Alger, an investment management firm, published its “Alger Spectra Fund” third quarter 2021 investor letter – a copy of which can be downloaded here. During the third quarter of 2021, the largest portfolio sector weightings were Information Technology and Consumer Discretionary. The Health Care sector was the largest sector overweight and Consumer Staples was the largest sector underweight. 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 Alphabet Inc. (NASDAQ: GOOG) and discussed its stance on the firm. Alphabet Inc. is a Mountain View, California-based multinational conglomerate company with a $1.8 trillion market capitalization. GOOG delivered a 58.26% return since the beginning of the year, while its 12-month returns are up by 68.95%. The stock closed at $2,772.50 per share on October 22, 2021.
Here is what Alger has to say about Alphabet Inc. in its Q3 2021 investor letter:
"Alphabet Inc. was among the top contributors to performance during the third quarter. Alphabet is a leading internet search provider and is a beneficiary in the share shift of advertising dollars from traditional mediums like television, radio and newspapers to digital platforms. The company is a leader in implementing Al, autonomous vehicles and cloud computing it and owns the highly trafficked YouTube property. Alphabet contributed to performance due to a strong quarterly report highlighted by revenue growth that beat consensus expectations across segments. The company's core search revenues have increased 10% over the past two years, with cloud computing increasing 8%. Results from YouTube also exceeded expectations. When discussing quarterly results, Alphabet management said retail, entertainment and travel were end markets that were particularly strong. The fixed cost structure of Alphabet’s search service resulted in profitability resulting from the increase in revenues being better than expected."
Based on our calculations, Alphabet Inc. (NASDAQ: GOOG) ranks 7th in our list of the 30 Most Popular Stocks Among Hedge Funds. GOOG was in 155 hedge fund portfolios at the end of the first half of 2021, compared to 159 funds in the previous quarter. Alphabet Inc. (NASDAQ: GOOG) delivered a 0.59% 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.