8 Stocks to Buy According to Alexander Captain’s Cat Rock Capital

In this article, we discuss 8 stocks to buy according to Alexander Captain’s Cat Rock Capital.

In the first quarter of 2015, Alexander Captain established the Connecticut-based hedge fund Cat Rock Capital. Captain has a Master of Arts in Statistics from the Harvard Graduate School of Arts and Sciences and a Bachelor of Arts in Economics from Harvard College. He worked at Chase Coleman’s Tiger Global and Blackstone before launching Cat Rock Capital. He is the founder and managing partner at the Cat Rock Capital.

Cat Rock Capital uses in-depth fundamental analysis and targeted value investing in providing returns for investors over the long term in high-quality, publicly traded firms. It often keeps investments for several years, borrows little to nothing, and has 10 to 15 core holdings. Cat Rock Capital’s investment strategy emphasizes on reliability, firm, people, and pricing.

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The fund’s Q2 2022 portfolio was worth $469.92 million, and some renowned names in Cat Rock Capital’s include TransDigm Group Incorporated (NYSE:TDG), Microsoft Corporation (NASDAQ:MSFT), and Meta Platforms, Inc. (NASDAQ:META). The hedge fund primarily invests in the information technology, industrials, and communication sectors, focusing on small and big companies with solid fundamentals and potential for future growth.

Our Methodology

Let’s start our list of 8 stocks to buy according to Alexander Captain’s Cat Rock Capital. These equities were chosen from Cat Rock Capital’s Q2 portfolio. The Q2 2022 database of Insider Monkey, which contains data on approximately 900 hedge funds, was utilised to ascertain the sentiment of the hedge funds towards these equities.

Stocks to Buy According to Alexander Captain’s Cat Rock Capital

8. DocuSign, Inc. (NASDAQ:DOCU)

Cat Rock Capital’s Stake Value: $16,411,000

Percentage of Cat Rock Capital’s 13F Portfolio: 3.49%

Number of Hedge Fund Holders: 37

DocuSign, Inc. (NASDAQ:DOCU) provides cloud-based electronic signing solutions. DocuSign, Inc. (NASDAQ:DOCU) was upgraded by Wedbush analyst Daniel Ives on October 12 from ‘Underperform’ to ‘Neutral’ with a $55 price target. According to the analyst, CLM deal execution has generally steadied, with numbers currently within reach for 2023–2024. DocuSign, Inc. (NASDAQ:DOCU) launched CLM Essentials in April to streamline contracts for expanding businesses.

At the end of Q2 2022, 37 hedge funds tracked by Insider Monkey owned stakes in DocuSign, Inc. (NASDAQ:DOCU), down from 45 a quarter earlier. The collective value of these stakes is over $1.01 billion. With nearly 5.22 million shares, Fisher Asset Management is DocuSign, Inc. (NASDAQ:DOCU)’s leading stakeholder as of Q2 2022.

Cat Rock Capital increased its stake in DocuSign, Inc. (NASDAQ:DOCU) during the second quarter of 2022 by around 30%. The fund now owns over 286,000 shares of DocuSign, Inc. (NASDAQ:DOCU), worth close to $16.41 million, representing 3.49% of the portfolio.

In addition to TransDigm Group Incorporated (NYSE:TDG), Microsoft Corporation (NASDAQ:MSFT), and Meta Platforms, Inc. (NASDAQ:META), Alexander Captain’s Cat Rock Capital is bullish on DocuSign, Inc. (NASDAQ:DOCU).

Rowan Street Capital, an investment management company, mentioned DocuSign, Inc. (NASDAQ:DOCU) in its Q3 2022 investor letter. Here is what the fund said:

“In the case of DocuSign, Inc. (NASDAQ:DOCU), the “Management” part no longer satisfies our requirements in order to remain in our investment portfolio. In the past 6-9 months, the company has had a huge turnover in both employees and upper management. In June of 2021, the board decided to get rid of Dan Springer, who had been a CEO of DocuSign since 2017 and took the company public in 2018. We found this decision strange as we thought that he actually did a great job growing the company over the past 5 years (revenues grew almost 5x from $519 million in 2017 to an estimated $2.4 billion this year).…” (Click here to read the full text)

7. eXp World Holdings, Inc. (NASDAQ:EXPI)

Cat Rock Capital’s Stake Value: $32,462,000

Percentage of Cat Rock Capital’s 13F Portfolio: 6.9%

Number of Hedge Fund Holders: 19

eXp World Holdings, Inc. (NASDAQ:EXPI) owns and runs a technology platform that enables businesses to run remotely, as well as a cloud-based real estate brokerage. eXp Realty has more than 85,000 agents globally, a 30% increase from the 65,286 agents it had at the start of October 2021. eXp World Holdings, Inc. (NASDAQ:EXPI) is the parent company of eXp Realty.

