Brown Capital Management Small Company Fund recently released its Q3 2020 Investor Letter, a copy of which you can download here. The fund posted a return of 5.35% (instl. class) for the quarter, underperforming its benchmark, the Russell 2,000 Growth Index which returned 7.16% in the same quarter. You should check out Brown Capital Management’s top 5 stock picks for investors to buy right now, which could be the biggest winners of 2021.
In the Q3 2020 Investor Letter, Brown Capital Management highlighted a few stocks and iRhythm Technologies Inc. (NASDAQ;IRTC) is one of them. iRhythm Technologies Inc. (NASDAQ;IRTC) is a digital health company. Year-to-date, iRhythm Technologies Inc. (NASDAQ;IRTC) stock gained 219.5% and on December 15th it had a closing price of $217.52. Here is what Brown Capital Management said:
“iRhythm Technologies is a medical-device company whose flagship solution, the ZIO Service, allows physicians to diagnose heart arrhythmias more quickly and effectively than traditional technologies. The ZIO XT Patch is a patient-worn biosensor that captures heartbeat data continuously for up to 14 days, representing 20,000 to 30,000 pages of data per patient. Following the wear period, the patient sends the ZIO XT Patch to an iRhythm diagnostic center, where the data is analyzed using machine-learning algorithms. A certified cardiac technician then combines the output into a simple and actionable report for the prescribing physician to use. The ZIO Service has been shown in multiple peer-reviewed studies to detect more arrhythmias compared to legacy Holter monitors, which are larger devices and can only be worn for 1-2 days. In addition, accurate detection and higher diagnostic yield allow the physician to more quickly prescribe the appropriate treatment options for patients, and help avoid more serious downstream medical events, including stroke.
During the third quarter, iRhythm’s Zio XT cleared a meaningful reimbursement hurdle. In 2012, the Zio XT was categorized by the Centers for Medicare and Medicaid Services (CMS) as a new technology, and was issued a temporary Current Procedural Terminology (CPT) code, which is used to determine reimbursement—hence pricing—for the service. Given that traditional Holter monitoring is reimbursed at lower rates, there had been some concern among investors that when a permanent CPT code is issued for the Zio, it will have a lower reimbursement rate. However, when the CMS published its proposed 2020 physician fee schedule in August, it actually showed a slight increase in reimbursement for Zio, versus expectations for a potential decrease. This led to iRhythm’s outperformance during the quarter. We see a long runway for growth for the company given its low penetration in a large market and strong competitive position.”
In Q2 2020, the number of bullish hedge fund positions on iRhythm Technologies Inc. (NASDAQ;IRTC) stock increased by about 40% from the previous quarter (see the chart here), so a number of other hedge fund managers believe in iRhythm’s growth potential. Our calculations showed that iRhythm Technologies Inc. (NASDAQ;IRTC) isn’t ranked among the 30 most popular stocks among hedge funds.
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Video: Top 5 Stocks Among Hedge Funds
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