LRT Capital Management, an investment management firm, published its second-quarter 2021 investor letter – a copy of which can be downloaded here. A return of +29.68% was recorded by the LRT Economic Moat strategy for the Q2 of 2021, extending its 12-month returns to +42.18%. 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 LRT Capital, the fund mentioned Repligen Corporation (NASDAQ: RGEN), and discussed its stance on the firm. Repligen Corporation is a Waltham, Massachusetts-based bioprocessing-focused life sciences company, that currently has a $13.9 billion market capitalization. RGEN delivered a 32.65% return since the beginning of the year, extending its 12-month returns to 79.01%. The stock closed at $255.43 per share on August 09, 2021.
Here is what LRT Capital has to say about Repligen Corporation in its Q2 2021 investor letter:
“Based in Waltham, MA, Repligen makes equipment for the biologic drug manufacturing industry. The company’s main products are focus on filtration (48% of revenue), chromatography (20% of revenue), process analytics products (9% of revenue), as well as select proteins used in the manufacturing of biological drugs (22%). We believe that biological drugs represent the most exciting frontier of medicine today, with monoclonal antibodies and gene therapy amongst the most promising approaches to tackling rare diseases.
The manufacturing of biological drugs is very different from that of traditional, “small molecule” drugs. Whereas the construction of a traditional line for a traditional small molecule drug might cost as little as $5 million dollars, the development and scaling of a biological manufacturing line can cost well over $100million. Every biological manufacturing process is different, but their common feature is that the active ingredient in the drug is created by living cells and usually consists of a complex protein that is administered to the patient by injection. In the most general of terms the manufacturing of a biological drugs has the following stages:
● Creation and selection of cell culture to produce desired protein.
● Growth and amplification of selected cells – usually in a bioreactor.
● Filtration, purification, and isolation of active ingredient.
● Testing, quality assurance and packaging.Under CEO Tony Hunt, Repligen has successfully reoriented itself away from selling commoditized inputs to the biological manufacturing process, towards selling specialized proprietary equipment – largely accomplished through M&A. Revenue grew at a CAGR of 22% before Tony joined the company and at 41% since then. Importantly, this growth has not come at the expense of margins of ROIC, which haveremained very strong throughout the period.
Shares are +28.22% year-to-date and +62.45% over the past twelve months.”
Mila Supinskaya Glashchenko/Shutterstock.com
Based on our calculations, Repligen Corporation (NASDAQ: RGEN) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. RGEN was in 38 hedge fund portfolios at the end of the first quarter of 2021, compared to 37 funds in the fourth quarter of 2020. Repligen Corporation (NASDAQ: RGEN) delivered a 44.87% 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.