In light of eXp World Holdings, Inc. (NASDAQ:EXPI)’s Q2 earnings deficit, DA Davidson analyst Tom White on August 4 maintained a ‘Buy’ rating on shares of eXp World Holdings while decreasing his price objective from $28 to $22. In addition, according to Insider Monkey’s data, 19 hedge funds were bullish on eXp World Holdings, Inc. (NASDAQ:EXPI) at the end of Q2 2022, compared to 18 funds in the prior quarter.

Alexander Captain’s Cat Rock Capital is the leading position holder in eXp World Holdings, Inc. (NASDAQ:EXPI). The hedge fund first bought a stake in eXp World Holdings, Inc. (NASDAQ:EXPI) in the fourth quarter of 2021. In Q2 2022, the hedge fund increased its position in eXp World Holdings, Inc. (NASDAQ:EXPI) by 8% to 2.76 million shares, accounting for 6.9% of the overall portfolio.

Here is what East 72 has to say about eXp World Holdings, Inc. (NASDAQ:EXPI) in its Q1 2022 investor letter:

“Investors don’t like listed real estate brokers – at all. There are three significant US listed residential real estate brokers or franchisors (which includes) eXp World Holdings (EXPI: market capitalisation US$3.03billion less $108m in cash) with 72,000 agents connected via the eXp World and Virbela platforms; EXPI earned ~$41million in operating profit in 2021, after $144million in stock based compensation!”

6. Liberty Broadband Corporation (NASDAQ:LBRDA-C)

Cat Rock Capital’s Stake Value: $36,753,000

Percentage of Cat Rock Capital’s 13F Portfolio: 7.82%

Number of Hedge Fund Holders: 27

Liberty Broadband Corporation (NASDAQ:LBRDA-C) provides telecommunications services in the United States. Both household users and small to medium-sized businesses can access cable services using the company’s infrastructure of fibre, hybrid fibre, and coaxial connections.

In Q2 2022, Cat Rock Capital decreased its position in Liberty Broadband Corporation (NASDAQ:LBRDA-C) by 70%, holding a total of 317,820 shares worth over $36.75 million. The company represented 7.82% of the fund’s total 13F portfolio. Eagle Capital Management is the leading Liberty Broadband Corporation (NASDAQ:LBRDA-C) stakeholder, with a $960.27 million stake in the company.

According to Insider Monkey’s data, 27 hedge funds held stakes worth $543.50 million in Liberty Broadband Corporation (NASDAQ:LBRDA-C) at the end of June 2022, compared to 26 funds in the prior quarter worth $606.16 million.

Here is what Longleaf Partners Fund had to say about Liberty Broadband Corporation (NASDAQ:LBRDA) in its Q1 2022 investor letter:

“Liberty Broadband – A new position in 4Q 2021, holding company Liberty Broadband also suffered from a widening of a market-imposed holdco discount in an uncertain quarter. Liberty’s stakes in Charter and Alaskan cable company GCI also faced near-term concerns over slowing industry broadband additions, but these businesses have over a decade of pricing power history and are well positioned to weather an inflationary environment. We have a high degree of respect for our partners in John Malone and Greg Maffei, who are focused on growing value per share and are actively repurchasing discounted shares to help close the price-to-value gap.”

5. TransDigm Group Incorporated (NYSE:TDG)

Cat Rock Capital’s Stake Value: $43,644,000

Percentage of Cat Rock Capital’s 13F Portfolio: 9.28%

Number of Hedge Fund Holders: 66

TransDigm Group Incorporated (NYSE:TDG) is a designer, producer, and supplier of engineered aviation components for use in operational, commercial, and military aircraft. Sharlyn C. Heslam’s Stockbridge Partners is the leading position holder in TransDigm Group Incorporated (NYSE:TDG), with 1.60 million shares worth $859.93 million.

On October 11, Credit Suisse analyst Scott Deuschle initiated coverage of TransDigm Group Incorporated (NYSE:TDG), assigning an ‘Outperform’ rating and a $661 price target. The expert asserted that TransDigm Group Incorporated (NYSE:TDG)’s over-earning is not an issue and that there is still time for the commercial aerospace revival.

