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Polen Capital on Blackbaud (BLKB): “We Recognized a Major Deficiency of our Investment Criteria”

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Jose Karlo Mari Tottoc
·3 min read
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Polen Capital Management, a value-driven, concentrated, long-term investment management firm, published its ‘Polen U.S. Small Company Growth’ fourth-quarter 2020 Investor Letter – a copy of which can be downloaded here. A gross return of 29.14% was recorded by the fund for the Q4 of 2020, slightly below its Russell 2000 Growth benchmark that delivered a 29.61% return. You can view the fund’s top 5 holdings to have a peek at their top bets for 2021.

Polen Capital Management, in their Q4 2020 investor letter, mentioned Blackbaud, Inc. (NASDAQ: BLKB) and shared their insights on the company. Blackbaud, Inc. is a New York-based computer software company that currently has a $3.4 billion market capitalization. Since the beginning of the year, BLKB delivered a 23.75% return, extending its 12-month gains to 34.17%. As of March 31, 2021, the stock closed at $71.23 per share.

Here is what Polen Capital Management has to say about Blackbaud, Inc. in their Q4 2020 investor letter:

"Finally, in addition to opportunistically trimming our position in Etsy, we exited our position in Blackbaud during the quarter after observing management behaviors that conflicted with our flywheel investment criteria. Blackbaud provides cloud-based and on-premise software solutions to the non-profit community. It made what we believed to be short-term-oriented decisions to preserve profitability during the pandemic at the expense of a long-term outlook. For example, the company slashed employee benefits and compensation despite having a relatively strong balance sheet to possibly maintain and even expand margins. We would have preferred that they made an effort to preserve employee stakeholder relationships and continue to invest and hire to further their competitive lead. We believe a crisis like COVID-19 serves as an opportunity to test the dedication of management toward their goals of long-term value creation. To us, short-term behavior like this is a red flag. Based on our discipline of unemotionally selling, we recognized a major deficiency of our investment criteria and exited our position."

5 Most Valuable technology Companies in the World
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Our calculations show that Blackbaud, Inc. (NASDAQ: BLKB) 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, Blackbaud, Inc. was in 19 hedge fund portfolios, compared to 21 funds in the third quarter. BLKB delivered a 23.75% 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.