Alger, an investment management firm, published its “Alger Small Cap Focus Fund” second quarter 2021 investor letter – a copy of which can be downloaded here. During the quarter, the largest portfolio sector weightings were Health Care and Information Technology. The largest sector overweight was Health Care. Class A shares of the Alger Small Cap Focus Fund outperformed the Russell 2000 Growth Index during the second quarter of 2021. 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 Alger Small Cap Focus Fund, the fund mentioned Heska Corporation (NASDAQ: HSKA), and discussed its stance on the firm. Heska Corporation is a Loveland, Colorado-based advanced veterinary diagnostic and specialty healthcare products manufacturer, that currently has a $2.7 billion market capitalization. HSKA delivered a 78.08% return since the beginning of the year, extending its 12-month returns to 144.47%. The stock closed at $259.38 per share on August 11, 2021.
Here is what Alger Small Cap Focus Fund has to say about Heska Corporation in its Q2 2021 investor letter:
“Heska sells diagnostic tools and specialty products including blood testing and supplies, digital imaging technology, software and single-use items primarily for cats and dogs. Heska also offers private label vaccine and pharmaceutical production primarily for cattle and other small mammals. The company has a unique go-to-market strategy, which allows customers to pay for its instruments over time and has helped Heska build a strong recurring revenue stream and continue capturing market share in the attractive veterinary diagnostics market. Shares of Heska outperformed due to impressive first quarter financial results, with strong utilization volumes by the company’s veterinary customers. In addition, Heska has several potential near-term growth drivers, including the launch of its Element AIM fecal and urinalysis instrument, entry into offering digital cytology services, increased growth from European customers and higher customer utilization of its products.”
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Based on our calculations, Heska Corporation (NASDAQ: HSKA) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. HSKA was in 28 hedge fund portfolios at the end of the first quarter of 2021, compared to 17 funds in the fourth quarter of 2020. Heska Corporation (NASDAQ: HSKA) delivered a 38.69% 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.
