In this article, we discuss 10 stocks billionaire Cliff Asness is selling in 2022. If you want to see more stocks that were recently dumped by Asness, click Billionaire Cliff Asness is Selling These 5 Stocks in 2022.
After a continuous period of underperformance, Cliff Asness’ AQR Capital Management fared well in 2021 and had a strong start to 2022. The hedge fund follows an absolute return strategy that drove a net return of 10.4% in the first five days of January and concluded the month with a year-to-date gain of 15.4%. This performance came in after a 16.8% net-of-fees return in 2021.
AQR Capital Management has long since leaned towards value stocks, and this strategy has led to dismal performance as value stocks suffered losses in the past few years, when the market was more inclined towards growth plays. However, Cliff Asness remained steadfast with his value approach and it is now paying off in 2022, when the market is piling into value plays as a safe haven from extreme volatility. Cliff Asness has time and again defended his strategies although they underperformed for a significant period in the last few years.
Cliff Asness’ AQR Capital Management is now reaping the benefits from its value plays and reports as of May 12 reveal that its main funds have gained between 20-30% year-to-date, compared to a 30% drop in the Nasdaq Composite Index so far this year. The hedge fund has a Q1 portfolio worth $52.6 billion and it made many amendments during the first quarter of 2022, including disposing of 167 stocks entirely and trimming positions in 1008 securities. Some of the most notable stocks that billionaire Cliff Asness dumped in 2022 included Twitter, Inc. (NYSE:TWTR), GameStop Corp. (NYSE:GME), and Palantir Technologies Inc. (NYSE:PLTR).
Cliff Asness of AQR Capital Management
Our Methodology
We used the Q1 2022 portfolio of billionaire Cliff Asness’ AQR Capital Management for this analysis, selecting the 10 most prominent stocks that he exited during the period.
Billionaire Cliff Asness is Selling These Stocks in 2022
10. Twitter, Inc. (NYSE:TWTR)
Number of Hedge Fund Holders: 68
Twitter, Inc. (NYSE:TWTR) runs an American microblogging platform that is used worldwide. Cliff Asness first opened a position in Twitter, Inc. (NYSE:TWTR) back in Q4 2013, but he has been inconsistent with his stake over the years, buying and selling the shares often. In Q4 2021, his hedge fund owned 99,665 shares of the company worth $4.30 million. He discarded the stake entirely in Q1 2022.
On May 16, Citi analyst Ronald Josey told investors that Elon Musk’s review of spam/false accounts on Twitter, Inc. (NYSE:TWTR) will potentially delay the proposed acquisition. However, he would be surprised if there are any notable changes to the deal structure as a result of spam accounts. He maintained a Neutral rating on Twitter, Inc. (NYSE:TWTR) with a $54.20 price target.
Elite hedge funds pulled out of Twitter, Inc. (NYSE:TWTR) recently. According to Insider Monkey’s Q1 data, 68 hedge funds were bullish on Twitter, Inc. (NYSE:TWTR), down from 83 funds in the last quarter. Paul Singer’s Elliott Management held the biggest position in the company, comprising 10 million shares worth about $387 million.
Here is what RGA Investment Advisors has to say about Twitter, Inc. (NYSE:TWTR) in its Q4 2021 investor letter:
“Twitter had an eventful quarter. The company started the year seemingly ready to fly for the first time as a public company. Consensus estimates for 2023 revenue started the year at barely north of $5b and by the end of the year were just shy of $7.5b, a target the company offered at their first investor day in years. Unfortunately, it was a second target offered at that same investor day that did them in: 330 million mDAUs by the end of 2023. Typically stocks follow revenues, but mDAUs became the noose around the stock, and perhaps even Jack Dorsey’s tenure as CEO. With each quarter reported following the investor day, the mDAU target became increasingly harder to achieve as the user base grew below the run-rate required to get there in straight-line fashion. Although the company stated this would happen, investors were left wondering how an already lofty target could be achieved with a higher hurdle. Importantly, however, the revenue target continued to look increasingly achievable with each passing quarter. Taking a step back, people came into the year convinced Twitter had a monetization problem, but exited the year focused on their user base growth.
