Baron Funds, an asset management firm, published its “Baron FinTech Fund” second quarter 2021 investor letter – a copy of which can be downloaded here. A return of 16.79% was delivered by the fund’s institutional shares for the Q2 of 2021, outperforming the S&P 500 Index, which appreciated 8.55%, and the FactSet Global FinTech Index which rose 5.40% for the same period. 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 Baron Funds, the fund mentioned SoFi Technologies, Inc. (NASDAQ: SOFI) and discussed its stance on the firm. SoFi Technologies, Inc. is a San Francisco, California-based personal finance company with a $12.1 billion market capitalization. SOFI delivered a 21.86% return since the beginning of the year and it closed at $15.16 per share on September 3, 2021.
Here is what Baron Funds has to say about SoFi Technologies, Inc. in its Q2 2021 investor letter:
“We invested in SoFi Technologies, Inc., an online consumer finance company or “neobank,” through a SPAC-PIPE transaction. The company was founded in 2011 to refinance student loans into lower interest rates and has since expanded into other financial services, such as bank accounts, debit and credit cards, brokerage, and cryptocurrency trading. We believe that SoFi now has the broadest product suite of any neobank in the U.S., and we view the core lending segment as a differentiated product line that few other neobanks offer. With most competitors targeting un-banked and under-banked individuals, we believe SoFi’s focus on a higher-income demographic coupled with its wide range of products positions it to be one of the leading digital banks. The company’s product breadth enables it to serve customers throughout their lives, such as offering student loan refinancing for new graduates or brokerage accounts when those graduates accumulate savings. SoFi seeks to cross-sell products to existing customers, driving higher customer engagement and retention. SoFi also owns a technology platform called Galileo that is used to power many other neobanks. We believe Galileo gives SoFi attractive exposure to the broader universe of fast-growing consumer FinTech companies. Over time, we expect SoFi to continue adding members and cross-selling additional services, which should drive improving unit economics and earnings growth.”
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Based on our calculations, SoFi Technologies, Inc. (NASDAQ: SOFI) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. SOFI was in 39 hedge fund portfolios at the end of the first half of 2021. SoFi Technologies, Inc. (NASDAQ: SOFI) delivered a -27.19% 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.
