Polen Capital, an investment management firm, published its “Polen U.S. Small Company Growth” second quarter 2021 investor letter – a copy of which can be downloaded here. A return of 13.47% was delivered by the fund for the second quarter of 2021, outperforming its Russell 2000 Growth benchmark that delivered a 3.91% gain 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 Polen Capital, the fund mentioned Trupanion, Inc. (NASDAQ: TRUP) and discussed its stance on the firm. Trupanion, Inc. is a Seattle, Washington-based pet insurance company with a $3.6 billion market capitalization. TRUP delivered a -24.03% return since the beginning of the year, while its 12-month returns are up by 34.49%. The stock closed at $90.94 per share on September 3, 2021.
Here is what Polen Capital has to say about Trupanion, Inc. in its Q2 2021 investor letter:
“We started a new position in Trupanion, the leading pet insurer in North America, which we think has two deep competitive moats. First, the company is the only pet insurer with software that deeply integrates with veterinary hospitals, reducing friction for both pet owner clients and veterinary practices by streamlining the reimbursement process. Second, the company has actuarial advantages because it is solely focused on the pet insurance market and have more breadth and depth of data than any other competitor. The latter advantage has widened significantly recently due to longterm exclusive data-sharing partnerships with IDEXX & Covetrus.
Trupanion has been led by founder Darryl Rawlings for over 20 years. In our opinion, Rawlings is an impressive leader, visionary, and innovator. Under his leadership, the company has developed a unique purpose-driven corporate culture that we believe could stand as a third competitive advantage potentially on par with those mentioned above.
The potential long-term opportunity for Trupanion is compelling as penetration for pet insurance in the U.S. is still in the very low-single-digit range despite rapid growth in recent history.
To put this into perspective, the pet insurance penetration rate for the U.K. is 25%, Sweden 40%, and Norway 14%. We expect the company to continue compounding its intrinsic value in the hightwenty to low-thirty-percent range for the foreseeable future.”
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Based on our calculations, Trupanion, Inc. (NASDAQ: TRUP) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. TRUP was in 14 hedge fund portfolios at the end of the first half of 2021, compared to 17 funds in the previous quarter. Trupanion, Inc. (NASDAQ: TRUP) delivered a 3.58% 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.
