Alger, an investment management firm, published its “Alger Weatherbie Specialized Growth Fund” third quarter 2021 investor letter – a copy of which can be downloaded here. During the third quarter, the largest portfolio sector weightings were Information Technology and Health Care. The largest sector overweight was Financials. The portfolio had no exposure to the Communication Services, Consumer Staples, or Utilities sectors. You can take a look at the fund’s top 5 holdings to have an idea about their best picks for 2021.
Alger, in its Q3 2021 investor letter, mentioned Nevro Corp. (NYSE: NVRO) and discussed its stance on the firm. Nevro Corp. is a Redwood City, California-based medical device company with a $4.2 billion market capitalization. NVRO delivered a -29.93% return since the beginning of the year, while its 12-month returns are down by -22.62%. The stock closed at $121.29 per share on October 22, 2021.
Here is what Alger has to say about Nevro Corp. in its Q3 2021 investor letter:
“Nevro Corp. was among the top detractors from performance. Nevro provides spinal cord stimulation (SCS) devices in the U.S. and internationally for patients suffering from chronic pain. The global SCS market exceeds $2 billion and has been growing as a result of increased investment by the industry. The company released second quarter results that were in-line with its prior guidance but provided new guidance that was disappointing, including a sequential decline in revenues for the third quarter driven largely by COVID-19 related factors. We believe these factors are beyond management’s control. However, Nevro has a near monopoly in the high frequency SCS market, strong clinical data and new product offerings underway. Additionally, the company’s initial launch of a product targeting Painful Diabetic Neuropathy (PDN) has been encouraging.”
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Based on our calculations, Nevro Corp. (NYSE: NVRO) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. NVRO was in 26 hedge fund portfolios at the end of the first half of 2021, compared to 29 funds in the previous quarter. Nevro Corp. (NYSE: NVRO) delivered a -20.74% 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.
