Ensemble Capital, an investment management firm, published its “Ensemble Fund” second quarter 2021 investor letter – a copy of which can be seen here. A quarterly portfolio net return of 6.93% was recorded by the fund for the second quarter of 2021, below the S&P Midcap 500 Index that delivered an 8.55% gains for the same period. You can view the fund’s top 5 holdings to have an idea about their top bets for 2021.
In the Q2 2021 investor letter of Ensemble Capital, the fund mentioned Alphabet Inc. (NASDAQ: GOOG), and discussed its stance on the firm. Alphabet Inc. is a Mountain View, California-based multinational conglomerate company, that currently has a $1.7 trillion market capitalization. GOOG delivered a 51.38% return since the beginning of the year, extending its 12-month revenues to 69.08%. The stock closed at $2,652.01 per share on July 21, 2021.
Here is what Ensemble Capital has to say about Alphabet Inc. in its Q2 2021 investor letter:
“Google: While Google’s stock was up 31% in 2020, handily beating the S&P 500, it was one of the weaker performing Big Five tech giants. With the company posting blow-out reports in the most recent quarters, the stock has soared 40% this year, making it the best performing of the Big Five this year. In the most recent quarter, the stock rallied 18% in the wake of the company reporting its largest beat of estimated earnings before interest and taxes in over a decade. Amazingly, the company is now reporting revenue more than 50% above the level it was generating two years ago, even though travel related advertising, which is one of Google’s largest advertising categories, has not yet rebounded.”
Based on our calculations, Alphabet Inc. (NASDAQ: GOOG) ranks 6th in our list of the 30 Most Popular Stocks Among Hedge Funds. Alphabet Inc. was in 159 hedge fund portfolios at the end of the first quarter of 2021, compared to 157 funds in the fourth quarter of 2020. GOOG delivered a 15.64% 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.