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Baron Funds: “Inogen (INGN) Shares Now Trade for a Bargain Price”

·4 min read

Baron Funds, an asset management firm, published its “Baron Discovery Fund” third quarter 2021 investor letter – a copy of which can be downloaded here. A decline of 5.02% was delivered by the fund’s institutional shares for the third quarter of 2021, which was 0.63% better than the Russell 2000 Growth Index (the “Benchmark”). You can take a look at the fund’s top 5 holdings to have an idea about their best picks for 2021.

Baron Discovery Fund, in its Q3 2021 investor letter, mentioned Inogen, Inc. (NASDAQ: INGN) and discussed its stance on the firm. Inogen, Inc. is a Goleta, California-based medical technology company with a $760.3 million market capitalization. INGN delivered a -25.11% return since the beginning of the year, while its 12-month returns are down by -2.39%. The stock closed at $33.46 per share on November 16, 2021.

Here is what Baron Funds has to say about Inogen, Inc. in its Q3 2021 investor letter:

"Inogen, Inc. makes portable oxygen concentrators (“POCs”) for patients with lung issues. Shares were down in the quarter despite the company handily beating June 2021 consensus numbers (driven by both sales and rentals of POCs) because Inogen took down full-year 2021 estimates as a component supply shortage (chips) is preventing the company from meeting strong demand. We believe this situation is much like the one in the automobile industry and that it will be resolved over the next few quarters as chip supply increases. In the meantime, management is procuring alternative supplies even at much higher prices, which it can pass on via low single-digit price increases (as the chips are a very small part of the overall cost of goods sold). Given that we are in the early stages of the transition of the oxygen treatment industry from tanks to POC’s (perhaps only 25% converted at this point) shares now trade for a bargain price, in our view."

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Based on our calculations, Inogen, Inc. (NASDAQ: INGN) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. INGN was in 19 hedge fund portfolios at the end of the first half of 2021, compared to 12 funds in the previous quarter. Inogen, Inc. (NASDAQ: INGN) delivered a -46.10% 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. Recently we came across a high-growth stock that has tons of hidden assets and is trading at an extremely cheap valuation. We go through lists like the 10 best growth stocks to buy 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.