Here’s Why Artisan Developing World Fund Characterizes Cadence (CDNS) as “Correlation Stocks”

Artisan Partners, an investment management company, released its “Artisan Developing World Fund” second quarter 2024 investor letter. A copy of the same can be downloaded here. In the second quarter, the fund (Investor Class) returned 4.72% compared to 5.00% for the MSCI Emerging Markets Index. The Artisan Developing World Fund has returned 127.46% cumulatively, since June 30, 2015, compared to 38.81% for the index. In addition, please check the fund’s top five holdings to know its best picks in 2024.

Artisan Developing World Fund highlighted stocks like Cadence Design Systems, Inc. (NASDAQ:CDNS), in the second quarter 2024 investor letter. Cadence Design Systems, Inc. (NASDAQ:CDNS) offers software, hardware, services, and reusable integrated circuit (IC) design blocks. The one-month return of Cadence Design Systems, Inc. (NASDAQ:CDNS) was 5.35%, and its shares gained 36.68% of their value over the last 52 weeks. On July 8, 2024, Cadence Design Systems, Inc. (NASDAQ:CDNS) stock closed at $317.36 per share with a market capitalization of $86.641 billion.

Artisan Developing World Fund stated the following regarding Cadence Design Systems, Inc. (NASDAQ:CDNS) in its Q2 2024 investor letter:

“While we remain focused on disproportionate equity outcomes, we seek to complement these investments with what we have come to characterize as “correlation stocks.” These investments have lower revenue velocity such that the range of investment outcomes is reduced, and can be further dampened by a company’s incremental margin structure. Cadence Design Systems, Inc. (NASDAQ:CDNS) is a semiconductor design and simulation company that has lower revenue velocity than some investments in our portfolio in part because of its scale, and lower revenue variability because of its recurring revenue model. These revenue characteristics render its high-margin structure less punitive in adverse industry or economic environments.”

An office of software engineers and designers collaborating on a digital project.

Cadence Design Systems, Inc. (NASDAQ:CDNS) is not on our list of 31 Most Popular Stocks Among Hedge Funds. As per our database, 74 hedge fund portfolios held Cadence Design Systems, Inc. (NASDAQ:CDNS) at the end of the first quarter which was 72 in the previous quarter. The total revenue of Cadence Design Systems, Inc. (NASDAQ:CDNS) for the first quarter was $1.009 billion (see the details here). While we acknowledge the potential of Cadence Design Systems, Inc. (NASDAQ:CDNS) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as NVIDIA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

We discussed Cadence Design Systems, Inc. (NASDAQ:CDNS) in another article and shared the list of largest software companies in the world by market cap. In addition, please check out our hedge fund investor letters Q2 2024 page for more investor letters from hedge funds and other leading investors.

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