As always, the Street is incredibly myopic about the company, but we are far more sanguine. The user base will exit the year growing at what we thought was a more appropriate quarterly run-rate (6-7 million quarterly new users), consistent with the acceleration that began before the COVID induced bump in Q1-Q2 of 2020. As it stands today, Twitter is trading near its lowest multiples as a public company (on both EV/S at ~4.5x forward and EV/EBITDA at ~18x), at a time when it will report its fastest growth rate as a public company and over the next two years is expected to report two of its next three fastest growing years. Altogether, the years 2021-2023 should be the company’s fastest three-year CAGR period by a lot, meanwhile the last time Twitter traded at multiples this low was in 2017 when revenue actually contracted 3.41% during the year. There is little that can actually justify such a disconnect where the company’s growth is as swift as ever, but its multiple is consistent with negative growth periods. Twitter remains drastically under monetized, has a long runway of opportunity ahead on both the user growth side and monetization, and has optionality in pursuing subscription, data and/or service extensions of the core offering.”
9. Carvana Co. (NYSE:CVNA)
Number of Hedge Fund Holders: 48
Carvana Co. (NYSE:CVNA) is an Arizona-based company that operates an e-commerce platform for buying and selling used cars in the United States. Cliff Asness had owned a stake in Carvana Co. (NYSE:CVNA) since Q2 2018. In the fourth quarter of 2021, his hedge fund held 11,711 shares of the company worth $2.70 million. AQR Capital Management discarded its position in Carvana Co. (NYSE:CVNA) entirely in Q1 2022.
On May 19, BofA analyst Nat Schindler slashed the price target on Carvana Co. (NYSE:CVNA) to $80 from $225, noting that the market’s changing opinion has “been driven by some things completely out of the company’s control”, including COVID-19 and supply chain challenges for the automobile market that led to soaring prices for used cars. However, the analyst believes that some factors were “clearly within its control”, such as higher recruitment and increased wages in 2021 leading to greater operating expenses per retail unit and the acquisition of ADESA resulting in an expensive debt raise. However, the analyst kept a Buy rating on the stock as he still appreciates Carvana Co. (NYSE:CVNA) and its opportunity to offer a fundamentally better way for consumers to purchase used cars.
Among the hedge funds tracked by Insider Monkey, 48 funds were bullish on Carvana Co. (NYSE:CVNA) at the end of March 2022, down from 56 funds in the prior quarter. Chase Coleman’s Tiger Global Management is the leading shareholder of the company, with 8.5 million shares worth over $1 billion.
In addition to Twitter, Inc. (NYSE:TWTR), GameStop Corp. (NYSE:GME), and Palantir Technologies Inc. (NYSE:PLTR), Cliff Asness dumped his position in Carvana Co. (NYSE:CVNA).
Here is what Saga Partners has to say about Carvana Co. (NYSE:CVNA) in its Q1 2022 investor letter:
“I first wrote about Carvana in this 2019 write-up. I initially explained Carvana’s business, superior value proposition compared to the traditional dealership model, attractive unit economics, and how they were uniquely positioned to win the large market opportunity.
Since then, Carvana has by far exceeded even my most optimistic initial expectations. While the company did benefit following COVID in the sense that customers’ willingness to buy and sell cars through an online car dealer accelerated, the operating environment over the last two years has been very challenging. Carvana executed exceedingly well considering the shifting customer demand in what is a logistically intensive operation and what has been a tight inventory environment due to supply chain issues restricting new vehicle production.
Shares have come under pressure following their first quarter results, which reflected larger than expected losses. The quarter was negatively impacted by a combination of COVID-related logistical issues in their network that started towards the end of the fourth quarter as Omicron cases spread. Employee call off rates related to Omicron reached an unprecedented 30% that led to higher costs and supply chain bottlenecks. As less inventory was available due to these problems, it led to less selection and longer delivery times, lowering customer conversion rates.
