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Here’s Why Rhizome Partners Exited its Nuance (NUAN) Position

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·2 min read
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  • NUAN
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Rhizome Partners, an investment management firm, published its third-quarter 2021 investor letter – a copy of which can be downloaded here. A quarterly net loss of 1.7% was delivered by the fund for the third quarter of 2021, versus the 0.6% gain of the S&P 500 index and 0.2% gain of the NAREIT index for the same period. You can take a look at the fund’s top 5 holdings to have an idea about their best picks for 2021.

Rhizome Partners, in its Q3 2021 investor letter, mentioned Nuance Communications, Inc. (NASDAQ: NUAN) and discussed its stance on the firm. Nuance Communications, Inc. is a Burlington, Massachusetts-based multinational computer software technology with a $17.6 billion market capitalization. NUAN delivered a 25.74% return since the beginning of the year, while its 12-month returns are up by 29.32%. The stock closed at $55.44 per share on November 24, 2021.

Here is what Rhizome Partners has to say about Nuance Communications, Inc. in its Q3 2021 investor letter:

"We also exited our small position in Nuance upon Microsoft’s acquisition. Nuance is a leader in voice recognition software, with dominant market share, and its speech-to-text product is the gold standard in radiology. In addition, by eliminating the need for note taking and allowing doctors to focus on patient care, Nuance could transform the way doctors treat patients. We built a 1% position in Nuance after attending its comprehensive investor day. Our view is that if Nuance can successfully grow its voice-recognition software in doctor’s offices, it could be worth multiples of our cost basis. Microsoft’s acquisition eliminated the multi-bagger upside but also partially validates the belief that Nuance is a high-quality technology company. We exited Nuance with a 62% gain in less than a year. This example is representative of the slight adjustments we made to our portfolio construction. We will allocate to small bets on technology and high-growth companies that could increase our exposure to “right tail” upside. Rest assured that our focus is still roughly 50% real estate, 30% high-quality companies trading at cheap multiples of free cash flow, and the rest in investments with the potential for growth and higher upside."

Photo by Hack Capital on Unsplash

Based on our calculations, Nuance Communications, Inc. (NASDAQ: NUAN) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. NUAN was in 61 hedge fund portfolios at the end of the third quarter of 2021, compared to 72 funds in the previous quarter. Nuance Communications, Inc. (NASDAQ: NUAN) delivered a 0.73% return in the past 3 months.

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