In this piece, we will take a look at 10 tech stocks to buy according to Daryl Smith’s Kayak Investment Partners.
Kayak Investment Partners LLC is an investment management and portfolio services provider that is based out of San Francisco, California. Its investment portfolio is worth close to a billion dollars and is managed by Mr. Daryl Smith. Mr. Smith, who co-founded the firm alongside Claude Hazan, Nowell Chernick and Kurt Lanzavecchia, is a graduate of the University of California, in Berkley, California, United States. Among his peers, Mr. Smith is one of the few who has a bachelor’s degree in history, having graduated from his alma mater in 1998.
Most of Kayak Investment’s holdings are concentrated in the technology industry, with its investment portfolio having a stake in sectors ranging from semiconductors, financial payments, ride sharing, cloud computing, social media and online retailing. Its biggest holding is in Smartsheet Inc. (NYSE:SMAR), but like other portfolios, the top three companies constitute a roughly equal share each. Some of Kayak Investment’s other big stakes are in Amazon.com, Inc. (NASDAQ:AMZN) and Roblox Corporation (NYSE:RBLX).
The investment firm is a relatively new player in the financial sector, as it was founded less than a decade ago in 2013. However, its team has more than a decade of experience in the financial sector. Mr. Smith started his financial journey in 2004 as the principal for research and investments at Anchor Capital Management and since then has managed the portfolios of two investment funds simultaneously and served as a partner at Cavalry Asset Management for six years.
As of the second quarter of this year, Kayak Investment’s portfolio was worth $707 million, with the top three investments accounting for $150 million of its value by the end of the third quarter of this year. Notably, the third quarter saw Mr. Smith knock off two Chinese companies from his portfolio. During this period, he sold roughly half a million shares of Alibaba Group Holding Limited (NYSE:BABA) and Baidu, Inc. (NYSE:BIDU), despite the two companies’ strong presence in their home country.
Christopher Penler / Shutterstock.com
Our Methodology
In order to keep up with the musings of Mr. Smith’s mind and the changes his investment firm makes to its portfolio each quarter, we start off by analyzing Kayak Investment’s Form 13-F filings for the third quarter with the Securities and Exchange Commission of the United States of America.
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10 Tech Stocks To Buy According to Daryl Smith’s Kayak Investment Partners
10. Advanced Micro Devices, Inc. (NASDAQ:AMD)
Value of Kayak Investment’s Stake: $36 million
Percentage of Kayak Investment’s 13F Portfolio: 5.11%
Number of Hedge Fund Holders: 63
Advanced Micro Devices, Inc. (NASDAQ:AMD) is a semiconductor designer and seller based in Santa Clara, California. It designs and sells central processing units (CPUs), graphics processing units (GPUs) and custom-built solutions for gaming consoles. The company’s products cater to both professional and nonprofessional users.
By the end of the third quarter of this year, Mr. Smith’s investment firm held 351,716 Advanced Micro Devices, Inc. shares in a stake that is worth $36 million and accounts for 5.11% of the investment firm’s portfolio. Additionally, an Insider Monkey survey of 873 hedge funds’ 13-F filings revealed that 63 had held a stake in the company by the end of this year’s first half.
At the end of its third fiscal quarter 2021, Advanced Micro Devices, Inc. reported $4.3 billion in revenue and $0.73 in non-GAAP EPS, beating analyst estimates on both counts. Reflecting the strong financial performance, Wedbush upgraded the company’s price target to $165 in a November 2021 investor note, citing strong performance in the data center segment that many believe is on the rise.
Advanced Micro Devices, Inc.’s largest shareholder according to Insider Monkey is Martin Taylor’s Crake Asset Management, which holds 120,000 shares worth $12 billion.
Like Amazon.com, Inc., Roblox Corporation and Smartsheet Inc., Advanced Micro Devices, Inc. is one of Mr. Smith’s favorite stocks.
9. ServiceNow, Inc. (NYSE:NOW)
Value of Kayak Investment’s Stake: $38 million
Percentage of Kayak Investment’s 13F Portfolio: 5.38%
Number of Hedge Fund Holders: 49
ServiceNow, Inc. (NYSE:NOW) is an American company headquartered in Santa Clara, California that provides software for workplace automation and improved information sharing between management and employees. Its platform offers artificial intelligence, machine learning and performance analysis as some of its features.
During the third fiscal quarter, ServiceNow, Inc. earned $1.5 billion in revenue and $1.55 in EPS, beating analyst estimates on both counts. In a November 2021 analyst note, Argus raised the company’s share price target to $805, citing its viewpoint that ServiceNow, Inc.’s business will only improve alongside the corporate world’s recovery from the ongoing pandemic.
