Wasatch Global Investors, an investment management firm, published its “Wasatch Small Cap Growth Fund” second quarter 2021 investor letter – a copy of which can be downloaded here. A return of 6.32% was recorded by the fund’s investor class for the Q2 of 2021, outperforming the benchmarks, Russell 2000 Growth Index, that increased 3.92%, and the Russell 2000 Index that rose to 4.29% 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 Wasatch Global Investors, the fund mentioned Rapid7, Inc. (NASDAQ: RPD) and discussed its stance on the firm. Rapid7, Inc. is a Boston, Massachusetts-based software company with a $6.6 billion market capitalization. RPD delivered a 31.17% return since the beginning of the year, while its 12-month returns are up by 93.50%. The stock closed at $120.38 per share on September 16, 2021.
Here is what Wasatch Global Investors has to say about Rapid7, Inc. in its Q2 2021 investor letter:
“Another significant contributor was Rapid7, Inc. (RPD), a cybersecurity company that provides analytic services including vulnerability management and incident detection. The company’s future looks particularly bright to us because the shift to a subscription-based model produces recurring revenues and because there’s been a realization among businesses and governmental entities that a belt-and-suspenders approach is necessary when it comes to cyberattacks. The stock was down due to volatile investor preferences in the first quarter but bounced back strongly in the second quarter. Again, if our investment thesis remains intact, our approach is to stay the course through such volatility.”
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Based on our calculations, Rapid7, Inc. (NASDAQ: RPD) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. RPD was in 17 hedge fund portfolios at the end of the first half of 2021, compared to 25 funds in the previous quarter. Rapid7, Inc. (NASDAQ: RPD) delivered a 24.11% 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.
