Activist investor and billionaire Dan Loeb made a comeback in the final quarter of 2023 after losing money during most of the year in addition to suffering losses in 2022. Wall Street Journal earlier this year reported that Loeb’s Third Point, which he founded in 1995, gained between 7.8% to 8.6% in the December quarter. Third Point was also down 21% in 2022. Third Point was a star performer in the pandemic year as the fund closed 2020 up 19%, as Loeb foresaw the economy doing much better than many had expected.
Loeb’s Q1’2024 Returns and Performance
Loeb is known for his activist bets in high-profile companies Intel, Disney and Shell. Some of his bets were highly unsuccessful, while others paid off. Latest data shows Loeb is continuing to retain the Q4’2023 momentum into 2024. In his Q1 letter to investors, Loeb revealed that Third Point returned 7.8% in the flagship Offshore Fund.
Billionaire Loeb Joins the “Soft Landing Camp”
Loeb said in his Q1 letter that he’s in the “soft landing camp” as he believes we are no longer in an inflationary environment. He’s also highly bullish on AI, saying the technology favors the “incumbents” who are deploying massive cash “war chests” to win the “AI arms race,” a term the billionaire used twice in his letter. Loeb is betting on the whole AI spectrum — semiconductors, data centers, AI software and power.
“We shared our views on AI’s transformational potential in recent letters and it is a key element of the thesis for nearly half of our equity positions today. Unlike in past periods of technological paradigm shifts, this new technology favors incumbents who are deploying their financial and intellectual war chests to win the AI arms race. Right now, what we see as the best-run “legacy” companies like Microsoft and Amazon (both of which we own) have built enormous competitive advantages and seen their growth vectors accelerate. Below, we discuss London Stock Exchange Group, Alphabet and TSMC, positions whose catalysts for further value creation are primarily “AI-driven”. We also see the energy transition and growth in data centers affecting scores of industrial, materials and energy companies as demand for infrastructure and certain commodities surges.”
Methodology
For this article we scanned Third Point’s Q1 portfolio and picked the fund’s top large-cap stock holdings. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
7. Gartner Inc (NYSE:IT)
Billionaire Dan Loeb Q1’2024 Stake Value: $26,216,850
Market data research company Gartner Inc (NYSE:IT) is one of the stocks billionaire Dan Loeb picked up for his portfolio in the first quarter. The stock is up about 28% so far this year. Third Point owns a $26 million stake in Gartner Inc (NYSE:IT). In April, Gartner Inc (NYSE:IT) beat Q1 EPS estimates, but the stock fell amid a decline in revenue and research contract value [RCV]. However, Gartner Inc (NYSE:IT) bulls believe the company was already anticipating lower RCV as new business sales in the first quarter are usually slow.
Gartner Inc (NYSE:IT) in Q1 earnings call talked in detailed about guidance and expectations:
“We expect Research revenue of at least $5.115 billion, which is FX-neutral growth of about 5%. First quarter results were about in line with our expectations. We updated for the stronger dollar. We expect Conferences revenue of at least $560 million, which is FX-neutral growth of about 11%. We expect Consulting revenue of at least $525 million, which is growth of about 3% FX neutral. The result is an outlook for consolidated revenue of at least $6.2 billion which is FX-neutral growth of 5%. We now expect full year EBITDA of at least $1.455 billion, up $35 million from our GAAP prior guidance before the effect of a stronger dollar. We expect typical operating expense seasonality to continue through the rest of the year.
We now expect 2024 adjusted EPS of at least $10.90. For 2024, we now expect free cash flow of at least $1.08 billion, up $15 million from our prior guidance. The higher free cash flow reflects a conversion from GAAP net income of 139%. Our guidance is based on 79 million fully diluted weighted average shares outstanding, which reflects the repurchases made through the end of March. And finally, for the second quarter, we expect adjusted EBITDA of at least $390 million.”
Read the full earnings call transcript here.
