U.S. markets close in 3 hours 30 minutes
  • S&P 500

    4,158.61
    +23.67 (+0.57%)
     
  • Dow 30

    34,032.08
    +210.78 (+0.62%)
     
  • Nasdaq

    13,879.37
    +93.10 (+0.68%)
     
  • Russell 2000

    2,222.50
    +34.29 (+1.57%)
     
  • Crude Oil

    61.97
    -0.70 (-1.12%)
     
  • Gold

    1,793.50
    +15.10 (+0.85%)
     
  • Silver

    26.59
    +0.75 (+2.90%)
     
  • EUR/USD

    1.2034
    -0.0007 (-0.06%)
     
  • 10-Yr Bond

    1.5730
    +0.0110 (+0.70%)
     
  • GBP/USD

    1.3927
    -0.0010 (-0.07%)
     
  • USD/JPY

    108.1310
    +0.0610 (+0.06%)
     
  • BTC-USD

    56,037.44
    +1,013.34 (+1.84%)
     
  • CMC Crypto 200

    1,293.81
    +30.85 (+2.44%)
     
  • FTSE 100

    6,895.29
    +35.42 (+0.52%)
     
  • Nikkei 225

    28,508.55
    -591.83 (-2.03%)
     

Polen Capital: Illumina (ILMN) Poised to Become ‘Even Larger and Stronger’ in $20B DNA Sequencing Market

  • Oops!
    Something went wrong.
    Please try again later.
Jose Karlo Mari Tottoc
·5 min read
  • Oops!
    Something went wrong.
    Please try again later.

Polen Capital Management, a value-driven, concentrated, long-term investment management firm, published its ‘Polen Focus Growth’ fourth-quarter 2020 Investor Letter – a copy of which can be downloaded here. A return of 10.15% was recorded by the fund for the Q4 of 2020, just an inch below both its S&P 500 benchmark that delivered a 12.15% return, and Russell 1000 index that returned 11.39%. You can view the fund’s top 5 holdings to have a peek at their top bets for 2021.

Polen Focus Growth, in their Q4 2020 Investor Letter, said that they acquired a position in Illumina, Inc. (NASDAQ: ILMN) because the company met their specific standards in choosing a stock to own. Illumina, Inc. is a premier developer and manufacturer of life science tools and integrated systems. It has a $428.64 billion market cap. For the past 3 months, ILMN delivered a decent 37.51% return and settled at $428.64 per share at the closing of February 4th.

Here is what Polen Focus Growth has to say about Illumina, Inc. in their investor letter:

"We made just one trade in the fourth quarter, initiating a new position in Illumina. The company manufactures DNA-sequencing equipment and the consumables for this equipment, which enable DNA to be sequenced in a timely, accurate, and affordable way. More simply, we view Illumina as the leading operating system for DNA sequencing. Mapping human DNA in an accurate, timely, and affordable manner is difficult. DNA sequencing is also important for early diagnosis and targeted treatment of many diseases. Illumina has over 70% market share of its long-term $20 billion+ sequencing market due to its leading technology platform that is difficult to replicate, the trust it has built with customers, and its sticky systems that customers are reluctant to replace.

We often say that it can take years for a company to make its way through our investment process and into the Portfolio, and Illumina is a great example of this. We studied Illumina for six years prior to investing. The biggest hurdle has been valuation over most of this period. We felt there was an opportunity to invest shortly after Illumina announced an $8 billion acquisition of Grail, a company that was founded inside of Illumina and later spun out. Grail has developed a unique blood test to diagnose more than 50 life threatening cancers at an early stage so they can be treated earlier and with far less mortality. Illumina’s stock dropped significantly following the Grail announcement because it is a sizeable acquisition that will bring down Illumina’s margins in the short-term. We viewed this as an opportunity because we do not believe Grail negatively impacts Illumina’s core sequencing business going forward. In fact, we believe Grail has a large opportunity to become a differentiated and leading early-stage cancer testing company that may be better positioned to realize this opportunity as part of Illumina.

We believe Illumina exercised sound judgment in both spinning Grail out four years ago and then moving to acquire the business today. While Grail will lower Illumina’s margins and return on equity meaningfully in the short-term, we remain focused on Illumina’s core sequencing business and the company’s long-term earnings power. We do not believe Grail would negatively impact the economics of Illumina’s core business even in a scenario where Grail fails to execute on the large opportunity in front of it. And, of course, if Grail can continue executing on its vision to become the leader in early-stage cancer testing, Illumina’s business and sequencing platform could become even larger and stronger."

biotech research company, bio-technology companies
biotech research company, bio-technology companies

Copyright: mikkolem / 123RF Stock Photo

ILMN delivered a 42.30% return in the past 12 months. Our calculations show that Illumina, Inc. (NASDAQ: ILMN) does not belong in our list of the 30 most popular stocks among hedge funds.

The top 10 stocks among hedge funds returned 216% since the end of 2014 and outperformed the S&P 500 Index ETFs by more than 121 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. Below you can watch our video about the top 5 hedge fund stocks right now. All of these stocks had positive returns in 2020.

Video: Top 5 Stocks Among Hedge Funds

https://www.youtube.com/watch?v=OgBhPDmWMtI

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. 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 website.

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