Artisan Mid Cap Fund recently released its Q1 2020 Investor Letter, a copy of which you can download below. The fund posted a return of -11.55% for the quarter (investor class), outperforming their benchmark, the Russell Midcap Index which returned -27.07% in the same quarter. You should check out Artisan Mid Cap Fund’s top 5 stock picks which helped them beat the market by nearly 16 percentage points. There weren’t a lot of funds who could deliver these kinds of returns without shorting the market or using aggressive put options.
In the said letter, Artisan Mid Cap Fund highlighted a few stocks and Zscaler Inc. (NASDAQ:ZS) is one of them. Zscaler is a information security company based in California. Year-to-date, ZS stock gained 59.2% and on May 8th it had a closing price of $74.02. Its market cap is of $9.6 billion. Here is what Artisan Mid Cap Fund said:
“Cybersecurity remains a top concern for businesses and governments alike as cyberattacks can have devastating financial and reputational consequences. Furthermore, managing the security needs of legacy on-premise applications, a growing number of cloud-based applications (Office 365, Salesforce, etc.) and a remote workforce, makes operating IT infrastructures increasingly complex. Zscaler’s scalable, cloud-based security platform is a more secure and efficient way to connect users and applications, which eliminates the need for several layers of security (firewalls, VPNs, etc.) developed and built over the last couple of decades. While the pandemic crisis is likely disrupting some areas of Zscaler’s new sales funnel, the company is particularly well-suited to scale and accelerate our market share-gain thesis. Ninety percent of employees are remotely connecting to the enterprise IT network in today’s inverted world, as opposed to prior solutions which are geared to support 10%-20% of workers connecting remotely with the rest connecting from within the walls of a corporate network. Many employees have used traditional VPN connections to log into their networks remotely, but Zscaler’s platform offers a more secure connection without exposing an entire internal network, is easier to configure and is less costly to operate at scale. Given the trend toward connecting remote devices over the Internet backbone, solid gross margins and a recurring revenue base, we added to our position during the quarter.”
In Q4 2019, the number of bullish hedge fund positions on ZS stock decreased by about 14% from the previous quarter (see the chart here), so a number of other hedge fund managers don’t seem to agree with ZS’s growth potential.
Disclosure: None. This article is originally published at Insider Monkey.
