In this article, we discuss billionaire Jeffrey Talpin’s top 5 stock picks. For Talpin’s investment philosophy and his comments on certain stocks, please see Billionaire Jeffrey Talpins’ Top 10 Stock Picks.
5. Facebook, Inc. (NASDAQ: FB)
Value: $50,439,000
Percent of Jeffrey Talpins’ 13F Portfolio: 5.26%
No. of Hedge Fund Holders: 242
As of the end of the fourth quarter, 242 hedge funds in Insider Monkey’s database of 887 funds held stakes in Facebook, compared to 230 funds in the third quarter. SB Management is the biggest stakeholder in the company, with 12 million shares, worth $3.3 billion. FB ranks 3rd in our list of the 30 Most Popular Stocks Among Hedge Funds: 2020 Q4 Rankings.
Oakmark Funds explained why they are bullish on Facebook in their 2020 Q4 investor letter:
“Facebook currently sells at approximately $273 per share or 26 times consensus 2021 earnings estimates of $10.47 per share. That might not seem excessive for such a high-quality company, but it certainly would not meet our value criteria if that was the whole story. But it’s not. For starters, Facebook is expected to have $29 per share of cash at the end of 2021, and, as we all know, cash currently earns almost nothing. Subtracting cash from the stock price, we are only paying $244 per share for the business or 23 times earnings.
There is more. Analysts believe that WhatsApp, a popular messaging service owned by Facebook, reports a GAAP loss, yet its subscribers have quadrupled since Facebook acquired the service in 2014. If WhatsApp‘s current subscriber base was valued at the same price-per-subscriber as in 2014, it would now be worth $31 per Facebook share. Using analyst forecasts for revenue several years out, that $31 per share seems reasonable as it roughly matches Facebook’s current price-to-sales multiple.
In addition to WhatsApp, Facebook has also made significant investments in augmented reality/virtual reality (AR/VR)—about $5 per share by our estimate—and we believe those investments are, at a minimum, worth what they cost. AR/VR generates little revenue today and it is likely losing at least $1.00 per share. So, when we factor in both WhatsApp and AR/VR, we should deduct another $36 from Facebook’s stock price and add to earnings the estimated $1.50 of losses they generate.
After these calculations are figured in, we are paying $208 for core Facebook/Instagram with consensus estimates of $12 in 2021—a P/E of only 17x. For a high growth, strong cash generator like Facebook, an adjusted P/E of less than the S&P 500 strikes us as a bargain. And, if you haven’t yet tried the new $299 Oculus Quest 2 virtual reality gaming system (by Facebook), you’re in for a treat.”
4. Alphabet Inc. (NASDAQ: GOOGL)
Value: $67,605,000
Percent of Jeffrey Talpins’ 13F Portfolio: 7.05%
No. of Hedge Fund Holders: 179
According to our database, the number of GOOGL’s long hedge funds positions increased at the end of the fourth quarter of 2020. There were 179 hedge funds that hold a position in Alphabet Inc. compared to 162 funds in the third quarter. The biggest stakeholder of the company is Chris Hohn’s TCI Fund Management, with 2.95 million shares, worth $5.2 billion. GOOGL ranks 4th in our list of the 30 Most Popular Stocks Among Hedge Funds: 2020 Q4 Rankings.
In their Q4 2020 investor letter, Bretton Fund highlighted a few stocks and Alphabet Inc. (NASDAQ:GOOG) is one of them. Here is what the fund said:
“Google (aka Alphabet) was one of our best performing stocks last year, returning 30.9%, while its earnings per share increased 19%. As lockdowns first went into place in the spring, many advertisers hit pause on their campaigns, waiting—like a lot of us—to see what the world would look like. And then—like a lot of us—advertisers adjusted. Travel companies cut back their campaigns, while ads for other goods, like athleisure wear and video games, picked up the slack. Google had a rough second quarter, but was back in the swing of things by the next quarter.”