Additionally, interest rates increased at a historically fast rate during the first quarter which negatively impacted financing gross profits. Carvana originates loans for customers and then sells them to investors at a later date. If interest rates move materially between loan origination and ultimately selling those loans, it can impact the margin Carvana earns on underwriting those loans…” (Click here to see the full text)
8. GameStop Corp. (NYSE:GME)
Number of Hedge Fund Holders: 18
GameStop Corp. (NYSE:GME) is an American firm that provides games and entertainment products through its e-commerce channels and retail stores in the United States, Canada, Australia, and Europe. Cliff Asness’ AQR Capital Management first invested in GameStop Corp. (NYSE:GME) back in Q4 2010, and consistently held the position over the years, except for a few minor breaks. In the fourth quarter of 2021, the hedge fund owned 5,988 shares of the company worth $889,000. The stake was disposed of entirely in the first quarter of 2022.
Wedbush analyst Michael Pachter on May 26 reiterated an Underperform rating on GameStop Corp. (NYSE:GME) ahead of the company releasing its Q1 financial results on June 1, citing valuation and cash burn concerns. The shares “remain at levels that are completely disconnected from the fundamentals of the business due to ongoing support from eager retail investors”, said the analyst, adding that he believes GameStop Corp. (NYSE:GME)’s NFT marketplace and wallet are unlikely to become the preferred medium for console and mobile gamers.
According to Insider Monkey’s database, 18 hedge funds were bullish on GameStop Corp. (NYSE:GME) at the end of Q1 2022, up from 14 funds in the last quarter. D E Shaw is a significant shareholder of the company, with 734,403 shares worth $122.3 million.
Here is what Bronte Capital Amalthea Fund has to say about GameStop Corp. (NYSE:GME) in its Q1 2022 investor letter:
“Gamestop is a retailer of video games on DVD ROM trying hard (and maybe with some success) to reinvent itself as an alternative computer game distributor. The company raised enough money that bankruptcy is not an immediately likely outcome. (GME would have gone bankrupt except for the willingness of largely retail investors to provide them with much more cash.)
Both have bad financial results. Gamestop’s last financial results were terrible. And both stocks more than doubled very rapidly in March from market caps that were absurd to market caps that are more absurd. We are of course completely aware that they can double again and again after that. Their valuations are absurd but if you double the price they are not twice as absurd. They are just similarly disconnected from reality.
The reason we want to talk about them is that it is indicative of what is going on. Gamestop, the most meme of all stocks, announced a possible stock split and the stock, after market that day, traded up 17 percent. We could joke that every child knows that cutting a pizza into more slices yields more pizza. But in this market, not accepting that stock splits add value is a recipe for losing money.”
7. Redfin Corporation (NASDAQ:RDFN)
Number of Hedge Fund Holders: 23
Redfin Corporation (NASDAQ:RDFN) is a digital residential real estate brokerage company in the United States and Canada. Cliff Asness initially invested in Redfin Corporation (NASDAQ:RDFN) back in the last quarter of 2019. In Q4 2021, the hedge fund owned 7,168 shares of the company worth $275,000. The billionaire sold out of his position entirely in Q1 2022.
Susquehanna analyst Shyam Patil lowered the price target on Redfin Corporation (NASDAQ:RDFN) to $13 from $25 and reiterated a Neutral rating on the shares on May 9. The analyst observed that although the choppy short-term keeps him on the sidelines, strong traffic and search trends point towards Redfin Corporation (NASDAQ:RDFN)’s robust competitive advantage and opportunity to scale with new markets and rentals.
Among the hedge funds tracked by Insider Monkey, 23 funds were long Redfin Corporation (NASDAQ:RDFN) at the end of Q1 2022, up from 18 funds in the earlier quarter. Brian Bares’ Bares Capital Management is the leading stakeholder of the company, with more than 19 million shares worth $345 million.
Here is what Saga Partners has to say about Redfin Corporation (NASDAQ:RDFN) in its Q1 2022 investor letter:
“I recently wrote about Redfin in this December 2021 write-up. I explained how Redfin has increased the productivity of real estate agents by integrating its website with its full-time salaried agents and then funneling the demand aggregated on its website to agents. Redfin agents do not have to spend time prospecting for business but can rather spend all their time servicing clients throughout the process of buying and selling a home.