Baron Asset Fund stated the following regarding Gartner, Inc. (NYSE:IT) in its first quarter 2024 investor letter:
“Shares of Gartner, Inc. (NYSE:IT), the leading provider of syndicated research to the IT sector, contributed to performance. Fourth quarter financial results were mixed, with declines in net income and EPS. However, solid increases in contract value and strong full-year performance, including a 9% increase in net income and an 11% rise in diluted EPS, helped boost the company’s share price. In addition, a 19% increase in free cash flow for the quarter and 6% for the full year underscored Gartner’s operational efficiency. Gartner’s core subscription research businesses compounded at attractive rates, and we believe growth is poised to accelerate. We think Gartner will emerge as a key decision support resource for every company evaluating the opportunities and risks of AI on its business, providing a tailwind to volume growth and pricing realization. We expect Gartner’s sustained revenue growth and focus on cost control to drive continued margin expansion and enhanced free-cash-flow generation. The company’s balance sheet is in excellent shape and can support aggressive repurchases and bolt-on acquisitions, in our view.”
6. Goldman Sachs Group Inc (NYSE:GS)
Billionaire Dan Loeb Q1’2024 Stake Value: $104,422,500
Billionaire Dan Loeb had exited his position in Goldman Sachs Group Inc (NYSE:GS) in early 2017. However, he came back to the stock in the first quarter of this year, buying 250,000 shares of the financial services giant, worth over $104.4 million. Over the past one year Goldman Sachs Group Inc (NYSE:GS) shares have jumped about 39%.
Last month, BofA published its updated list of US-1 stocks. These are the Buy-rate stocks which are the top picks of BofA. The firm recommends these stocks for “superior investment performance” over the long term. Goldman Sachs Group Inc (NYSE:GS) was part of the list.
Goldman Sachs Group Inc (NYSE:GS) is a strong dividend-paying stock, as the bank has increased its dividend every year since 2010.
Of the 919 hedge funds tracked by Insider Monkey, 72 hedge funds reported owning stakes in Goldman Sachs Group Inc (NYSE:GS). The biggest stake in Goldman Sachs Group Inc (NYSE:GS) is owned by Ken Fisher’s Fisher Asset Management which owns a $2.4 billion stake in Goldman Sachs Group Inc (NYSE:GS).
5. Marvell Technology Inc. (NASDAQ:MRVL)
Billionaire Dan Loeb Q1’2024 Stake Value: $108,001,263
Billionaire Dan Loeb piled into semiconductor company Marvell Technology Inc. (NASDAQ:MRVL) during the first quarter, buying 1.5 million shares of Marvell Technology Inc. (NASDAQ:MRVL), worth over $108 million. Citi analyst Christopher Danely earlier this month talked about several AI semiconductor stocks he’s bullish on. Marvell Technology Inc. (NASDAQ:MRVL) is one of these stocks.
Of the 919 hedge funds tracked by Insider Monkey, 87 hedge funds reported owning stakes in Marvell Technology Inc. (NASDAQ:MRVL) as of the end of the March quarter, up from 53 hedge funds in the previous quarter. This shows a significant jump in hedge fund sentiment for Marvell Technology Inc. (NASDAQ:MRVL), as hedge funds flock to AI stocks to maximize their profits.
Analysts believe that Marvell Technology Inc. (NASDAQ:MRVL) could be the next major AI play as Marvell Technology Inc. (NASDAQ:MRVL) begins to roll out AI-specific products like Spica™ 800G PAM4 DSP platform for optical interconnects. Marvell Technology Inc. (NASDAQ:MRVL) also sells Application-specific integrated circuits (ASICs) for data centers, which are seeing a huge boost amid the AI revolution.
According to data compiled by Yahoo Finance, average Wall Street price target for Marvell Technology Inc. (NASDAQ:MRVL) is $87.7, which represents a 14% upside potential from the current levels.
