Below we take a look at why Billionaire Cliff Asness Was Relentlessly Buying Meta Platforms (META) and These 4 Stocks in Q1. For our methodology and a more comprehensive list of the billionaire money manager’s biggest buys of Q1, check out Billionaire Cliff Asness Was Relentlessly Buying Meta Platforms (META) and These 9 Stocks in Q1.
5. Gilead Sciences, Inc. (NASDAQ:GILD)
Value of AQR Capital Management‘s 13F Position: $161 million
Number of Hedge Fund Shareholders: 68
Cliff Asness’ AQR Capital Management bought 1.48 million shares of Gilead Sciences, Inc. (NASDAQ:GILD) during the first quarter to more than double the size of its stake in the company to giving it 2.71 million shares. Hedge fund ownership of Gilead hit a seven-year low in the middle of 2021.
Hedge funds may be concerned by the lack of diversification in Gilead Sciences, Inc. (NASDAQ:GILD)’s portfolio. Aside from the Covid treatment remdesivir (Veklury), the vast majority of Gilead’s sales revolve around HIV drugs and those drugs face a host of challenges, including rising competition and the loss of exclusivity. With Veklury’s impact likely to be short-term, and Gilead only growing its top line by 3% year-over-year in the first quarter despite the ongoing boost from that drug, which accounted for 23.5% of sales, it doesn’t bode well for the company in a post-pandemic world.
The ClearBridge Investments Sustainability Leaders Strategy briefly discussed Gilead Sciences, Inc. (NASDAQ:GILD)’s blockbuster antiviral medication remdesivir in its Q4 2021 investor letter:
“Other pharma companies are providing solutions as well. Biopharmaceutical company Gilead Sciences’ remdesivir, sold under the brand name Veklury, is a broad-spectrum antiviral medication administered by intravenous infusion; it can shorten the time to recovery in hospitalized patients and reduce the risk of hospitalization and death in non-hospitalized patients.”
4. Bio-Rad Laboratories, Inc. Class A Common Stock (NYSE:BIO)
Value of AQR Capital Management‘s 13F Position: $164 million
Number of Hedge Fund Shareholders: 46
There was a 15% increase in the number of hedge funds long Bio-Rad Laboratories, Inc. Class A Common Stock (NYSE:BIO) during Q1. AQR Capital was also buying up shares of the specialized clinical products developer, raising the size of its position by 26% to 290,598 shares.
Bio-Rad Laboratories, Inc. Class A Common Stock (NYSE:BIO) recently held an investor’s day in New York City, where it detailed the company’s medium-term growth targets. The biotech expects to grow core revenue CAGR by 9% annually through 2025, while achieving an adjusted EBITDA margin of 28% by 2025.
Bio-Rad Laboratories, Inc. Class A Common Stock (NYSE:BIO) had a strong Q1 even as Covid-related tailwinds began to subside. The company earned $4.94 per share, crushing estimates that had called for just $3.40 in EPS. Revenue of $700.1 million also handily topped estimates by $25 million, thanks in part to strong growth in its life sciences department.
3. Moderna, Inc. (NASDAQ:MRNA)
Value of AQR Capital Management‘s 13F Position: $235 million
Number of Hedge Fund Shareholders: 41
Health and related companies were among AQR’s top buys during Q1, evidenced again by the fund building up its stake in Moderna, Inc. (NASDAQ:MRNA) by 163% to 1.37 million shares during the quarter. Philippe Laffont’s Coatue Management also raised its position in MRNA during Q1, by 62% to 6.93 million shares.
Cliff Asness appears to be taking advantage of the weakness in Covid stocks like Moderna, Inc. (NASDAQ:MRNA), shares of which have tanked by 69% since early August 2021. The company recently had its Covid vaccine approved for kids aged 6 to 17, but that approval comes after many kids have already been vaccinated against the virus using Pfizer Inc. (NYSE:PFE)’s approved vaccine.
Moderna, Inc. (NASDAQ:MRNA) has also been working on a booster shot that has been shown to be effective against omicron’s subvariants. How much of a need there will ultimately be for those boosters will depend on what kind of foothold those subvariants can gain. Covid cases are again on the rise globally after falling for much of the past five months, and those omicron subvariants, which are highly transmissible, could soon be the dominant strains in many countries according to projections.
2. Pfizer Inc. (NYSE:PFE)
Value of AQR Capital Management‘s 13F Position: $554 million
Number of Hedge Fund Shareholders: 80
Cliff Asness also continued to build up his fund’s position in Pfizer Inc. (NYSE:PFE) during Q1, growing it to 10.7 million shares by the end of March, 56% more than his fund held at the end of 2021. The biopharmaceutical company now ranks among AQR Capital’s top ten long positions. Hedge fund ownership of Pfizer is up by 45% since bottoming out in the third quarter of 2019.
With coronavirus cases trending upwards again, the U.S government recently ordered 105 million doses of Pfizer Inc. (NYSE:PFE) and BioNTech’s co-developed vaccine, which will pay the two companies $3.2 billion upon delivery. The deal also includes an option to buy another 195 million doses. Pfizer has used the windfall from its vaccines to aggressively grow its company with an eye towards a post-pandemic future, spending nearly $19 billion on three separate acquisitions since last December which have helped expand its pipeline and product portfolio.
