Alger, an investment management firm, published its “Alger Small Cap Focus Fund” second quarter 2021 investor letter – a copy of which can be downloaded here. During the quarter, the largest portfolio sector weightings were Health Care and Information Technology. The largest sector overweight was Health Care. Class A shares of the Alger Small Cap Focus Fund outperformed the Russell 2000 Growth Index during the second quarter of 2021. 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 Alger Small Cap Focus Fund, the fund mentioned CareDx, Inc (NASDAQ: CDNA), and discussed its stance on the firm. CareDx, Inc is a Brisbane, California-based molecular diagnostics company, that currently has an $3.8 billion market capitalization. CDNA delivered a 1.10% return since the beginning of the year, extending its 12-month returns to 122.17%. The stock closed at $73.25 per share on August 11, 2021.
Here is what Alger Small Cap Focus Fund has to say about CareDx, Inc in its Q2 2021 investor letter:
“CareDx, Inc. was among the top contributors to performance during the second quarter. CareDx provides high-value and differentiated diagnostic surveillance products for patients receiving organ or stem cell transplants. Its diagnostic tests can increase the chances of successful transplants by facilitating a better match between donors and recipients of stem cells and organs. In post transplant diagnostics, CareDx offers tests for monitoring signs of rejection in kidney and heart transplant patients. Shares of CareDx outperformed due to stronger-than-expected first quarter testing volumes, revenues and earnings.
Strong testing volumes were driven by continued adoption of CareDx’s heart and kidney rejection tests. In addition, a new reimbursement policy by Medicare will allow CareDx’s lung transplant rejection test to be commercialized early next year, which is sooner than previously expected.”
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Based on our calculations, CareDx, Inc (NASDAQ: CDNA) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. CDNA was in 23 hedge fund portfolios at the end of the first quarter of 2021, compared to 20 funds in the fourth quarter of 2020. CareDx, Inc (NASDAQ: CDNA) delivered a 14.08% 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.
