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Alger: “Business Fundamentals for Avalara (AVLR) Remained Strong Despite Performing Poorly”

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Alger, an investment management firm, published its “Alger Small Cap Focus Fund” first quarter 2021 investor letter – a copy of which can be downloaded here. During the quarter, the largest portfolio sector weightings were Health Care and Information Technology. The largest sector overweight was Health Care. Class A shares of the Alger Small Cap Focus Fund underperformed the Russell 2000 Growth Index during the first quarter of 2021. You can view the fund’s top 5 holdings to have a peek at their top bets for 2021.

Alger Small Cap Focus Fund, in their Q1 2021 investor letter, mentioned Avalara, Inc. (NYSE: AVLR) and shared their insights on the company. Avalara, Inc. is an automated tax compliance software company that currently has a $16.2 billion market capitalization. Since the beginning of the year, AVLR delivered a -11.52% return, while its 12-month gains are up by 71%. As of April 16, 2021, the stock closed at $148.33 per share.

Here is what Alger Small Cap Focus Fund has to say about Avalara, Inc. in their Q1 2021 investor letter:

"Avalara Inc. was among the top detractors from performance. Avalara is leading provider of cloud-based solutions and services that enable companies to automate the complex and onerous burden of statutory transactional tax compliance. Avalara's solutions include an advanced database of broad and up-to-date tax content with technology for executing compliance processes including tax determination, tax document management and returns preparation and filing, which enable businesses of all sizes to automate transaction tax compliance, process transactions in real time, produce accurate tax records, and reduce errors and audit exposure. Today, Avalara has 14,890 core customers. Avalara underperformed in the first quarter as part of a broader sector rotation away from high-growth software stocks. After material outperformance in 2020, the correction in Avalara's stock price is due to increasing interest rates negatively impacting growth-focused companies like Avalara. Business fundamentals for Avalara have remained strong, with the company seeing an elevated demand pipeline and early signs of business momentum in the enterprise segment. We view increased digitization as a result of the Covid-19 pandemic as a long-term tailwind for Avalara's software business."

16 Most Technologically Advanced Countries in the World in 2017
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Our calculations show that Avalara, Inc. (NYSE: AVLR) does not belong in our list of the 30 Most Popular Stocks Among Hedge Funds. As of the end of the fourth quarter of 2020, Avalara, Inc. was in 56 hedge fund portfolios, compared to 46 funds in the third quarter. AVLR delivered a -7.41% return in the past 3 months.

The top 10 stocks among hedge funds returned 231.2% between 2015 and 2020, and outperformed the S&P 500 Index ETFs by more than 126 percentage points. We know it sounds unbelievable. You have been dismissing our articles about top hedge fund stocks mostly because you were fed biased information by other media outlets about hedge funds’ poor performance. You could have doubled the size of your nest egg by investing in the top hedge fund stocks instead of dumb S&P 500 ETFs. Here you can watch our video about the top 5 hedge fund stocks right now. All of these stocks had positive returns in 2020.

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