Bretton Fund recently released its Q4 2020 Investor Letter, a copy of which you can download here. The fund posted a return of 11.52% for the quarter, underperforming its benchmark, the S&P 500 Index which returned 12.15% 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 Q4 2020 Investor Letter, the fund highlighted a few stocks and PerkinElmer Inc (NYSE:PKI) is one of them. PerkinElmer Inc (NYSE:PKI) is a provider of products, services and solutions for the diagnostics, life sciences and applied markets. In the last three months, PerkinElmer Inc (NYSE:PKI) stock lost 12.6% and on March 5th it had a closing price of $124.05. Here is what the fund said:
“PerkinElmer is a laboratory testing equipment company with two major lines of business: Diagnostics and Discovery & Analytical (DAS). Both have broadly similar business models where PerkinElmer sells a piece of capital equipment and then monetizes a long stream of consumables purchases by customers; 70% of the revenue and the overwhelming majority of the operating income come from these consumables purchases.
The Diagnostic division focuses on the identification of diseases. For obvious reasons, this year the business was dominated by Covid-19, with PerkinElmer generating over $1 billion in revenue selling the most accurate coronavirus tests in the US. Crucially, this was accompanied by the installation of nearly two thousand testing machines; while Covid-19 may go away, we expect the testing machines to stay busy for years to come running other tests. Labs tend to use their tools. The company’s portfolio as a whole offers 500 tests, largely clustered in autoimmune, allergy, and infectious diseases. Diagnostics also houses the legacy core of the company, which is the prenatal screening franchise; PerkinElmer is the leader in noninvasive prenatal testing (NIPT), which uses fragments of fetal DNA found in the mother’s bloodstream to test for genetic disorders. We expect demand for NIPT to increase substantially after the American College of Gynecology’s decision in September 2020 to endorse NIPT for all pregnant women as the “standard of care”; commercial insurers have historically denied reimbursement to women under the age of 35.
The DAS business is similar to Diagnostics, except that instead of providing tests that will be used to identify conditions in people, it provides tests that are used to identify conditions in processes. The bulk of its business is with pharma companies, where it sells tests for all steps in the drug development and manufacturing processes. (A researcher might use a PerkinElmer test to identify antibodies in a sample, while a production engineer might use very different tests to check for contaminants in a manufacturing process.) Smaller portions of DAS sell into the food and cannabis industries.
Setting aside the Covid-19 windfall, we expect PKI to earn about $7/share on a sustainable basis. We own it for a little more than 20 times earnings and are up 13.9% so far.”
In Q3 2020, the number of bullish hedge fund positions on PerkinElmer Inc (NYSE:PKI) stock increased by about 20% from the previous quarter (see the chart here), so a number of other hedge fund managers believe in PerkinElmer’s growth potential. Our calculations showed that PerkinElmer Inc (NYSE:PKI) isn’t ranked among the 30 most popular stocks among hedge funds.
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.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best innovative stocks to buy to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website:
Disclosure: None. This article is originally published at Insider Monkey.