ClearBridge Investments, an investment management firm, published its “International Growth EAFE Strategy” second quarter 2021 investor letter – a copy of which can be downloaded here. During the second quarter, the ClearBridge International Growth EAFE Strategy outperformed its MSCI EAFE Index benchmark. The Strategy delivered gains across nine of the 10 sectors in which it was invested (out of 11 total), with the IT, consumer staples, consumer discretionary, and health care sectors the primary contributors. 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 Zai Lab Limited (NASDAQ: ZLAB) and discussed its stance on the firm. Zai Lab Limited is a Cayman Islands-based biopharmaceutical company with a $10.2 billion market capitalization. ZLAB delivered a -24.08% return since the beginning of the year, while its 12-month returns are up by 21.54%. The stock closed at $102.75 per share on October 1, 2021.
Here is what ClearBridge Investments has to say about Zai Lab Limited in its Q2 2021 investor letter:
“The other major area of focus is understanding recent developments in China. Zai Lab, the portfolio’s other Chinese holding, was up significantly in the second quarter as it continues to find new bestin-class molecules for its growing portfolio of products for unmet medical needs in high demand and a key focus of the government in the world’s second-largest economy.”
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Based on our calculations, Zai Lab Limited (NASDAQ: ZLAB) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. ZLAB was in 36 hedge fund portfolios at the end of the first half of 2021, compared to 32 funds in the previous quarter. Zai Lab Limited (NASDAQ: ZLAB) delivered a -41.59% 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.
