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Here’s Why You Should Consider Investing in IDEXX Laboratories (IDXX)

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Baron Funds, an asset management firm, published its “Baron Asset Fund” second quarter 2021 investor letter – a copy of which can be downloaded here. A quarterly return of 10.03% was delivered by the fund’s institutional shares for the Q2 of 2021, compared to its Russell Midcap Growth Index and S&P 500 benchmarks that delivered 11.07% and 8.55% returns respectively 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 Baron Funds, the fund mentioned IDEXX Laboratories, Inc. (NASDAQ: IDXX), and discussed its stance on the firm. IDEXX Laboratories, Inc. is a Westbrook, Maine-based animal health monitoring, pathology, veterinary clinical trials, livestock and poultry, water testing, and dairy developer with a $57.1 billion market capitalization. IDXX delivered a 34.46% return since the beginning of the year, while its 12-month returns are up by 75.04%. The stock closed at $673.36 per share on August 26, 2021.

Here is what Baron Funds has to say about IDEXX Laboratories, Inc. in its Q2 2021 investor letter:

“Favorable stock selection in Health Care was driven by IDEXX Laboratories, Inc., the global leader in veterinary diagnostics, software, and water microbiology testing. IDEXX was the largest contributor as veterinary visits continued their recovery from pandemic lows, leading to double-digit growth in veterinary practice revenues.

Shares of veterinary diagnostics leader IDEXX Laboratories, Inc. gained after reporting outstanding quarterly results. Total corporate revenues grew 21%, recurring revenues in its core companion animal segment grew 23%, its margins increased more than 800 basis points, and its normalized EPS grew a whopping 80%. The company’s business continued to benefit from an ongoing recovery in veterinary office visits, which drives growth in veterinarians’ expenditures on diagnostic instruments and testing performed both in clinics and laboratories. We remain optimistic about IDEXX’s ability to continue growing its revenues and profits at elevated rates.”

Veterinarian, Vet, Dogs, Pets, Animals

Photo by Karlo Tottoc on Unsplash

Based on our calculations, IDEXX Laboratories, Inc. (NASDAQ: IDXX) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. IDXX was in 39 hedge fund portfolios at the end of the first half of 2021, compared to 49 funds in the previous quarter. IDEXX Laboratories, Inc. (NASDAQ: IDXX) delivered a 20.48% 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.