3. Sea Limited (NYSE:SE)
ARK Investment Management’s 13 Portfolio: 1.31%
ARK Investment Management’s Stake Value: $315.05 million
Number of Hedge Fund Holders: 108
Sea Limited (NYSE:SE) is based in Singapore and deals in the provision of digital financial services, e-commerce and digital entertainment services in Asia, Latin America and around the world. The firm offers payment processing and digital bank services to customers through its brands ShopeePay, SPayLater, and SeaBank. It also owns and operates the e-commerce platform Shopee.
As of the end of the first quarter of 2022, Cathie Wood owned 2.63 million shares of Sea Limited (NYSE:SE) valued at $315 million. This signals a jump of 302% from the previous quarter where ARK Investment Management owned roughly 655,000 shares of the firm.
On May 4, HSBC analyst Piyush Choudhary maintained a ‘Buy’ rating on Sea Limited (NYSE:SE) shares and lowered the price target to $145 from $150. The analyst forecasts the firm’s adjusted revenue to grow 32% year-over-year in the first quarter and expects Shopee’s gross merchandise volume to rise by 40% from last year. The firm’s revenue for the fourth quarter was recorded at $3.22 billion, a jump of 105.68% year-on-year and above estimates by $234.4 million.
108 hedge funds out of the 900+ tracked by Insider Monkey were long Sea Limited (NYSE:SE) at the close of the fourth quarter of 2022. The total value of these holdings stood at $10.05 billion. In contrast, 117 hedge funds held $14.13 billion worth of positions in the firm a quarter ago.
Farrer Wealth Advisors, an investment firm, talked about many stocks in its Q1 2022 investor letter, and Sea Limited (NYSE:SE) was one of them. The fund said:
“Sea Limited had been selling off since its peak in early November of ~$363/share. This was driven by both a general sell off in tech, especially non-profitable tech, and a general belief that its gaming arm (Garena) was experiencing a slowdown due to its flagship game Free Fire. Free Fire has experienced a slowdown for three reasons: it is a victim of its own success, and by the end of Q321, nearly 10% of the world’s population already played the game, and thus reaching new users was difficult; A return to normal with people traveling/going out more and spending less time playing games; and the Indian market imposed a ban on the game due to anti-Chinese sentiment (Tencent is a large shareholder in Sea). We believed that these issues, while worth considering, were a bit overblown, and some of the data we saw from 3rd party sources showed that though Free Fire usage was dipping, it wasn’t too drastic. Thus, we marginally added to the position throughout the quarter. This was a mistake. During Sea’s earnings report in early March, the company guidance for Garena (down nearly 35% yoy) showed that the slowdown was far worse than predicted. Secondly, Shopee (Sea’s ecommerce arm) has pulled out of certain markets (in Europe and India), which long-term is probably the right strategy, but short-term hampers the optionality of the business. After considering this information and the guidance from earnings, we decided to significantly trim the position. In our opinion, management does have a bit of egg on its face from an overly aggressive expansion or as one investor called it, “bull market hubris.” We think management’s moves were mostly logical, it’s just that their failures came during an unforgiving market. While we believe that Sea’s future is still bright (especially with regards to their e-commerce and financial services), it will take a few quarters of strong earnings for them to regain their momentum, and for now the capital can be better spent elsewhere.”