Mr. Smith’s Kayak Investment held 61,239 ServiceNow, Inc. by the end of the third quarter of this year, accounting for 5.38% of the 13F portfolio. This stake is worth $38 million. Out of the 873 hedge fund holdings surveyed by Insider Monkey by the end of the year’s second quarter, 49 had held shares of ServiceNow, Inc..
Alexander Becker’s Codex Capital is ServiceNow, Inc.’s biggest stakeholder, owning 9,850 shares worth $5 billion, according to Insider Monkey’s data.
Asset management fund Baron Funds mentioned the company in a first-quarter 2021 investor letter, outlining that:
“We believe short-term focused investors and consensus often miss the longer-term strength and durability of growth and business-model efficiency (earnings and free cash flow margins) of truly special businesses. An example of this is ServiceNow, a SaaS-industry leader and pioneer, and a long-time Fund investment. As shown in the table below, over the seven years from March 2014 through March 2021, ServiceNow experienced eight multiple declines that averaged –32%, ranging from a low of –19% to a high of –52%.
But during that period, ServiceNow demonstrated compounding revenue performance and stronger operating leverage and FCF generation than expected by consensus. The table below shows the first quarter 2014 projections of one of the top software analysts on the Street, Keith Weiss of Morgan Stanley, versus what ServiceNow achieved.
As you can see, over this three-year period, ServiceNow beat revenue expectations by $315 million, or 29%, and generated FCF margins of 23%, trouncing estimates by $186 million, or 138%.The compounding effects of seven years of strong revenue growth and FCF generation drove ServiceNow’s share price to increase from $70.03 on March 5, 2014 to $500.11 on March 31, 2021, a 32% annualized return. A 7-bagger!
ServiceNow delivered these point-a-to-point-b returns despite the eight multiple pullbacks described above, including the one that occurred towards the end of the first quarter. The power of faster-for-longer, cash-generative business models.”
ServiceNow, Inc. is, therefore, one of Mr. Smith’s favorite stocks, alongside Roblox Corporation, Amazon.com, Inc. and Smartsheet Inc..
8. Airbnb, Inc. (NASDAQ:ABNB)
Value of Kayak Investment’s Stake: $39 million
Percentage of Kayak Investment’s 13F Portfolio: 5.56%
Number of Hedge Fund Holders: 58
Airbnb, Inc. (NASDAQ:ABNB) is known for its online platform that allows hosts and guests all over the world to connect with each other. It is the go to choice for international and local travelers who are looking for affordable options to stay during trips. The company was founded in 2007 and is located in San Francisco, California.
By the end of the third quarter of this year, Mr. Smith’s investment firm held 234,624 Airbnb, Inc. shares in a stake that was worth $39 million and accounted for 5.56% of Kayak Investment’s portfolio. Additionally, an Insider Monkey survey of 873 hedge funds’ 13-F filings revealed that 58 had held a stake in the company by the end of this year’s first half.
At the end of its third fiscal quarter 2021, Airbnb, Inc. reported $2.2 billion in revenue and $1.22 in GAAP EPS, beating analyst estimates on both counts. Reflecting the strong financial performance, Truist raised the company’s price target to $180 in a November 2021 investor note, sharing that new features and travel recovery will fare well for Airbnb, Inc..
Airbnb, Inc.’s largest shareholder according to Insider Monkey is Jim Simons’s Renaissance Technologies, who holds 2.7 million shares worth $465 million.
Polen Capital mentioned the company during a third-quarter 2021 investor letter, outlining that:
“We believe Airbnb has substantial competitive advantages in a large, fast-growing, and global market. Airbnb acts as a “System of Trust” in the private rental accommodations market, removing a considerable amount of friction so hosts can trust unknown guests and guests can trust unknown hosts/properties.
We believe Airbnb has an attractive growth runway given its unique inventory, powerful platform, and system enhancements that further reduce user friction.
We see Airbnb as well-positioned to benefit from secular growth in travel, the increasingly mainstream nature of private rentals, and as hybrid work/travel can lead to more frequent and longer stays. Unlike traditional online travel agencies like Booking.com and Expedia, Airbnb’s user traffic comes almost entirely directly, which speaks to the brand’s strength. This also means that Airbnb does not need to pay Google or other meta-search engines nearly as much money for generating booking leads, which is a favorable structural business model advantage in our view. We expect the company’s bookings and revenue to compound at a high-teens rate or better over the next five years and margins to expand by thousands of basis points as it scales its fixed costs base, leading to 40%+ earnings per share growth over that period.”
