In this article, we will review the 10 best stocks to invest in according to tech billionaire Chase Coleman.
The founder of Tiger Global Management Chase Coleman’s strategy of investing in tech and internet stocks has been helping one of Julian Robertson’s “tiger cubs” proteges to outperform the broader market trends. This is evident from the substantial increase in Coleman’s fund portfolio value from $25.79 billion in the June quarter to $35.53 billion at the end of the September quarter. The fund saw a $9 billion value growth in the June Quarter. Chase Coleman’s net worth is now around $7 billion, almost twice as large as his mentor Julian Robertson’s net worth.
Tech stocks have been on an unstoppable growth trajectory since the burst of the dotcom bubble. Tech stocks have also been shining even brighter since the beginning of this year as virus-related concerns have added to the demand for internet stocks and technology companies.
The latest filings reveal Coleman seeks to expand its investment in companies benefiting from changing consumer trends. Excluding a small stake sale in Alibaba Holdings (BABA), the billionaire hedge fund has not sold any stake in its top 17 stock holdings. Indeed, he added to his existing positions in several top-performing internet and tech stocks.
The hedge fund has generated a 33% return in 2019 and another 33.5% return this year through the end of August, with expectations that Coleman’s investments strategies would help Tiger Global Management to improve returns for the remainder of this year. This is because all of its top US stock holdings have generated massive share price gains in the latest quarter. The top ten stock holdings account for 56% of the overall portfolio.
Besides investments in top tech and internet companies, Coleman and his team like to invest in startups, private companies, and IPOs. Coleman invested more than $313 million in a tech IPO Snowflake (NYSE: SNOW) during the latest quarter and expanded the position in the Chinese e-commerce platform Pinduoduo (NASDAQ: PDD). CrowdStrike Holdings Inc. (NASDAQ: CRWD), as well as GSX Techedu Inc. (NYSE: GSX), are among the startups that gained the confidence of one the most successful Tiger cubs.
Chase Coleman of Tiger Global
In addition, the fund has also significantly raised its stake in tech companies benefiting from pandemic related changes in the market trends. He doubled its stake in ServiceNow Inc. (NYSE: NOW) while increased Zoom Video (NASDAQ: ZM) position by 50% in the September quarter. Meanwhile, the billionaire hedge fund has sold small stakes in companies like PayPal (NASDAQ: PYPL) and Salesforce (NYSE: CRM) to capitalize on gains.
If we were forced to invest in a single industry’s stocks, we would have picked tech stocks without a doubt. Tech stocks used to be a separate industry before the previous decade, but now tech is everywhere. Industrial products like thermostats, light bulbs, batteries, automobiles, trucks are becoming technological products. Technology companies will be disrupting everything from construction, banking, insurance, healthcare, education, and several other industries over the coming years. You want to be on the side of the disrupting companies and avoid investing in disrupted companies which will come across as “value investments”. That’s why the 10 best stocks to invest in right now should probably be drawn from the tech industry. Chase Coleman’s track record of delivering around 20% annual returns after fees shows that he can pick the best technology stocks to buy.
While Chase Coleman’s reputation remains intact, the same can’t be said of the hedge fund industry as a whole, as its reputation has been tarnished in the last decade during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 78 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 significantly underperformed the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 16. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
Let’s start reviewing the 10 best stocks to invest in according to tech billionaire Chase Coleman.
10. CrowdStrike Holdings, Inc. (NASDAQ: CRWD)
The cybersecurity platform (NASDAQ: CRWD) is one of the best growth stocks to invest in according to the tech billionaire. Tiger Global Management first initiated a position in CrowdStroke during the first quarter of 2019 and it has raised the stake in the cybersecurity platform by 49% in the September quarter this year.
The hedge fund has benefitted strongly from its investment in CrowdStrike Holdings. The shares of CrowdStrike jumped almost 270% in the last twelve months, with expectations for more gains ahead. The company has generated 86% year-over-year growth in revenue in the latest quarter while subscription revenue grew 87% to $213.5 million amid the addition of 1,186 net new subscription customers.
“We continued to drive operating leverage and record unit economics. As a result of our strong execution in the quarter, we reduced GAAP operating loss year-over-year, achieved non-GAAP operating profitability for the third consecutive quarter, and generated positive operating and free cash flow for the fifth consecutive quarter,” says CFO Burt Podbere.
9. Pinduoduo Inc (PDD)
PDD ranks 9th in our list of the 10 best stocks to invest in now. The Chinese social e-commerce giant Pinduoduo has also been gaining the confidence of one of the best tiger cubs in the past few quarters. The tech billionaire first initiated a position in the Chinese online platform in the third quarter of 2018. Coleman has raised the stake in the online platform by 149% in the September quarter this year.
