Wedgewood Partners: “We Continue to Hold Alphabet (GOOG) as our Largest Position”

Wedgewood Partners, an investment management firm, published its second quarter 2021 investor letter – a copy of which can be downloaded here. A quarterly portfolio return of 11.8% was recorded by the fund for the first half of 2021, outperforming the S&P 500 that delivered an 8.6% return for the same period, but slightly below the 11.9% gain of Russell 1000 Growth Index. You can view the fund’s top 5 holdings to have an idea about their top bets for 2021.

In the Q2 2021 investor letter of Wedgewood Partners, the fund mentioned Alphabet Inc. (NASDAQ: GOOG), and discussed its stance on the firm. Alphabet Inc. is a Mountain View, California-based multinational conglomerate company, that currently has a $1.7 trillion market capitalization. GOOG delivered a 50.52% return since the beginning of the year, extending its 12-month revenues to 73.99%. The stock closed at $2,636.91 per share on July 16, 2021.

Here is what Wedgewood Partners has to say about Alphabet Inc. in its Q2 2021 investor letter:

Alphabet’s core business revenue growth further accelerated during its first quarter and showed continued margin expansion. Google Search and YouTube combined to generate nearly $38 billion in revenue during the first three months of 2021, up over +30% year-overyear, quicker too than the +20% reported in the fourth quarter. The Google business segment also generated robust margin expansion on moderated expense growth, partially due to pandemic-induced spending curbs. The Company has several, long-term revenue and profitability drivers, in addition to the ability to enhance returns by returning net cash to shareholders. We continue to hold Alphabet as our largest position.”


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Based on our calculations, Alphabet Inc. (NASDAQ: GOOG) ranks 6th in our list of the 30 Most Popular Stocks Among Hedge Funds. Alphabet Inc. was in 159 hedge fund portfolios at the end of the first quarter of 2021, compared to 157 funds in the fourth quarter of 2020. GOOG delivered a  14.76% 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.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, pet market is growing at a 7% annual rate and is expected to reach $110 billion in 2021. So, we are checking out the 5 best stocks for animal lovers. We go through lists like the 10 best battery stocks 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 homepage.

Disclosure: None. This article is originally published at Insider Monkey.