3. Amazon.com, Inc. (NASDAQ: AMZN)
Value: $116,246,000
Percent of Jeffrey Talpins’ 13F Portfolio: 12.13%
No. of Hedge Fund Holders: 273
With a $7.4 billion stake in AMZN, SB Management owns 2.3 million shares of the company as of the end of the fourth quarter of 2020. Our database shows that 273 hedge funds held stakes in Amazon as of the end of the fourth quarter, versus 245 funds in the third quarter. AMZN ranks 1st in our list of the 30 Most Popular Stocks Among Hedge Funds: 2020 Q4 Rankings.
Here is what Mairs & Power has to say about Amazon.com, Inc. in their Q4 2020 investor letter:
“We did acquire AMZN in the fourth quarter. But not owning it till then cost the Fund in performance relative to the S&P 500 TR Index. We had held off taking a position in Amazon largely due to concerns about the company’s slim margins. But in 2020, we saw its core margins nearly double as more consumers shopped online, which in turn led to greater utilization and route density within Amazon’s delivery network. In addition, Amazon’s advertising business, which represents a small portion of its overall sales, has been growing quickly. Advertising could become a third leg of growth for the company along with e-commerce and Amazon Web Services. In short, Amazon checks all of our boxes — it has a strong management team, great growth prospects, and a strong competitive advantage. And last year, we initiated our position at an intriguing valuation.”
2. Microsoft Corporation (NASDAQ: MSFT)
Value: $136,231,000
Percent of Jeffrey Talpins’ 13F Portfolio: 14.22%
No. of Hedge Fund Holders: 258
As of the end of the fourth quarter, there were 258 hedge funds in Insider Monkey’s database that held stakes in Microsoft, compared to 234 funds in the third quarter. Fisher Asset Management, with 23.4 million shares of MSFT, is the biggest stakeholder in the company. MSFT ranks 2nd in our list of the 30 Most Popular Stocks Among Hedge Funds: 2020 Q4 Rankings.
In their Q4 2020 investor letter, Bretton Fund highlighted a few stocks and Microsoft Corp (NASDAQ:MSFT) is one of them. Here is what the fund stated:
“Microsoft’s stock also had a great year, returning 42.4% on increased earnings per share of 30%. The main driver of their growth in recent years is their cloud computing business, and while it did see a bump in demand as office workers went remote, most of the growth is from the continued shift of corporate computing systems to “the cloud.” We think this shift is still in its early stages.”
1. Apple Inc. (NASDAQ: AAPL)
Value: $211,442,000
Percent of Jeffrey Talpins’ 13F Portfolio: 22.07%
No. of Hedge Fund Holders: 146
According to our database, the number of AAPL’s long hedge funds positions increased at the end of the fourth quarter of 2020. There were 146 hedge funds that hold a position in Apple Inc. compared to 134 funds in the third quarter. The biggest stakeholder of the company is Warren Buffett’s Berkshire Hathaway, with 887.1 million shares, worth $117.7 billion. AAPL ranks 10th in our list of the 30 Most Popular Stocks Among Hedge Funds: 2020 Q4 Rankings.
In their Q3 2020 investor letter, Alger Spectra Fund highlighted a few stocks and Apple Inc. (NASDAQ:AAPL) is one of them. Here is what the fund stated:
“Apple is a leading technology provider in telecommunications, computing and services. Apple’s iOS operating system is the company’s unique intellectual property and competitive strength. This software drives extremely tight engagement with consumers and enterprises. This tight engagement is facilitating significant growth in high-margin services like streaming music. apps. and Apple Pay. Apple’s continued development of high-margin services and earnings streams for wearable devices as well as the potential contribution of 5G phones to the company’s growth supported the performance of Apple shares.”
You can also take a peek at Billionaire Carl Icahn’s Top 10 Picks and Cathie Wood’s Top 10 Stock Picks.
Disclosure: None.