Since Redfin agents are three times more productive than a traditional agent, Redfin is a low-cost provider, i.e., it costs Redfin less to close a transaction than a traditional brokerage at scale. It is a similar concept as the higher operating leverage of e-commerce relative to brick & mortar retailers. Redfin has higher operating leverage compared to the traditional real estate brokerage.
Real estate agents are typically contractors for a brokerage. They are largely left alone to run their own business. Agents have to prospect for clients, market/advertise listings, do showings, and service clients throughout each step of the real estate transaction. Everything an agent does is largely a variable cost because few of their tasks are automated. Redfin, on the other hand, turned prospecting for demand, marketing/advertising listings, and investments in technology to help agents and customers throughout the transaction into more of a fixed cost. These costs are scalable and become a smaller cost per transaction as total transaction volumes grow across the company.
Because Redfin is a low-cost provider, it has a relative advantage over traditional brokerages. No other real estate brokerage has lowered or attempted to lower the costs of transacting real estate in a similar way. This cost advantage provides Redfin with options about how to share these savings on each transaction. Redfin has primarily shared the cost savings with customers by charging lower commission rates than traditional brokerages. By offering a similar, if not superior, service to customers compared to other brokerages yet charging lower fees, it naturally attracts further demand which then provides Redfin with the ability to scale fixed costs per transaction even more, further widening their cost advantage to other brokerages.
So far, the majority of those cost savings are shared with home sellers as opposed to homebuyers. Sellers are more price sensitive than homebuyers because the buyer’s commission is already baked into the seller’s contract and therefore buyers have not directly paid commissions to agents historically. Also, growing share of home listings is an important component of controlling the real estate transaction. The seller’s listing agent is the one who controls the property, decides who sees the house, and manages the offers and negotiations. Therefore, managing more listings enables Redfin to have more control over the transaction and further streamline/reduce inefficiencies for the benefit of both potential buyers and sellers…” (Click here to see the full text)
6. Spotify Technology S.A. (NYSE:SPOT)
Number of Hedge Fund Holders: 49
Spotify Technology S.A. (NYSE:SPOT) provides audio streaming services worldwide, operating through Premium and Ad-Supported segments. Cliff Asness’ hedge fund added Spotify Technology S.A. (NYSE:SPOT) to its portfolio in the third quarter of 2019. In the fourth quarter of 2021, AQR Capital Management owned a $2.6 million position in the company, which it sold out of entirely in Q1 2022.
On April 29, Citi analyst Jason Bazinet lowered the price target on Spotify Technology S.A. (NYSE:SPOT) to $165 from $240 and kept a Buy rating on the shares after the Q1 earnings. At current share levels, the Street does not seem to be ascribing much, if any, value to Spotify Technology S.A. (NYSE:SPOT)’s emerging businesses, nor is the Street counting on much value from upcoming growth in the primary paid music service, the analyst told investors in a research thesis.
According to Insider Monkey’s first quarter database, 49 hedge funds held long positions in Spotify Technology S.A. (NYSE:SPOT), compared to 53 funds in the last quarter. Cathie Wood’s ARK Investment Management held the leading stake in the company, consisting of 4.3 million shares worth $662.7 million.
Like Twitter, Inc. (NYSE:TWTR), GameStop Corp. (NYSE:GME), and Palantir Technologies Inc. (NYSE:PLTR), billionaire Cliff Asness removed Spotify Technology S.A. (NYSE:SPOT) from his Q1 holdings.
Here is what Cooper Investors Rowan Street Capital has to say about Spotify Technology S.A. (NYSE:SPOT) in its Q1 2022 investor letter:
“Let’s run through our top holdings in order to visualize what happened to their stocks in relation to the fundamentals of their underlying businesses:
We have owned Spotify (NYSE:SPOT) stock since its IPO year in 2018, and this company continued to be one of our highest long-term convictions despite the recent drawdown in the stock. We had outlined our investment thesis for SPOT in our H1 2021 Letter and in Q2 2020 Letter (we encourage you to review those). We believe there is a great future for this company beyond what you can see and hear today!”
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Disclosure: None. Billionaire Cliff Asness is Selling These 10 Stocks in 2022 is originally published on Insider Monkey.
