Baron Funds, an asset management firm, published its “Baron Small Cap Fund” second quarter 2021 investor letter – a copy of which can be downloaded here. A return of 6.37% was delivered by the fund’s institutional shares for the Q2 of 2021, trailing the S&P 500 Index, which appreciated 8.55% and modestly outperforming the Russell 2000 Growth Index which rose 3.92% 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 Baron Funds, the fund mentioned Fox Factory Holding Corp. (NASDAQ: FOXF) and discussed its stance on the firm. Fox Factory Holding Corp. is a Duluth, Georgia-based shock absorbers and racing suspension products developer with a $6.39 billion market capitalization. FOXF delivered a 43.60% return since the beginning of the year, while its 12-month returns are up by 53.61%. The stock closed at $153.67 per share on August 31, 2021.
Here is what Baron Funds has to say about Fox Factory Holding Corp. in its Q2 2021 investor letter:
“We sold our entire position in Fox Factory Holding Corp., a neat growth stock that was a terrific investment. It traded up to a price that we thought discounted many years of expected growth.”
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Based on our calculations, Fox Factory Holding Corp. (NASDAQ: FOXF) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. FOXF was in 14 hedge fund portfolios at the end of the first half of 2021. Fox Factory Holding Corp. (NASDAQ: FOXF) delivered a -0.53% 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.