7. Warner Music Group Corp. (NASDAQ:WMG)
Value of Kayak Investment’s Stake: $39.5 million
Percentage of Kayak Investment’s 13F Portfolio: 5.58%
Number of Hedge Fund Holders: 29
Warner Music Group Corp. (NASDAQ:WMG) is an American music entertainment company founded in 1929 and headquartered in New York, New York. The company is involved at all stages of music production, from working with artists to publishing their work with its labels.
During its fourth fiscal quarter, Warner Music Group Corp. earned $1.3 billion in revenue and $0.05 in GAAP EPS, beating analyst estimates for revenue. In a November 2021 analyst note, Citi raised the company’s share price target to $48, sharing that the stock offered a balance of risk and reward.
Mr. Smith’s Kayak Investment held 924,229 Warner Music Group Corp. shares by the end of the third quarter of this year, that were worth $39.5 million and accounted for 5.58% of the 13F portfolio. Out of the 873 hedge fund holdings surveyed by Insider Monkey by the end of the year’s second quarter, 29 had held shares of Warner Music Group Corp..
Anand Desai’s Darsana Capital Partners is Warner Music Group Corp.’s biggest stakeholder, owning 4.2 million shares worth $179 million, according to Insider Monkey’s data.
6. Snowflake Inc. (NYSE:SNOW)
Value of Kayak Investment’s Stake: $44.4 million
Percentage of Kayak Investment’s 13F Portfolio: 6.27%
Number of Hedge Fund Holders: 70
Snowflake Inc. (NYSE:SNOW) is an American big data cloud services provider that enables its customers to derive insights through crunching big data. The company is headquartered in Montana and was incorporated in 2012.
In an investor note issued in October 2021, JMP Securities raised its price target to $320 per share from an earlier $300 per share, expressing optimism for Snowflake Inc.’s crucial role in its industry.
Snowflake Inc.’s largest investor by the second quarter was Brad Gerstner’s Altimeter Capital Management who owned 21 million shares worth $6 billion.
During the third quarter, Mr. Smith’s Kayak Investment Partners held 146,842 Snowflake Inc. shares worth $44 million, which represented 6.27% of his firm’s overall portfolio. At the same time, 70 out of the 873 hedge funds polled by Insider Monkey had held a stake in the company by the end of the second quarter.
Therefore, it’s a no-brainer that Snowflake Inc. is a part of Mr. Smith’s elite stock picks such as Amazon.com, Inc, Roblox Corporation, and Smartsheet Inc..
In its first-quarter 2021 investor letter published earlier this year, RiverPark Funds had the following to say about Snowflake Inc.:
“We also established a position in Snowflake during the quarter. Snowflake offers cloud-based data storage and analytics, generally termed “data warehouse-as-a-service.” The data warehousing market—created by the massive, growing amount of user, customer, and account data and the need to search and analyze it—has historically stored its data on physical servers located on-premises. The cloud data platform market—storing data off-premises on cloud servers—is a relatively new $70 billion+ market. Significantly, incremental warehouse data capacity and renewals are expected to be driven by and to the cloud, with more than 75% of databases in the cloud by 2022.”
5. Meta Platforms, Inc. (NASDAQ:FB)
Value of Kayak Investment’s Stake: $48 million
Percentage of Kayak Investment’s 13F Portfolio: 6.83%
Number of Hedge Fund Holders: 266
Meta Platforms, Inc. (NASDAQ:FB) is the largest social media conglomerate in the world, as it owns three distinctive brands under its portfolio. These brands enable their user base to share details of their lives with each other and stay connected through the Internet.
Meta Platforms, Inc. earned $29 billion in revenue and $3.22 in GAAP EPS during its third quarter, beating analyst estimates for the EPS. Rosenblatt upgraded the company’s shares to Buy and kept the price target unchanged at $400, sharing cautious optimism about capital expenditure in an October 2021 analyst note.
Meta Platforms, Inc.’s largest shareholder is Alexander Becker’s Codex Capital who owns 27,950 shares worth $9.6 billion.
Mr. Smith’s Kayak Investment owned 142,459 Meta Platforms, Inc. shares worth $48 million and 6.83% of his total portfolio value by the end of the third quarter. During the second quarter, 266 of the 873 hedge funds polled by Insider Monkey held stakes in the company.