TransDigm Group Incorporated (NYSE:TDG) is a notable position in Alexander Captain’s Cat Rock Capital portfolio, alongside Microsoft Corporation (NASDAQ:MSFT), and Meta Platforms, Inc. (NASDAQ:META). Shares of TransDigm Group Incorporated (NYSE:TDG) rallied 7.11% last month, resulting in a $30.96 billion market capitalization. According to Insider Monkey’s data, 66 hedge funds were bullish on TransDigm Group Incorporated (NYSE:TDG) at the end of Q2 2022, compared to 64 funds in the preceding quarter.

The hedge fund of Alexander Captain entered the second quarter of 2022 with 81,323 shares of TransDigm Group Incorporated (NYSE:TDG) in its portfolio worth around $43.64 million. The company has featured on Captain’s portfolio since the fourth quarter of 2015.

In its Q2 2022 investor letter, Vulcan Value Partners mentioned TransDigm Group Incorporated (NYSE:TDG) and explained its insights for the company. Here is what the fund said:

“TransDigm Group Inc. is an aerospace manufacturing firm that provides highly engineered, niche components for use on commercial and military aircraft. The vast majority of the company’s profits come from aftermarket sales of sole-sourced products. The company produces high levels of free cash flow and has an effective, shareholder-oriented management team who are good capital allocators. Despite the company’s strong results during the quarter and solid outlook, its stock price declined.”

4. Meta Platforms, Inc. (NASDAQ:META)

Cat Rock Capital’s Stake Value: $56,468,000
Percentage of Cat Rock Capital’s 13F Portfolio: 12.01%
Number of Hedge Fund Holders: 184

Alexander Captain’s Cat Rock Capital trimmed its stake in American multinational tech company Meta Platforms, Inc. (NASDAQ:META) by 57% in Q2 2022. This leaves the investment value at 350,192 shares worth $56.47 million.

The number of hedge funds tracked by Insider Monkey holding stakes in Meta Platforms, Inc. (NASDAQ:META) declined to 184 in Q2, down from 200 in the preceding quarter. The aggregate value of these stakes is over $18.20 billion.

On October 13, Cowen analyst John Blackledge maintained an ‘Outperform’ rating while reducing his price objective on Meta Platforms, Inc. (NASDAQ:META) from $250 to $205. Due to a mix of macroeconomic and foreign exchange headwinds, the move to short-form video monetisation, and a worse-than-anticipated 3Q22 Digital ad expert check call, the analyst cut his 2022–2027 advertising predictions.

In its Q3 2022 investor letter, Wedgewood Partners mentioned Meta Platforms, Inc. (NASDAQ:META). Here is what the fund said:

“Meta Platforms, Inc. (NASDAQ:META) detracted from performance during the quarter. Meta’s advertising revenue grew +3% (currency-adjusted) over 2021 and is up +70% since 2019 (pre-pandemic). The shift of advertisers and consumers to social media has been fairly dramatic and sticky. The company reported $2.88 billion “daily active people” of its Family of Apps (as of June 2022) and is +35% higher than the comparable month pre-COVID (June 2019). Meta also serves over 10 million advertisers which is up from 8 million in January 2020. In spite of these impressive gains, the stock now trades at absolute levels well below where it traded before the pandemic. We suspect much of the market’s concern revolves around slowing revenue growth. It is fairly evident that there was a tremendous pull-forward of demand for many businesses and services over the past couple of years, and that the normalization of revenue growth from that “pull-forward” is hardly an existential crisis. Further, while Meta’s profit margins have fallen below pre-pandemic levels, it’s important to note that the company likely hired well in excess of what it needed because it assumed the pandemic induced growth would continue. Meta has plenty of room to moderate its expense base and drive significant value by repurchasing shares at today’s historically depressed multiples.”

3. Microsoft Corporation (NASDAQ:MSFT)

Cat Rock Capital’s Stake Value: $69,601,000
Percentage of Cat Rock Capital’s 13F Portfolio: 14.81%
Number of Hedge Fund Holders: 258

Cat Rock Capital bought a stake in the tech giant Microsoft Corporation (NASDAQ:MSFT) in the first quarter of 2020. According to the 13F filings for the second quarter of 2022, Cat Rock Capital holds 271,000 shares of Microsoft Corporation (NASDAQ:MSFT), amounting to more than $69.60 million and representing 14.81% of the fund’s portfolio value.

