Baron Funds, an asset management firm, published its “Baron Health Care Fund” second quarter 2021 investor letter – a copy of which can be downloaded here. A return of 11.43% was delivered by the fund’s institutional shares for the Q2 of 2021, outperforming both its S&P 500 and Russell 3000 Health Care benchmarks that delivered 8.55% and 8.16% returns respectively 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 Twist Bioscience Corporation (NASDAQ: TWST) and discussed its stance on the firm. Twist Bioscience Corporation is a South San Francisco, California-based synthetic biology company with a $4.9 billion market capitalization. TWST delivered a -28.86% return since the beginning of the year, while its 12-month returns are up by 51.60%. The stock closed at $100.51 per share on August 13, 2021.
Here is what Baron Funds has to say about Twist Bioscience Corporation in its Q2 2021 investor letter:
“We initiated a position in Twist Bioscience Corporation, a provider of synthetic DNA. The company’s proprietary semiconductor-based platform
has driven its position as the low-cost provider of DNA for a variety of high-growth applications. These include the attractive areas of synthetic biology,
liquid biopsy, and antibody discovery. Of note, the antibody business has the potential to become a source of high-margin royalty streams in the future.
As further optionality, we believe Twist has a shot at disrupting the entire digital data storage industry with DNA-based storage.”
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Based on our calculations, Twist Bioscience Corporation (NASDAQ: TWST) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. TWST was in 24 hedge fund portfolios at the end of the first quarter of 2021, compared to 23 funds in the fourth quarter of 2020. Twist Bioscience Corporation (NASDAQ: TWST) delivered an 8.45% 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.
