ClearBridge Investments, an investment management firm, published its “Small Cap Growth Strategy ” second quarter 2021 investor letter – a copy of which can be downloaded here. During the second quarter, the ClearBridge Small Cap Growth Strategy outperformed its Russell 2000 Growth benchmark. On an absolute basis, the Strategy had gains across eight of the 10 sectors in which it was invested during the quarter (out of 11 sectors total), with the health care and IT sectors the leading 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 CareDx, Inc. (NASDAQ: CDNA) and discussed its stance on the firm. CareDx, Inc. is a Brisbane, California-based molecular diagnostics company with a $3.5 billion market capitalization. CDNA delivered a -8.10% return since the beginning of the year, while its 12-month returns are up by 59.36%. The stock closed at $66.58 per share on October 1, 2021.
Here is what ClearBridge Investments has to say about CareDx, Inc. in its Q2 2021 investor letter:
“The primary contributions to portfolio performance during the second quarter came from a diversified set of companies in the health care sector benefiting from improving activity as the economy reopens. CareDx, a provider of testing and related diagnostic services for transplant patients, booked solid topline growth as increased patient reach through digital platforms and a favorable reimbursement decision on its new heart product late last year continued to support increased testing volumes.”
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Based on our calculations, CareDx, Inc. (NASDAQ: CDNA) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. CDNA was in 28 hedge fund portfolios at the end of the first half of 2021, compared to 23 funds in the previous quarter. CareDx, Inc. (NASDAQ: CDNA) delivered a -26.01% 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.
