East 72, an investment management firm, published its second quarter 2021 investor letter – a copy of which can be downloaded here. A quarterly portfolio gross return of 6.2% was recorded by the fund for the 2nd quarter of 2021 and a 33.6% gross return over the fiscal year. You can view the fund’s top 5 holdings to have a peek at their top bets for 2021.
East 72, in its Q2 2021 investor letter, mentioned Trupanion, Inc. (NASDAQ: TRUP), and shared their insights on the company. Trupanion, Inc. is a Seattle, Washington-based pet insurance company that currently has a $4.7 billion market capitalization. Since the beginning of the year, TRUP delivered a -1.30% return, while its 12-month gains are up by 157.35%. As of July 06, 2021, the stock closed at $120.29 per share.
Here is what East 72 has to say about Trupanion, Inc. in its Q2 2021 investor letter:
“Three examples from our short-sale portfolio show the extent of these extreme – and in two cases detrimental – moves in “high-growth” stocks, as the bearishness in bond markets (includes), Trupanion (TRUP), the pet insurer, started the quarter at $76, meandered around to $75 by 13 May, showing no reaction to a first quarter result with widening losses, then rose 53% to $115 in six weeks. Hence, in June, all five of our worst contributors were short positions in bouncing growth stocks. “
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Our calculations show that Trupanion, Inc. (NASDAQ: TRUP) does not belong in our list of the 30 Most Popular Stocks Among Hedge Funds. As of the end of the first quarter of 2021, Trupanion, Inc. was in 17 hedge fund portfolios, compared to 18 funds in the fourth quarter of 2020. TRUP delivered a 64.86% 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.