4. S&P Global Inc. (NYSE:SPGI)
Billionaire Dan Loeb Q1’2024 Stake Value: $142,525,750
Billionaire Dan Loeb opened a new position in financial data and ratings company S&P Global Inc. (NYSE:SPGI) in the first quarter of 2024, buying 335,000 shares of S&P Global Inc. (NYSE:SPGI), worth about $142 million. S&P Global has 52 years of consistent dividend increases under its belt. S&P Global Inc. (NYSE:SPGI) recently posted Q1 results, beating estimates on both EPS and revenue. Adjusted earnings came in at $4.01 per share in the March quarter, surpassing estimates by $0.35. Revenue jumped 10.4% year over year to $3.49 billion, beating estimates by $80 million. S&P Global Inc. (NYSE:SPGI) also increased its full-year guidance for 2024. S&P Global Inc. (NYSE:SPGI) expects revenue growth of 6% to 8% in the year, while analysts were expecting growth of 7.42%.
Hedge fund sentiment for S&P Global Inc. (NYSE:SPGI) jumped in the first quarter, as 97 funds tracked by Insider Monkey reported owning stakes in S&P Global Inc. (NYSE:SPGI), up from 82 hedge funds in the previous quarter.
Aristotle Atlantic Focus Growth Strategy stated the following regarding S&P Global Inc. (NYSE:SPGI) in its first quarter 2024 investor letter:
“S&P Global Inc. (NYSE:SPGI detracted from portfolio performance in the quarter, as shares were weak following a lower-than-expected earnings report and newly issued fiscal year 2024 financial guidance that was slightly below expectations. The company’s lower-than-expected forecast of bond issuance activity for the year was the primary focus of the guidance, although management acknowledged that the guidance is likely conservative, which could result in actual activity exceeding expectations later in the year.”
3. Corpay Inc (NYSE:CPAY)
Billionaire Dan Loeb Q1’2024 Stake Value: $200,551,000
Business payments company Corpay Inc (NYSE:CPAY) came on billionaire Dan Loeb’s radar as his fund Third Point bought a $200.5 million stake in Corpay Inc (NYSE:CPAY) during the March quarter. The stock accounts for about 2.55% of the billionaire’s portfolio. Over the past one year the stock has gained about 16%.
Earlier in May Corpay Inc (NYSE:CPAY) reported Q1 results. Adjusted EPS in the quarter came in at $4.10, beating estimates by $0.01. Revenue in the period jumped 3.8% year over year to $935.3 million, missing estimates by $2.71 million. Net income increased 7% in the quarter to $229.8 million. Corpay Inc (NYSE:CPAY) is operating in the lucrative digital payments industry, which is expected to grow at a CAGR of 14% through 2029.
Corpay Inc’s (NYSE:CPAY) revenue over the past five years has grown at a CAGR of about 9%, better than many of its competitors. The stock’s PE ratio is also under 20. Analysts expect Corpay Inc’s (NYSE:CPAY) revenue to grow at 11.4% per annum, based on data from Yahoo Finance. This makes Corpay Inc (NYSE:CPAY) an attractive play in the digital payments industry.
2. Alphabet Inc. Class C (NASDAQ:GOOG)
Billionaire Dan Loeb Q1’2024 Stake Value: $452,790,000
Alphabet Inc. Class C (NASDAQ:GOOG) was a new stock pick of billionaire Dan Loeb in the first quarter, with Third Point adding three million shares of Alphabet Inc. Class C (NASDAQ:GOOG) in its portfolio, worth $453 million. With about 93% share in the global search market, Alphabet Inc. Class C (NASDAQ:GOOG) remains the leader in the online advertisement market, and it’s launching all engines when it comes to AI transformation. Analysts expect Alphabet Inc. Class C (NASDAQ:GOOG) revenue to growth 18.16% annually over the next five years. According to data from Yahoo Finance, Alphabet Inc. Class C’s (NASDAQ:GOOG) 2025 earnings estimate is $7.91. Based on today’s price of $177, its forward P/E ratio comes out to be 22.42, which is still attractive when compared to competitors like MSFT, AMZN and NVDA. Alphabet Inc. Class C (NASDAQ:GOOG) is also continuing to enjoy strong moat with YouTube. Its Cloud business is also growing. In the first quarter of 2024, Alphabet Inc. Class C’s (NASDAQ:GOOG) Cloud revenue jumped 28.5% year over year.
