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 GXO Logistics, Inc. (NYSE: GXO) and discussed its stance on the firm. GXO Logistics, Inc. is a Greenwich, Connecticut-based contract logistics company with a $9.8 billion market capitalization. GXO delivered a 36.81% return since the beginning of the year, while its 12-month returns are up by 100.13%. The stock closed at $85.72 per share on October 22, 2021.
Here is what Alger has to say about GXO Logistics, Inc. in its Q3 2021 investor letter:
“GXO Logistics is the second-largest contract logistics provider globally. It operates an asset-light model that provides valueadded warehousing and distribution, order fulfillment, ecommerce and reverse logistics (or providing services for consumers who are returning purchased items to retailers) and other supply chain services. It has one of the largest platforms for outsourced e-commerce logistics globally, including the largest e-fulfillment platform in Europe. The company is characterized by multi-year, recurring contractual relationships in which GXO provides technology-enabled customized services to customers at a large scale. The company was spun off from XPO Logistics in July 2021, allowing the unlocking of equity value. The strong stock performance reflects a re-rating of the valuation multiple higher as investors appreciate the stock’s scarcity value (or the value of not having other publicly traded contract-logistics companies). The company’s exposure to secular growth trends in its end markets, its high percentage of recurring revenues, solid revenue growth and the potential for margin expansion also supported the performance of its shares.”
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Based on our calculations, GXO Logistics, Inc. (NYSE: GXO) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. GXO Logistics, Inc. (NYSE: GXO) delivered a -4.16% 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.