Polen Capital, an investment management firm, published its “Polen U.S. Small Company Growth” second quarter 2021 investor letter – a copy of which can be downloaded here. A return of 13.47% was delivered by the fund for the second quarter of 2021, outperforming its Russell 2000 Growth benchmark that delivered a 3.91% gain 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 AppFolio, Inc. (NASDAQ: APPF) and discussed its stance on the firm. AppFolio, Inc. is a Goleta, California-based software company with a $4.2 billion market capitalization. APPF delivered a -31.65% return since the beginning of the year, while its 12-month returns are down by -18.89%. The stock closed at $123.60 per share on September 3, 2021.
Here is what Polen Capital has to say about AppFolio, Inc. in its Q2 2021 investor letter:
“During the quarter, we also opportunistically added to AppFolio seeking to take advantage of price weakness. We view this business as attractive secular growth companies. The company’s stocks had sold off as investors seemed to rotate towards pandemic laggards earlier in the quarter, making them more attractive to us. We believe pullbacks like these will be short-lived…”
Based on our calculations, AppFolio, Inc. (NASDAQ: APPF) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. APPF was in 17 hedge fund portfolios at the end of the first half of 2021, compared to 12 funds in the previous quarter. AppFolio, Inc. (NASDAQ: APPF) delivered a -9.68% 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.