Here’s Why Mercury Systems (MRCY) Became One of Baron Funds’ Top Detractors

Baron Funds, an asset management firm, published its “Baron Small Cap Fund” first quarter 2021 investor letter – a copy of which can be downloaded here. A return of 2.67% was delivered by the fund’s institutional shares for the Q1 of 2021, trailing the S&P 500 Index, which appreciated 6.17%, and modestly underperforming the Russell 2000 Growth Index which rose 4.88% for the same period. You can view the fund’s top 5 holdings to have a peek at their top bets for 2021.

Baron Small Cap Fund, in its Q1 2021 investor letter, mentioned Mercury Systems, Inc. (NASDAQ: MRCY), and shared their insights on the company. Mercury Systems, Inc. is a Andover, Massachusetts-based aerospace and defense company that currently has a $3.5 billion market capitalization. Since the beginning of the year, MRCY delivered a -27.63% return, while its 12-month returns are down by -21.92%. As of May 14, 2021, the stock closed at $63.73 per share.

Here is what Baron Small Cap Fund has to say about Mercury Systems, Inc. in its Q1 2021 investor letter:

Mercury Systems, Inc. is a leading provider of innovative high-tech subsystems for the defense electronics industry. Shares fell this quarter after the company reported that near-term sales were a little light and because of a fear that the Democrats’ control of the government could lead to a smaller defense budget. We do not think that the change in administrations will prevent the company from continuing to grow its sales at high single-digits, as in the past, as the company continues to benefit from its critical role as the outsourcing partner for prime contractors. The company also recently announced another large strategic and accretive acquisition, which has been core to the company’s success. We added to our position on weakness.”


Our calculations show that Mercury Systems, Inc. (NASDAQ: MRCY) does not belong in our list of the 30 Most Popular Stocks Among Hedge Funds. As of the end of the fourth quarter of 2020, Mercury Systems, Inc. was in 10 hedge fund portfolios, compared to 19 funds in the third quarter. MRCY delivered a -14.97% return in the past 3 months.

The top 10 stocks among hedge funds returned 231.2% between 2015 and 2020, and outperformed the S&P 500 Index ETFs by more than 126 percentage points. We know it sounds unbelievable. You have been dismissing our articles about top hedge fund stocks mostly because you were fed biased information by other media outlets about hedge funds’ poor performance. You could have doubled the size of your nest egg by investing in the top hedge fund stocks instead of dumb S&P 500 ETFs. Here you can watch our video about the top 5 hedge fund stocks right now. All of these stocks had positive returns in 2020.

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Disclosure: None. This article is originally published at Insider Monkey.