In its third quarter investor letter, Wedgewood Partners had the following to say about Meta Platforms, Inc.:
“Facebook detracted from performance despite posting a staggering +56% growth in advertising revenues. Much of the stock’s underperformance was driven by nonoperating concerns that we view as mostly political in nature. The Company’s digital properties command a massive audience of over 2.7 billion daily users, so any government or state actor would be able to wield tremendous power by controlling that audience and it should not be a surprise when those actors attempt to do that. However, Facebook has invested aggressively in its content curation capabilities that address many of the concerns raised by media and political critics. We continue to carry Facebook at our maximum weighting as the stock is trading in line with a market multiple despite unrivaled competitive positioning and rapid growth, representing one of the best risk-rewards available in the market.”
4. salesforce.com, inc. (NYSE:CRM)
Value of Kayak Investment’s Stake: $48.9 million
Percentage of Kayak Investment’s 13F Portfolio: 6.91%
Number of Hedge Fund Holders: 108
salesforce.com, inc. (NYSE:CRM) is an American enterprise cloud computing provider that focuses its services on customer relationship management. Its cloud software allows customers to generate analytics for insight and fulfill various business functions such as delivering quotas and contracts.
In an investor note issued in November 2021, Morgan Stanley raised its price target to $360 per share, expressing optimism salesforce.com, inc. (NYSE:CRM)’s total addressable market. During its second fiscal quarter, the company reported $6.3 billion in revenue and $1.48 in non-GAAP EPS, beating analyst estimates on both.
salesforce.com, inc. (NYSE:CRM)’s largest investor by the third quarter was Alexander Becker’s Codex Capital who owned 32,650 shares worth $8 billion.
During the third quarter, Mr. Smith’s Kayak Investment Partners held 180,317 salesforce.com, inc. (NYSE:CRM) shares worth $48.9 million and representing 6.91% of his firm’s overall portfolio. At the same time, 108 out of the 873 hedge funds polled by Insider Monkey had held a stake in the company by the end of the second quarter.
In its third-quarter 2021 investor letter published earlier this year, investment firm Polen Capital had the following to say about salesforce.com, inc. (NYSE:CRM):
“Salesforce came under pressure earlier in the year after agreeing to purchase Slack for about $26 billion. Since then, management has articulated well the strategic rationale and integration of Slack into its other software offerings and has demonstrated continued double-digit organic revenue growth within its legacy product offerings. At its recent investor day, the company also outlined long-term growth plans in line with our estimates but probably above what others may have been expecting, especially on margin expansion.”
3. Amazon.com, Inc. (NASDAQ:AMZN)
Value of Kayak Investment’s Stake: $49.6 million
Percentage of Kayak Investment’s 13F Portfolio: 7%
Number of Hedge Fund Holders: 271
Amazon.com, Inc. is one of the world’s largest online retailers and is based out of the United States. It is known for its founder Mr. Jeffery P. Bezos, who is also one of the world’s richest men, and for targeting emerging markets such as data center computing in addition to its retail platform.
Kayak Investment owns 15,120 Amazon.com, Inc. shares that represent 7% of its portfolio and are worth $49.6 million as of the end of this year’s third quarter. Furthermore, 271 out of the 873 hedge funds polled by Insider Monkey at the end of the second quarter of this year held a stake in the company.
Amazon.com, Inc.’s price target was lowered to $4,200 by Credit Suisse in October 2021 due to tighter margins. The company missed both revenue and GAAP EPS analyst estimates during its third quarter, by posting $110 billion in revenue and $6.12 in earnings per share.
Amazon.com, Inc. largest shareholder is Alexander Becker’s Codex Capital who owns 2,850 shares worth $9.8 billion.
In its third-quarter 2021 investor letter, Madison Funds had the following to say about Amazon.com, Inc.:
“We did add a modest new position weight to the portfolio in the quarter in Amazon.com, Inc. stock (AMZN). We acknowledge that many aspects of Amazon’s merit as an investment are well appreciated. However, our work leads us to conclude that shares are attractive. Leadership positions in both e-commerce and cloud computing provide the company with significant durable competitive advantages in industries that we think can produce above average growth over the next decade. Over the past year, AMZN shares have trailed the market as investors debate near-term growth prospects following the pandemic-induced e-commerce demand. Additionally, margins have been depressed due to Amazon’s unprecedented increases in spending to build out fulfillment and in-house logistics capabilities – Amazon will build out more square footage this year and last than it did cumulatively over the previous 10 years, more than doubling its in-house delivery capacity. We like the investments Amazon is making and believe they will further advantage the company relative to other retailers, making it nearly impossible for competitors to match the same level of delivery speed and convenience. With its large and frequently engaged customer base, Amazon has multiple mechanisms to make money, including selling advertising and enhanced subscription services. Within the cloud business, we forecast Amazon Web Services (AWS) leveraging its strengths in Infrastructure-as-a-service (IaaS) to move into higher value segments of cloud computing (such as platform-as-a-service: PaaS), allowing the company to continue outgrowing the overall IT sector with strong profitability. While Amazon shares have performed extremely well over the long-term, we think near-term concerns about whether Amazon will earn a return on its accelerated investments provide an opportunity now for investors willing to look through the investment period. Our view is that the investments likely earn strong returns and extend Amazon’s competitive advantages and above average growth.”
