Polen Capital, an investment management firm, published its “Polen Focus Growth” third quarter 2021 investor letter – a copy of which can be downloaded here. A quarterly gross return of 2.78% was delivered by the fund for the third quarter of 2021, outperforming both its Russell 1000 Growth benchmark that delivered a 1.16% return, and the S&P 500 Index that had a 0.59% gain for the same period. You can take a look at the fund’s top 5 holdings to have an idea about their best picks for 2021.
Polen Capital, in its Q3 2021 investor letter, mentioned Illumina, Inc. (NASDAQ: ILMN) and discussed its stance on the firm. Illumina, Inc. is a San Diego, California-based biotechnology company with a $65.7 billion market capitalization. ILMN delivered a 13.69% return since the beginning of the year, while its 12-month returns are up by 30.74%. The stock closed at $420.78 per share on October 25, 2021.
Here is what Polen Capital has to say about Illumina, Inc. in its Q3 2021 investor letter:
“Illumina shares underperformed on news that the company closed its acquisition of GRAIL despite regulatory reviews in the U.S. and EU that are still pending. We believe there is no precedent for applicable courts to use as a basis for validly concluding this acquisition violates antitrust law. Also, we think U.S. regulators were unnecessarily delaying their regulatory reviews in hopes of deterring Illumina and GRAIL from moving forward. Grail is still a
pre-revenue business, and we believe it will be highly dilutive to Illumina’s earnings in the short term. Still, we expect Illumina’s core business to strengthen as a result of this acquisition. We also expect earnings accretion from GRAIL in the intermediate-term as its liquid biopsy test appears to be effective for early cancer detection across 50 of the most lethal cancers (most of which there are no tests for today).”
Photo by National Cancer Institute on Unsplash
Based on our calculations, Illumina, Inc. (NASDAQ: ILMN) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. ILMN was in 51 hedge fund portfolios at the end of the first half of 2021, compared to 52 funds in the previous quarter. Illumina, Inc. (NASDAQ: ILMN) delivered a -13.66% 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.