In its Q4 2021 investor letter, ClearBridge Investments discussed its Pfizer Inc. (NYSE:PFE) holding and how the rapidly evolving Covid-19 pandemic affected its various investment decisions. Here is what the fund had to say on the topic:
“While the level of general turnover abated as we progressed through 2021, it remained high in one area: post-COVID-19 recovery plays. The concept behind this investment thesis was, and still is, straightforward: with the advent of effective vaccines, the path from pandemic to endemic is just a matter of time. As this transition occurs, the estimated excess savings of over $2 trillion built up on U.S. consumer balance sheets will unlock dramatic pent-up demand for experiences, especially global travel. This investment case seemed especially compelling when the Pfizer vaccine positively surprised markets in November 2020. As a result, we made post-COVID-19 stocks (which were trading well below our estimate of recovery value) a sizable theme within the portfolio. We understood this to be a more aggressive tilt in positioning because it required a major improvement in demand to catalyze fundamentals and drive price toward higher business values. While we accepted that recovery would not be smooth and that it would take time to deploy vaccines both domestically and globally, we decided that recovery was the logical path of least resistance and we were being well compensated for these risks.
What we did not account for, however, was vaccine hesitancy and the risk of further infection waves. As a result, the first variant wave, Delta, was a negative surprise to both the market and our team. When the risk surfaced, we immediately updated our probability-driven models and debated how we should react. The resulting conclusion was that the recovery would be delayed and that we should reduce our exposure quickly, subsequently targeting the most aggressive recovery stocks such as cruise lines. We again acted swiftly and decisively to the positive surprise that Pfizer Inc. (NYSE:PFE) had delivered a high-efficacy antiviral COVID-19 pill. This pill should greatly reduce COVID-19 severity risks globally, increasing the probability of a global travel recovery in 2022. While this is still true, the emergence of the highly mutated Omicron variant set off another infection wave which spurred us to again act quickly and further reduce our risk exposure. This back-and-forth may sound exhausting, but it highlights our compulsion to act if we determine a surprise has a large enough impact on the probabilities that power our valuation-driven investment cases.”
1. Meta Platforms, Inc. (NASDAQ:META)
Value of AQR Capital Management‘s 13F Position: $658 million
Number of Hedge Fund Shareholders: 204
Closing out the list of stocks that Cliff Asness was relentlessly buying during Q1 is Meta Platforms, Inc. (NASDAQ:META). While many other hedge funds have been zigging their way out of their META investments (check out Hedge Funds Brace for Impact: Top 10 Stocks to Dump Now as an example), Asness was zagging during the first quarter, growing his stake in Meta by another 47% to just under 3 million shares.
It’s not surprising that hedge funds have been bailing on Meta Platforms, Inc. (NASDAQ:META), given the extreme challenges the company is facing, which has forced it to scale back hiring. Meta’s revenue growth has slowed to a relative crawl at just 7% year-over-year in Q1 and its metaverse initiative has been nothing short of a disaster thus far, with delayed or canceled products and massive losses coming out of that division. The unrelenting rise of TikTok is also threatening the longer-term success of both Facebook and Instagram.
Polen Capital took a look at the challenges and competition being faced by Meta Platforms, Inc. (NASDAQ:META) in its Q1 2022 investor letter:
“What Would You Pay for the World’s Largest Communication and Entertainment Platform? How Does 5x Earnings Sound?
Meta Platforms also had solid, if not slightly lower-than-expected revenue growth last quarter but guided to a significant slowdown in revenue growth for 1Q 2022. Meta called out TikTok, a competitor for people’s time and attention, seeming to imply it as one of the factors causing the growth slowdown. This appeared to stoke fears that the company’s user engagement and value proposition was eroding for its users and marketers and subsequently would lead to lower advertising revenue growth and market share loss.
We do not doubt that TikTok is taking time and attention away from many forms of digital media, core Facebook and Instagram included. That said, we believe TikTok has mostly expanded the pie. Meta’s user engagement has been stable, even on the very mature core Facebook app. Our research shows that most of the growth headwinds are more likely attributable to a combination of factors. These factors include a preference for short-form video while spending time on the platform (Facebook and Instagram Reels), which is not monetized effectively yet, a COVID-19 pull-forward impact like Netflix, and changes to Apple’s (AAPL) iOS operating system.
More specifically, the changes to iOS make it more difficult for Facebook and Instagram to measure certain types of ads accurately, at least for now. Meta has quantified that the Apple impact as roughly a $10 billion revenue headwind for fiscal 2022, or approximately 7% of total revenue. This is a bit larger than we would have expected, and it is taking longer than expected for Facebook to develop with their own measurement tools. But, excluding the Apple impact alone, Facebook would be growing close to what we would have expected in a more normal environment. Although it could take some time to alleviate, we believe the Apple impact will prove temporary, and we continue to monitor engagement trends on Facebook and Instagram from competitors like TikTok…” (Click here to see the full text)
For more on the latest trades made by some of the biggest hedge fund managers in the world, check out 10 Stocks You Should Sell in 2022 According to Billionaire Dan Loeb and 11 Best Undervalued Stocks to Buy Now.
Disclosure: None.