2. Roblox Corporation (NYSE:RBLX)
Value of Kayak Investment’s Stake: $51.4 million
Percentage of Kayak Investment’s 13F Portfolio: 7.27%
Number of Hedge Fund Holders: 49
Roblox Corporation provides a 3D virtual environment for entertainment and interaction. It is an American company headquartered in San Mateo, California after being incorporated in 2004.
Roblox Corporation reported $509 million in revenue and -$0.13 in GAAP EPS, beating analyst estimates for EPS during its third quarter earnings. Mr. Smith’s Kayak Investment held 680,788 shares of Roblox Corporation during the third quarter of this year, in a stake worth $51.4 million and 7.27% of its portfolio.
Truist reduced the company’s share price target to $92 in October 2021 due to new gaming curbs in China, and 49 of the 873 hedge funds polled by Insider Monkey had holdings in Roblox Corporation by the end of the second quarter 2021.
Roblox Corporation’s largest shareholder is Chase Coleman and Feroz Dewan’s Tiger Global Management LLC who owns $2.4 billion of equity through 27 million shares.
In its third quarter 2021 investor letter, investment management firm Tao Value had the following to say about Roblox Corporation:
“Roblox is a new position of “Mindful Compounder” category and is a new breed of business that is hard to define at this point. It started with gaming but has the potential to evolve to a new being for human society. Roblox management calls it “human co-experience” and many practitioners call it “metaverse”.
Tao
The company made many “drastic and rational” decisions which shows deep mindfulness – an important trait I look for. The first thing caught my attention is management’s attitude towards security, privacy & trust. Different than Facebook, Roblox took trust and security seriously very early on. So serious that they actually report “Infrastructure and Trust & Safety“ as an accounting item in its operating expense breakdown, indicating that they see the trust & safety is an integral part of the infrastructure of the virtual world. Roblox didn’t just say it, but also did so. For example, Roblox doesn’t have voice chat functionality, which is a key engagement feature and is almost a standard setup for almost all gaming platforms. Yet it is also a feature that is very hard to moderate in real time with old day technologies and can be abused heavily. Roblox made a conscious decision to put security/trust before product stickiness and deferred the audio chat until recently (Roblox recently rolled out an alpha test moderated by AI-based technologies).
Roblox, as any other large social platforms (which becomes the human society itself), will unavoidably have the dark side of the humanity. One Wired article revealed the story about “How ‘Roblox’ Became a Playground for Virtual Fascists”. Yet it is how the platform sees and treats the problem matters. In Roblox’ case, it seems to me that they have a very strong stand on their responsibility (to be the trustee of its users). According to this article, a Roblox spokesperson said the company reviews “every single image, audio file, and video before it is uploaded.” Accordingly, Roblox disclosed that it has 3600 people (albeit outsourced) working on trust and safety, compared to only 1200 full time employees…”
1. Smartsheet Inc. (NYSE:SMAR)
Value of Kayak Investment’s Stake: $51.6 million
Percentage of Kayak Investment’s 13F Portfolio: 7.29%
Number of Hedge Fund Holders: 49
Smartsheet Inc. is a provider of cloud based software for workflow management, to let its customers manage their employee activities and conduct planning and coordination through a software platform. It is headquartered in Bellevue, Washington and was founded in 2005.
Kayak Investment held 750,119 shares of Smartsheet Inc. by the end of the third quarter. These were worth $51.6 million and represented 7.29% of its portfolio. During the prior quarter, 49 out of the 873 hedge funds surveyed by Insider Monkey held a stake in the company.
Smartsheet Inc. earned $131 million in revenue and -$0.05 in non-GAAP EPS, beating analyst estimates on both counts in its second quarter. BMO Capital raised the company’s price target to $90 in a September 2021 analyst note citing faith in its total addressable market and the emergence of remote working trends.
Smartsheet Inc.’s largest investor is Panayotis Takis Sparaggis’s Alkeon Capital Management who owns 3.3 million shares worth $238 million.
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This article is originally published at Insider Monkey.
