Baron Funds, an asset management firm, published its “Baron Discovery Fund” third quarter 2021 investor letter – a copy of which can be downloaded here. A decline of 5.02% was delivered by the fund’s institutional shares for the third quarter of 2021, which was 0.63% better than the Russell 2000 Growth Index (the “Benchmark”). You can take a look at the fund’s top 5 holdings to have an idea about their best picks for 2021.
Baron Discovery Fund, in its Q3 2021 investor letter, mentioned Raven Industries, Inc. (NASDAQ: RAVN) and discussed its stance on the firm. Raven Industries, Inc. is a Sioux Falls, South Dakota-based agriculture company with a $2.1 billion market capitalization. RAVN delivered a 74.83% return since the beginning of the year, while its 12-month returns are up by 140.94%. The stock closed at $57.85 per share on November 16, 2021.
Here is what Baron Funds has to say about Raven Industries, Inc. in its Q3 2021 investor letter:
“During the quarter, Raven Industries Inc. agreed to be acquired by CNH Industrial at a 49% premium to the stock’s price the day before the announcement. Raven, a leader in precision and autonomous agriculture technology, will, in our opinion, significantly improve CNH’s ability to innovate and compete in its markets. We thank the management team for creating significant shareholder value during our ownership. Raven is the second company in the Fund’s portfolio to agree to be acquired in 2021 (the other was Medallia, Inc.) As we have written in the past, we never invest in a business with the primary investment thesis being that we believe the company is likely to be acquired. That said, we believe that our early stage, fast growing businesses tend to make great bolt-on acquisitions for largercap companies in need of additional growth, as was the case with Raven.”
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Based on our calculations, Raven Industries, Inc. (NASDAQ: RAVN) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. RAVN was in 22 hedge fund portfolios at the end of the first half of 2021, compared to 16 funds in the previous quarter. Raven Industries, Inc. (NASDAQ: RAVN) delivered a -0.53% 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.
