Here’s Why NVIDIA Corp. (NVDA) Landed in Baillie Gifford’s Top Contributor List

·3 min read

Baillie Gifford, a large-scale investment management firm in the UK, published its "Long Term Global Growth Fund" second quarter 2021 investor letter – a copy of which can be downloaded here. A quarterly return of 13.59% was recorded by the fund for the second quarter of 2021, compared to the 7.53% return of its MSCI ACWI benchmark. 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 Baillie Gifford, the fund mentioned NVIDIA Corporation (NASDAQ: NVDA), and discussed its stance on the firm. NVIDIA Corporation is a Santa Clara, California-based computer systems design services company, that currently has a $485.9 billion market capitalization. NVDA delivered a 49.36% return since the beginning of the year, extending its 12-month returns to 83.70%. The stock closed at $194.99 per share on July 30, 2021.

Here is what Baillie Gifford has to say about NVIDIA Corporation in its Q2 2021 investor letter:

"Short-term share price movements are not a good measure of a company’s long-term value. Our focus is, as always, on the business fundamentals of companies over five to ten years and beyond.

Among the top contributors to Fund performance in the second quarter was NVIDIA. NVIDIA continues to deliver robust fundamental performance. Revenues grew 84% year-on-year, driven by growth in Gaming, Data Center and Professional Visualisation areas. Its data center business is expanding as different industries worldwide adopt NVIDIA AI to help with computer vision, conversational AI and natural language understanding. NVIDIA continues to innovate in many areas, from gaming, cloud computing, AI, robotics, self-driving cars, to genomics and computational biology. It is also progressing with its planned acquisition of semiconductor design company Arm, which if successful could unlock further growth potential."

Nvidia, software
Nvidia, software

Photo by Javier Esteban on Unsplash

Based on our calculations, NVIDIA Corporation (NASDAQ: NVDA) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. NVDA was in 80 hedge fund portfolios at the end of the first quarter of 2021, compared to 88 funds in the fourth quarter of 2020. NVIDIA Corporation (NASDAQ: NVDA) delivered a 29.91% 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.

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