Polen Capital, an investment management firm, published its “Polen International Small Company Growth” second quarter 2021 investor letter – a copy of which can be downloaded here. A gross return of 8.00% was delivered by the fund for the Q2 of 2021, outperforming its MSCI ACWI ex-US Small Capitalization benchmark that delivered a 6.35% return 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 Polen Capital, the fund mentioned Endava plc (NYSE: DAVA) and discussed its stance on the firm. Endava plc is a London, United Kingdom-based software company with an $8.2 billion market capitalization. DAVA delivered a 77.24% return since the beginning of the year, while its 12-month returns are up by 162.30%. The stock closed at $136.03 per share on September 3, 2021.
Here is what Polen Capital has to say about Endava plc in its Q2 2021 investor letter:
“Endava is (one of) the two largest positions in the Portfolio and returned 34% gross of fees. Both companies are European-headquartered, disruptive IT consulting firms that help their clients digitize their businesses.
Many governments and businesses around the world recognize the need for digital transformation. Yet, few have the internal capabilities required to effectively lead and navigate the ongoing change. In our opinion, this is where Endava deliver critical value for their clients as the business has deep capabilities and expertise in digital transformation.
We also think Endava has the culture and corporate structure needed to create innovative solutions, as demonstrated by their performance track record and high repeat engagement rate with customers. The company often start assisting a client with a smaller project. Then, the relationship expands for many years as the client sees success and realizes the need for further digital enhancement. Additionally, the pandemic has served as a wake-up call for many businesses that were slower to digitize their operations. Therefore, we believe that demand for digital transformation-related services has been pulled forward meaningfully and is likely to remain elevated for many years to come.”
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Based on our calculations, Endava plc (NYSE: DAVA) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. DAVA was in 16 hedge fund portfolios at the end of the first half of 2021, compared to 9 funds in the previous quarter. Endava plc (NYSE: DAVA) delivered a 31.05% 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.
