarterly return of 4.65% was delivered by the fund’s institutional shares for the Q2 of 2021, below both its MSCI Real Estate and MSCI US REIT benchmarks that delivered 6.99% and 11.74% returns respectively 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 The AZEK Company Inc. (NYSE: AZEK) and discussed its stance on the firm. The AZEK Company Inc. is a Chicago, Illinois-based outdoor living products manufacturer with a $7.07 billion market capitalization. AZEK delivered a 7.05% return since the beginning of the year, extending its 12-month returns to 6.38%. The stock closed at $41.16 per share on August 13, 2021.
Here is what Baron Funds has to say about The AZEK Company Inc. in its Q2 2021 investor letter:
“The AZEK Company Inc.: AZEK is a leading manufacturer of outdoor, non-wood building products including decking, railing, trim, and other leading outdoor products. 95% of cash flow is generated from the U.S. residential housing market. We believe the company has a compelling multi-year strategic growth plan that should result in strong share price appreciation in the next few years.”
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Based on our calculations, The AZEK Company Inc. (NYSE: AZEK) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. AZEK was in 29 hedge fund portfolios at the end of the first quarter of 2021, compared to 23 funds in the fourth quarter of 2020. The AZEK Company Inc. (NYSE: AZEK) delivered a -4.96% 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.
