Alger, an investment management firm, published its “Alger Small 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 Health Care and Information Technology. The largest sector overweight was Health Care. The portfolio had no exposure to the Financials, Materials, Real Estate, or Utilities 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 CareDx, Inc. (NASDAQ: CDNA) and discussed its stance on the firm. CareDx, Inc. is a Brisbane, California-based precision medicine company with a $3.7 billion market capitalization. CDNA delivered a -0.51% return since the beginning of the year, while its 12-month returns are up by 43.64%. The stock closed at $72.08 per share on October 22, 2021.
Here is what Alger has to say about CareDx, Inc. in its Q3 2021 investor letter:
“CareDx, Inc. was among the top detractors from performance. CareDx provides high-value and differentiated diagnostic surveillance products for patients receiving organ or stem cell transplants. CareDx’s diagnostic tests can increase the chances of successful transplants by facilitating a better match between donors and recipients of stem cells and organs. In posttransplant diagnostics, CareDx offers tests for monitoring signs of rejection in kidney and heart transplant patients. Shares of CareDx underperformed during the third quarter due to concerns about potential competitive product launches in 2022. One competitor announced plans to launch a cell-free DNA heart transplant test and another competitor announced plans to launch a kidney transplant test. We believe CareDx has a very strong competitive offering and is well positioned to avoid having its products disrupted by new entrants. Additionally, we believe CareDx’s markets remain underpenetrated and the company is working to expand its lung transplant testing product.”
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 28 hedge fund portfolios at the end of the first half of 2021, compared to 23 funds in the previous quarter. CareDx, Inc. (NASDAQ: CDNA) delivered a -15.69% 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.
