Is Beyond Meat (BYND) A Worthy Investment Pick?

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Baillie Gifford, a large-scale investment management firm in the UK, published its “Long Term Global Growth Fund” second quarter 2021 investor letter – a copy of which can be downloaded here. A quarterly return of 13.59% was recorded by the fund for the second quarter of 2021, compared to the 7.53% return of its MSCI ACWI benchmark. You can view the fund’s top 5 holdings to have an idea about their top bets for 2021.

In the Q2 2021 investor letter of Baillie Gifford, the fund mentioned Beyond Meat, Inc. (NASDAQ: BYND), and discussed its stance on the firm. Beyond Meat, Inc. is a Los Angeles, California-based, plant-based meat substitutes producer, that currently has a $7.7 billion market capitalization. BYND delivered a -1.84% return since the beginning of the year, while its 12-month returns are down by -2.54%. The stock closed at $122.70 per share on July 30, 2021.

Here is what Baillie Gifford has to say about Beyond Meat, Inc. in its Q2 2021 investor letter:

“One of the most important cognitive elements, is our recognition that consumer patterns and attitudes are evolving increasingly rapidly and with ever greater amplitude. While the human needs for self-actualisation, esteem and belonging are innate and immutable, they are being expressed in new ways. Tastes are being shaped by social groups who are culturally similar but geographically distant. The lines between the physical and digital-self continue to blur.

To those in the throes of middle age, this can be discombobulating. I profess to unease when my daughter recently earned five pounds stacking logs – only to ‘blow’ this pocket money on a pair of virtual Gucci sneakers for her online Roblox character. But we need to be imaginative about the possible size of the market for virtual luxury in the long term and it’s encouraging to observe that Kering is already on the front foot. It is also amply clear that the experienced Long Term Global Growth investors who predate Generations Y & Z, need the help of colleagues in understanding the mood and aspirations of a new cohort of conscious consumers. In this sense, the multigenerational and multicultural dynamic within the LTGG team (and indeed across the broader Baillie Gifford investment floor), has never seemed more important.

It was the younger members of the team who pushed us to be more imaginative on the true size of the opportunity for Beyond Meat. This holding’s investment case is predicated firmly on the removal of the cow as a rather inefficient middle-man between the sun and the stomach. Some within the team see no reason why the opportunity for Beyond Meat shouldn’t ultimately be larger than the $500bn market for traditional protein forms.”

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Based on our calculations, Beyond Meat, Inc. (NASDAQ: BYND) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. BYND was in 26 hedge fund portfolios at the end of the first quarter of 2021, compared to 27 funds in the fourth quarter of 2020. Beyond Meat, Inc. (NASDAQ: BYND) delivered a -6.82% 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.

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