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Time to Take Profits in SolarEdge Technologies (SEDG)?

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ClearBridge Investments, an investment management firm, published its “International Growth ADR Strategy” second quarter 2021 investor letter – a copy of which can be downloaded here. The ClearBridge International Growth ADR Strategy outperformed its MSCI EAFE Index benchmark. The Strategy delivered gains across seven of the 10 sectors in which it was invested (out of 11 total), with the consumer staples, IT and consumer discretionary sectors the primary contributors. You can view the fund’s top 5 holdings to have a peek at their top bets for 2021.

In the Q2 2021 investor letter of ClearBridge Investments, the fund mentioned SolarEdge Technologies, Inc. (NASDAQ: SEDG), and discussed its stance on the firm. SolarEdge Technologies, Inc. is a Herzliya, Israel-based photovoltaics company, that currently has a $13.7 billion market capitalization. SEDG delivered a -16.84% return since the beginning of the year, while its 12-month revenues are up by 57.77%. The stock closed at $265.37 per share on July 13, 2021.

Here is what ClearBridge Investments has to say about SolarEdge Technologies, Inc. in its Q2 2021 investor letter:

"Our sustainability orientation has led us to favor renewable energy providers such as SolarEdge over traditional fossil fuel energy companies. Renewables stocks moved up very strongly over the last several quarters on optimism about huge green stimulus plans in Europe and the U.S. so we took profits and sold SolarEdge Technologies as valuations became demanding."

Based on our calculations, SolarEdge Technologies, Inc. (NASDAQ: SEDG) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. SolarEdge Technologies, Inc. was in 32 hedge fund portfolios at the end of the first quarter of 2021, compared to 28 funds in the fourth quarter of 2020. SEDG delivered a -1.51% 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, an activist hedge fund wants to buy this $26 biotech stock for $50. So, we recommended a long position to our monthly premium newsletter subscribers. 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.