ClearBridge Investments, an investment management firm, published its “Sustainability Leaders Strategy” second quarter 2021 investor letter – a copy of which can be downloaded here. The ClearBridge Sustainability Leaders Strategy underperformed its Russell 3000 Index benchmark during the second quarter. On an absolute basis, the Strategy had gains in eight of 10 sectors in which it was invested (out of 11 sectors total). 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 Amazon.com, Inc. (NASDAQ: AMZN) and discussed its stance on the firm. Amazon.com, Inc. is a Seattle, Washington-based e-commerce company with a $1.6 trillion market capitalization. AMZN delivered a 0.72% return since the beginning of the year, while its 12-month returns are up by 4.97%. The stock closed at $3,285.04 per share on September 30, 2021.
Here is what ClearBridge Investments has to say about Amazon.com, Inc. in its Q2 2021 investor letter:
“The Strategy’s goal of generating strong risk-adjusted performance while investing in companies that can make a positive impact on society and the environment is often supported by holdings that are companies with significant customer bases, making our engagements with them effective platforms for driving change. This is the case with new holding Amazon.com, the leading retail e-commerce site and provider of web hosting and related cloud services that continues to benefit from the migration of commerce from offline to online. We initiated a position in Amazon based on its strength in several areas, including retail, its Amazon Web Services cloud business and advertising; from a valuation perspective, Amazon has become more attractive as profitability has improved and the stock has gone sideways in an up market.
ClearBridge has been holding interactive engagements with Amazon on several ESG issues for several years, including labor and environmental issues, and we have seen improvements over that time. From a sustainability perspective, Amazon has made meaningful ESG commitments and improved labor practices and it faces fewer regulatory issues than many large tech peers. Labor management remains a key focal point and the company has made
increased commitments to its labor force, including in December 2018, when Amazon increased its minimum wage standard to $15 an hour in the U.S., well above the federal minimum wage standard. Amazon is also taking steps toward environmental sustainability that would put it ahead of peers if goals are achieved. In June 2019, Amazon set new targets to be carbon neutral by 2040 and to use 100% renewable energy by 2030.Amazon has a long track record of innovation that benefits consumers and third-party sellers and has raised the bar multiple times on delivery and selection within its e-commerce business. In 2018, 58% of Amazon’s gross merchandise value (GMV) was generated by third-party sellers on the Amazon platform.
Given the colossal size of Amazon’s operations — it has over one million employees and ships nearly three billion packages each year — we see Amazon as a significant impact opportunity through continuous improvements in its operations, such as its net-zero carbon by 2040 goal.”
Photo by Bryan Angelo on Unsplash
Based on our calculations, Amazon.com, Inc. (NASDAQ: AMZN) tops our list of the 30 Most Popular Stocks Among Hedge Funds. AMZN was in 271 hedge fund portfolios at the end of the first half of 2021, compared to 243 funds in the previous quarter. Amazon.com, Inc. (NASDAQ: AMZN) delivered a -6.64% 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.
