Is Duck Creek Technologies (DCT) A Smart Long-Term Buy?

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Perpetual Limited, an investment management firm, published its “Perpetual Global Innovation Fund” second quarter 2021 investor letter – a copy of which can be downloaded here. A quarterly portfolio return of 6.9% was recorded by the fund for the second quarter of 2021, and 38.2% for the financial year. 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 Perpetual Limited, the fund mentioned Duck Creek Technologies, Inc. (NASDAQ: DCT), and discussed its stance on the firm. Duck Creek Technologies, Inc. is a Boston, Massachusetts-based software company, that currently has a $5.8 billion market capitalization. DCT delivered a 3.05% return since the beginning of the year, while its 3-month returns are up by 11.33%. The stock closed at $44.62 per share on August 02, 2021.

Here is what Perpetual Limited has to say about Duck Creek Technologies, Inc. in its Q2 2021 investor letter:

“We also re-entered Duck Creek Technologies during the quarter. Duck Creek is a provider of software to the property and casualty insurance market, which while a major spender on technology, is a market that has been slow to adopt the flexibility offered by the cloud. There are many reasons for this, but it is now beginning to change and has become a high priority for insurance CTOs. Duck Creek was early to recognise that this shift would eventually happen and invested accordingly. They are now gaining market share and we believe they have another decade at least of strong growth in front of them.”


Photo by Hack Capital on Unsplash

Based on our calculations, Duck Creek Technologies, Inc. (NASDAQ: DCT) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. DCT was in 19 hedge fund portfolios at the end of the first quarter of 2021, compared to 22 funds in the fourth quarter of 2020. Duck Creek Technologies, Inc. (NASDAQ: DCT) delivered a 3.22% return in the past month.

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.