Several other hedge funds including Tao Value have also been showing confidence in the Chinese social e-commerce giant. Here is what Tao Value said, “PDD was a relatively new position since last year (refer to our 2018 Q3 letter for detailed thesis: [Link] 1 ). PDD returned +56% over this past quarter, helped by the very positive earnings surprise. In its announced Q2 18 results, PDD booked +169% YoY revenue growth, +171% YoY GMV growth, 41% YoY active buyer growth & a +98% annual spending by active buyers, all beating street’s estimate by a big margin. However, it was no surprise to us as our evaluation has concluded that PDD highly possibly stood a chance to compete with the incumbents. Now that the question changes from “whether” PDD can compete to “how” it competes, it may become a fiercer battle. But given its superior mission & vision, we can be patient with its exploration in other adjacent playfields. I am particularly intrigued to see the development in their brand cultivating (C2M) & logistics initiatives.”
8. Sea Limited (SE)
SE ranks 8th in our list of the 10 best stocks to invest in now. The e-commerce, gaming, and fintech stock Sea Limited (NYSE: SE) is the eighth-largest stock holding of Chase Coleman’s portfolio. The firm has made no changes in its stake during the third quarter. Tiger Global Management is currently holding 8.3 million shares of Sea Limited valued at $1.2 billion, accounting for 3.79% of the overall portfolio.
The shares of e-commerce, gaming, and fintech platform jumped 400% this year, driven by robust revenue growth. Its GAAP revenue of $1.2 billion in the latest quarter increased 98.7% from the year-ago period. The company expects fiscal 2020 bookings for digital entertainment in the range of $3.1 billion, representing 75.4% growth from 2019. Tao Value is cautiously bullish on Sea Limited:
“Sea Ltd (ticker: SE) Based on reported Q2 numbers, Sea did well across the board, beating already high expectation in all 3 business segments. It is evolving into a super app for ASEAN region leveraging its leading positions in all 3 mega trends: gaming, e-commerce & fintech, basically a combined Alibaba & Tencent of ASEAN. Given the strong price reaction, I decided to trim slightly to control position size.”
7. Alibaba Group Holding (BABA)
BABA ranks 7th in our list of the 10 best stocks to invest in now. The Chinese e-commerce platform Alibaba Group Holding (NYSE: BABA) has been a permanent member of Coleman’s portfolio over the years. The hedge fund is holding 4.4 million shares of BABA valued at $1.31 billion, accounting for 3.88% of the overall portfolio. The tech billionaire benefited from its investments in the largest Chinese e-commerce platform because Alibaba shares soared more than 200% in the past five years.
The company has generated revenue growth of 30% in the latest quarter while earnings per share of $2.68 topped the consensus estimate by $2.65 per share. The company says Mobile MAUs on its China retail marketplaces hit 881 million in the latest quarter, representing a growth of 7 million over June 2020.
In a letter to investors, Baron Opportunity Fund applauded the future fundamentals of Alibaba. Baron Opportunity Fund said: “Alibaba Group Holdings Limited is the largest retailer and e-commerce company in China. Alibaba operates shopping platforms Taobao and Tmall and owns 33% of soon-to-be publicly traded Ant Financial, which operates Alipay, China’s largest third-party online payment provider. Shares of Alibaba were up on sustained core commerce recovery benefiting from improved purchase frequency and spending per order. We believe Alibaba’s core business remains highly profitable, complemented by rapid growth in the cloud business and inflection in the Cainiao logistics and New Retail segments.”
6. Carvana Co (CVNA)
The online used cars buying and selling e-commerce platform Carvana Co (NYSE: CVNA) is one of the best performers of 2020. The e-commerce platform is the sixth-largest stock holding of Tiger Global, accounting for 3.95% of the overall portfolio. The company is currently holding 6 million shares of Carvana valued at $1.34 billion.
In a letter to shareholders, Steel City Capital expressed confidence in Carvana. The firm said, “I believe market expectations for Carvana (CVNA) are disconnected from what the company is likely to deliver, particularly as it relates to the next several quarters. One of the company’s key value propositions – purchasing a car from the comfort of your home with no direct human interaction – is tailor-made for a world of social distancing. After bottoming at $22.16, shares have risen 6.4x to their current level of $141. The market is expecting more from CVNA today than it did at the beginning of the year.
“What I believe investors fail to appreciate is the company actually finds itself at a momentary disadvantage that should fully emerge in its third quarter results. Specifically, CVNA made a strategic decision to pull back on used vehicle inventory purchases in March and April in order to preserve liquidity. While the company has since resumed purchases, inventory listed on the company’s website remains far below levels exhibited earlier in the year. In turn, this will weigh upon future retail sales volumes.”
5. Apollo Global Management, Inc. (APO)
The asset management firm Apollo Global Management, Inc. (NYSE: APO) is the fifth-largest stock holding of Tiger Global Management. The tech billionaire Chase Coleman believes Apollo Global Management is a good stock to invest in. The hedge fund has been holding 33.9 million shares of Apollo valued at $1.5 billion.
Shares of Apollo Global Management soared 200% in the last eighteen months. In addition, the asset management firm also offers hefty dividends to investors.
