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 Red Rock Resorts, Inc. (NASDAQ: RRR) and discussed its stance on the firm. Red Rock Resorts, Inc. is a Las Vegas, Nevada-based casino and entertainment properties developer with a $5.4 billion market capitalization. RRR delivered an 85.90% return since the beginning of the year, while its 12-month returns are up by 153.68%. The stock closed at $46.81 per share on August 31, 2021.
Here is what Baron Funds has to say about Red Rock Resorts, Inc. in its Q2 2021 investor letter:
“Red Rock Resorts, Inc. operates casinos in Las Vegas that cater to locals. As its casinos reopen, the company is reporting strong results, revenues, and especially profits. Red Rock learned a lot during the pandemic and is evolving its operations accordingly, leading to much higher margins. Moneylosing amenities have been terminated, marketing budgets have been slashed, employee levels reduced, and underperforming casinos have been shuttered. For the quarter just ended, on a same store basis (compared to 2019 results), revenues grew 5% and profits grew 38%. Red Rock also announced it sold the troubled Palms casino for a big price and is soon to embark on the building of a new casino in Durango. We believe that there will be great returns from this development and that it is just the first of many, which will help the company’s growth profile go forward.”
Based on our calculations, Red Rock Resorts, Inc. (NASDAQ: RRR) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. RRR was in 26 hedge fund portfolios at the end of the first half of 2021, compared to 28 funds in the previous quarter. Red Rock Resorts, Inc. (NASDAQ: RRR) delivered a 4.18% 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.
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage.
Disclosure: None. This article is originally published at Insider Monkey.