Of the 919 hedge funds tracked by Insider Monkey, 222 hedge funds tracked by Insider Monkey reported owning stakes in Alphabet Inc. Class C (NASDAQ:GOOG).
Baron Fifth Avenue Growth Fund stated the following regarding Alphabet Inc. (NASDAQ:GOOG) in its first quarter 2024 investor letter:
“During the quarter, we initiated a position in Alphabet Inc. (NASDAQ:GOOG), the parent company of Google, the world’s largest search and online advertising company. Alphabet has over 90% market share in its core Google search business, it owns the world’s leading video platform, YouTube (which has over 2 billion users), a competitive cloud service provider, Google Cloud, a leading ad network, and optionality in a number of smaller subsidiaries like the autonomous vehicle company, Waymo.
Google’s core search business continues to grow at a solid clip, and we believe it could structurally earn much higher margins than it does today as the company increases operating efficiency. Google Cloud should also continue growing in the healthy double digits for years to come given the relatively early stage of cloud adoption with $597 billion total cloud spending14 in 2023 out of worldwide IT spending of $4.7 trillion15, or around 13%. Additionally, YouTube has a long runway for growth, driven by the growing adoption of connected TV and the shift of advertising dollars from linear TV…” (Click here to read the full text)
1. Amazon.com Inc (NASDAQ:AMZN)
Billionaire Dan Loeb Q1’2024 Stake Value: $919,938,000
Billionaire Dan Loeb increased his position in Amazon.com Inc (NASDAQ:AMZN) by 22% during the first quarter, ending the period with a $920 million stake. Amazon.com Inc (NASDAQ:AMZN) is becoming an AI power house thanks to its AWS business, which saw operating margins cross 37% during the first quarter. AWS operating margins have now came in more than 30% for the past five straight quarters. Amazon.com Inc’s (NASDAQ:AMZN) revenue in the first quarter jumped 12.5% YoY and its adjusted EPS more than tripled. Revenue in North America and International segments grew as well. Analysts believe digital ads is another strong revenue stream for Amazon.com Inc (NASDAQ:AMZN), with revenue from the segment increasing 24% YoY to $11.8 billion in the first quarter.
Amazon.com Inc (NASDAQ:AMZN) replaced MSFT to take the spot of the most popular stock among the over 900 hedge funds tracked by Insider Monkey. A total of 302 hedge funds reported owning stakes in Amazon.com Inc (NASDAQ:AMZN).
Baron Fifth Avenue Growth Fund stated the following regarding Amazon.com, Inc. (NASDAQ:AMZN) in its first quarter 2024 investor letter:
“Amazon.com, Inc. (NASDAQ:AMZN) is the world’s largest retailer and cloud services provider. Shares increased 18.7% on quarterly results that exceeded consensus expectations, with revenue growth of 13% year-over-year and operating margins of 7.8% (up from 1.8% a year ago). We believe that Amazon is well positioned in the short to medium term to continue improving its core North American margins, which have reached 6.1% in the fourth quarter, the seventh straight quarter of margin improvement and an overall improvement of 800bps. Amazon has been rearchitecting its fulfillment network, improving efficiency, reducing cost-to-serve and accelerating delivery speeds thanks to initiatives such as regionalization, with the number of items delivered during the same day or overnight increasing by nearly 70% year-over-year. Reducing the cost to serve also enables Amazon to sell lower priced items and expand its addressable market to everyday purchases. Additionally, Amazon continues to benefit from its fast-growing, margin-accretive advertising business winning market share in digital advertising thanks to its structural advantages of a closed loop system, which enables a deterministic calculation of Return on Ad Spending. We also believe that e-commerce still has long duration growth ahead as it still accounts for less than 15% of retail. Similarly, Amazon’s cloud service, AWS, remains relatively early in its S-curve with cloud representing around 13% of worldwide IT spending13 incremental tailwinds across the three layers of the GenAI stack – infrastructure with NVIDIA’s own AI chips (Trainium and Inferentia) as well as with its offering of NVIDIA chips, platform (Bedrock), and applications (first and third party).”
If you are looking for an AI stock that is as promising as Microsoft but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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