Miller Value Partners recently pointed to Apollo Global Management in a letter to investors. The firm said, “Apollo Global Management (APO) dropped 9.5% over the period. The company reported Q2 distributable earnings of $0.46, just below consensus of $0.48, and the quarterly dividend of $0.49/share (4.7% annualized yield). Pretax fee-related earnings of $259M ($0.59/share) topped estimates of $242M ($0.55/share) driven by higher advisory and transaction fees while management fees of $401.8M were in-line. Assets under management (AUM) of $413.6Bn rose 31% sequentially with fee-earnings AUM growth of 36% to $329.8Bn driven by insurance transactions and $16Bn of gross inflows. Permanent capital of $246Bn represents 60% of total assets under management.”
4. Amazon.com, Inc. (AMZN)
The world’s largest e-commerce platform Amazon.com (NASDAQ: AMZN) is the fourth largest stock holding of tech billionaire Coleman’s portfolio. It is one of the best stocks to invest in according to the tech billionaire. Tiger Global Management has recently raised its stake in the e-commerce platform by 1% to 604,800 shares valued at $1.90 billion, accounting for 5.61% of the overall portfolio.
In a letter to investors, Baron Opportunity Fund believes Amazon will expand its market share in the days ahead. The firm said, “Amazon.com, Inc. is the world’s largest retailer and cloud services provider. Shares were up on strong second quarter revenue metrics – with paid unit growth accelerating to 57%, a startling figure for a company of this scale – as Amazon benefited from recent investments in logistics and distribution to meet increased COVID-19-related demand. Amazon has the unique ability to deliver all the necessities of life safely to your doorstep, including groceries. Amazon also reported a stunning beat in operating profit, with $5.8 billion of operating income, almost six times Wall Street’s expected figure. While e-commerce penetration is rising rapidly and Amazon continues to grow its addressable market by entering new verticals, we continue to view Amazon Web Services as the more material driver of the company given its leadership in the vast and growing cloud infrastructure market and potential to compete in application software in the years to come.”
3. Facebook, Inc. (NASDAQ: FB)
The social media platform Facebook, Inc. (NASDAQ: FB) is one of the most favorite stocks of tech billionaire Coleman. The tech hedge fund has been holding the Facebook stock since the fourth quarter of 2016. It currently represents the third-largest stock investment, accounting for 6.75% of the portfolio. Shares of Facebook jumped 40% this year, extending the five years gains to 160%.
At the end of the latest quarter, Facebook was in 230 hedge funds’ portfolios, up from the previous all-time high for this statistics was 213. Wedgewood Partners commented on the performance of Facebook in the letter to investors. The firm said:
“Facebook reported 32% growth in constant currency ad revenue, along with expectations for 50-55% growth in expenses as the Company continued with their telegraphed plan to accelerate investments in privacy and security across their social platforms. The Federal Trade Commission (FTC) also approved a $5 billion fine for violating a 2012 FTC order by misrepresenting users’ ability to control data privacy. While this removed an overhang dating back to early 2018, continued pressure from politicians and regulators kept Facebook’s earnings multiple in check.”
2. Microsoft Corporation (NASDAQ: MSFT)
The technology giant Microsoft (NASDAQ: MSFT) is one of the best stocks to invest in according to the tech billionaire. The firm first initiated a stake in the technology giant in the fourth quarter of 2016 when shares were trading around $80. In addition, the tech hedge fund has raised its stake in Microsoft in the latest quarter to 11.41 million shares valued at $2.4 billion.
Amana Mutual Funds is bullish on Microsoft for the following reason:
“Microsoft has done an excellent job building its Azure cloud services business, while we believe a strong period of semiconductor demand will arrive in the new decade supporting Microchip and Taiwan Semiconductor. Whether the rally starts in 2020 or 2021 remains to be seen but recent signs have been positive.”
1. JD.com (NASDAQ: JD)
The Chinese e-commerce platform JD.com (NASDAQ: JD) is the largest stock holding of tech billionaire Chase Coleman’s portfolio. The hedge fund currently holds 51 million shares of JD valued above $4 billion, accounting for 11.80% of the overall portfolio. JD share price soared almost 140% in the last twelve months.
Hayden Capital recently pointed to the performance of JD.com in a letter to shareholders. The firm stated: “We originally bought the position in March 2017, predicated on the thesis that as Chinese GDP per capita rises, consumers would increasingly place emphasis on shipping times and name brand / authentic products. In addition, as the consumer base widened and shoppers got in the habit of instant gratification (due to same day / next day shipping), they would engage with the platform more often. The thesis was that this engagement and resulting loyalty to the platform, would allow JD to branch out into higher-margin general merchandise categories (which also have higher order frequencies) vs. their traditional electronics & appliances (lower margin, low order frequency), which would result in higher profits and margins.
Please also see: 15 Best Long-Term Stocks To Buy Now and 10 Best Large-Cap Stocks To Buy According to Ray Dalio
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