ClearBridge Investments, an investment management firm, published its “Select Strategy” second quarter 2021 investor letter – a copy of which can be downloaded here. The Strategy outperformed in a second-quarter rotation into growth stocks, fueled by a comeback in the higher growth disruptors we have owned for a number of years. 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 ClearBridge Investments, the fund mentioned Sprout Social, Inc. (NASDAQ: SPT) and discussed its stance on the firm. Sprout Social, Inc. is a Chicago, Illinois-based software company with a $6.6 billion market capitalization. SPT delivered a 173.93% return since the beginning of the year, while its 12-month returns are up by 220.10%. The stock closed at $120.61 per share on September 29, 2021.
Here is what ClearBridge Investments has to say about Sprout Social, Inc. in its Q2 2021 investor letter:
“Sprout Social (is one of the) companies that have become go-to platforms for small and medium size businesses (SMBs) engaged in e-commerce and social media marketing, rebounded strongly in the quarter after being caught in the selloff among high-multiple growth names since Vaccine Monday. These and the portfolio’s other disruptors had thrived through the first part of the pandemic, leading us to trim positions into strength and reallocate cash into more attractively priced evolving opportunities and steady compounders that had been overly punished by lockdowns and a drop in economic activity.”
Based on our calculations, Sprout Social, Inc. (NASDAQ: SPT) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. SPT was in 25 hedge fund portfolios at the end of the first half of 2021, compared to 24 funds in the previous quarter. Sprout Social, Inc. (NASDAQ: SPT) delivered a 39.86% 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.