As part of its multi-city data center strategy for India, Microsoft Corporation (NASDAQ:MSFT), a leading provider of US-based software, intends to build a sizable hyper-scale data center in Pune. Accordingly, the business paid Finolex Industries $39.92 million for commercial land in Pune.

In anticipation of Microsoft Corporation (NASDAQ:MSFT)’s fiscal Q1 earnings on October 25, Deutsche Bank analyst Brad Zelnick retained a ‘Buy’ rating on the stock on October 18 while trimming his price objective from $330 to $315. According to Zelnick, although investors are aware of the dismal consumer history, particularly regarding PCs and Windows, they believe that Microsoft’s commercial and corporate businesses have not become markedly worse and are still holding up.

Among the hedge funds tracked by Insider Monkey, 258 were long Microsoft Corporation (NASDAQ:MSFT) at the end of Q2 2022, compared to 259 funds in the last quarter.

Lakehouse Capital, an investment management company, mentioned Microsoft Corporation (NASDAQ:MSFT) in its September 2022 investor letter. Here is what the fund said:

“During the month, the Fund initiated a new position in Microsoft Corporation (NASDAQ:MSFT), a name that is no doubt familiar to our investors. The company was founded by Bill Gates and Paul Allen in a friend’s garage in 1975 and began dominating the operating system market with MS-DOS by the mid-1980s. The company has come a long way since then and is now widely considered the most critical and indispensable IT mega-vendor for businesses globally. In addition to its well-known Windows operating systems and Office productivity suite, the company has a broad portfolio of strategic products, including a rapidly growing public cloud business in Azure and a sizeable gaming presence.…” (Click here to read the full text)

2. Semrush Holdings, Inc. (NYSE:SEMR)

Cat Rock Capital’s Stake Value: $76,024,000
Percentage of Cat Rock Capital’s 13F Portfolio: 16.17%
Number of Hedge Fund Holders: 12

Semrush Holdings, Inc. (NYSE:SEMR) is an American publicly traded company that provides the Semrush SaaS platform. Semrush assists its clients with social media marketing and search engine optimization to improve their online presence. It has 91,000 clients, and 80%  of them now spend $10,000 or more annually than they did the previous year.

According to Insider Monkey’s data, 12 hedge funds held stakes worth $140.51 million in Semrush Holdings, Inc. (NYSE:SEMR) at the end of the second quarter of 2022, compared to the same number of funds in the prior quarter worth $116.34 million.

Alexander Captain’s Cat Rock Capital is the most prominent position holder in Semrush Holdings, Inc. (NYSE:SEMR). The hedge fund has 5.88 million shares of Semrush Holdings, Inc. (NYSE:SEMR) worth $76.02 million, accounting for 16.17% of the total Q2 portfolio. This is a 7% increase over the previous quarter when the hedge fund owned 5.52 million shares in the company.

In its Q1 2021 investor letter, ClearBridge Investments mentioned Semrush Holdings, Inc. (NYSE:SEMR). Here is what the fund said:

“We established seven new positions during the quarter, (including SEMrush) largely financed through trims in existing holdings whose market values have risen. Four of the additions play roles in the accelerating digital transformation of the sales, marketing and customer development processes. SEMrush, in the IT sector, is a software provider that help clients optimize their marketing spend across digital search and social media platforms.”

1. Docebo Inc. (NASDAQ:DCBO)

Cat Rock Capital’s Stake Value: $138,561,000
Percentage of Cat Rock Capital’s 13F Portfolio: 29.48%
Number of Hedge Fund Holders: 15

Docebo Inc. (NASDAQ:DCBO) offers a cloud-based learning management system for teaching internal and external workforces, partners, and clients. It has offices in Asia, Europe, and North America. According to Insider Monkey’s data, Docebo Inc. (NASDAQ:DCBO) was part of 15 hedge fund portfolios at the end of Q2 2022, compared to 11 in the prior quarter.

Alexander Captain’s Cat Rock Capital has owned a stake in Docebo Inc. (NASDAQ:DCBO) since Q4 2020. The hedge fund’s $138.56 million investment in the second quarter of 2022 represents 29.48% of the total 13F securities. In addition, Cat Rock Capital held the most significant position in Docebo Inc. (NASDAQ:DCBO) in Q2.

You can also take a peek at 10 Stocks to Buy According to James Morrow’s Callodine Capital Management and 10 Stocks to Buy According to Teresa Barger’s Cartica Management.

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Disclosure: None. 8 Stocks to Buy According to Alexander Captain’s Cat Rock Capital is originally published on Insider Monkey.