In this article, we discussed how billionaire Jorge Paulo Lemann adjusted his stock portfolio in 2020 to generate big gains and also took a look at billionaire Jorge Paulo Lemann’s top 10 stock picks for 2021. Click to skip ahead and see Billionaire Jorge Paulo Lemann’s Top 5 Stock Picks.
The Brazilian billionaire Jorge Paulo Lemann continues impressing investors with his market-beating portfolio management strategies. His equity investment firm 3G Capital generated robust gains in 2020 amid investments in information technology and consumer discretionary stocks. 3G Capital, which also invests alongside Warren Buffett, has extended its strategy of holding major positions in high growth stocks in 2021 despite investors’ shift towards value stocks. The firm created only two small stock positions in the latest quarter and added to its two existing positions. The Brazilian investor’s group, which was behind Kraft Heinz, Burger King and Tim Hortons, has been delaying big investments amid higher valuations, according to a Financial Times report. 3G is currently sitting on about $10 billion of deployable funds.
The firm ended the December quarter with $24 billion in assets under management and $119 million in 13F stock portfolio. Lemann is the founder of investment firm 3G Capital and a major shareholder in Anheuser-Busch InBev, Kraft Heinz (NYSE: KRFT), as well as Burger King and Tim Horton parent Restaurant Brands International.
He recently decided to step down from the Kraft Heinz board due to personal reasons. He had created Kraft Heinz through a merger in 2015 by teaming up with Buffett. His investment firm 3G capital had exited a stake in the food and beverage company last year. 3G Capital and Warrens Buffett’s bet on Kraft Heinz was didn’t go as expected. Buffett admitted that he paid a bigger price for Kraft. “I made a mistake in the Kraft purchase in terms of paying too much,” Buffett said. Besides that, Lemann successfully completed several biggest consumer deals during the last two decades and his firm has a history of securing a large amount of debt from lenders on top of the fund’s own cash to support mega deals.
Billionaire Jorge Paulo Lemann has a keen eye on the market and he knows how to make gains from changing market trends. This is clearly reflecting in a shift in his investment strategy last year. He slashed stakes in communications stocks to just over 4% of the overall portfolio at the end of Q4 2020 compared to almost 70% of portfolio weighting in the year-ago period. Moreover, he also took advantage of users’ shift to online payments platforms by initiating a big position in Square (NASDAQ: SQ). The billionaire investor also bought shares of a few start-ups including Snowflake Inc. (NASDAQ: SNOW) and nCino, Inc (NASDAQ: NCNO). On the other hand, the firm sold out Fastly Inc (NYSE: FSLY) position during the final quarter of 2020 to capitalize on its share price gains.
While Jorge Paulo Lemann’s reputation remains intact, the same can’t be said of the hedge fund industry as a whole, as its reputation has been tarnished in the last decade, during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017. Between March 2017 and February 26th 2021 our monthly newsletter’s stock picks returned 197.2%, vs. 72.4% for the SPY. Our stock picks outperformed the market by more than 124 percentage points (see the details here). We were also able to identify in advance a select group of hedge fund holdings that significantly underperformed the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 16th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
Let start examining billionaire Jorge Paulo Lemann’s top 10 stock picks to see whether his stock selection would beat the broader market returns in 2021. Billionaire Jorge Paulo Lemann’s top 10 stock picks represent 95.78% of his fund’s 13F portfolio.
10. Coupa Software Incorporated (NASDAQ: COUP)
3G Capital initiated a position in Coupa Software Incorporated (NASDAQ: COUP) during the December quarter by purchasing 1000 shares valued at $3.3 million. Shares of Coupa Software fell sharply since the beginning of this year due to investors’ move towards value stocks. Despite the latest selloff, Coupa stock price is still up 75% in the last twelve months. The company has generated year-over-year revenue growth of 47% in Q4 with a surprise profit of $0.17 per share.
Artisan Partners Limited Partnership, a high value-added investment management firm, highlighted a few stocks including Coupa Software in their Q4 investors’ letter. Here is what Artisan Partners Limited Partnership stated:
“We started new investment campaigns in Coupa Software. Coupa is a leading provider of cloud-based business spend-management software. The company helps 1,400 customers process over $2 trillion in annual spend across more than 5 million suppliers. While this quarter’s announcement of a major new customer win at Walmart shows it still has a long runway for growth in this business, we are particularly excited about Coupa Pay—a recently introduced set of cloud services that seeks to process B2B payments (not just invoices) across its large network. B2B payments has seen far less innovation in recent years compared to B2C (PayPal, Venmo, Square), but we see it as a major opportunity in the years ahead.”
9. ZoomInfo Technologies Inc. (NASDAQ: ZI)
Billionaire Jorge Paulo Lemann’s strategy of initiating a position in the go-to-market data intelligence platform ZoomInfo Technologies Inc. (NASDAQ: ZI) worked for his investment firm in 2020. Despite ZoomInfo stock price underperformance year to date, its future fundamentals look strong amid robust financial growth. Its December quarter revenue grew 50% year over year and the company expects 2021 revenue in the range of $645 million-$655 million compared to expectations for $602.1 million.
In a Q3 investor letter, Baron Asset Fund painted a rosy outlook for ZoomInfo Technologies. Here is what Baron Asset Fund stated:
“ZoomInfo Technologies Inc. operates a cloud-based software platform that provides sales and marketing teams with comprehensive intelligence on approximately 14 million companies and 120 million professionals. Access to this valuable data enables its clients to shorten their sales cycles and achieve higher win rates. The company’s shares declined, given a somewhat uncertain spending environment among its clients. We retain conviction in the long-term opportunity, and we believe the spending environment has since improved. We think ZoomInfo is well positioned given its unique contributory network for data collection and validation, patented data extraction technologies, and proprietary go-to-market strategy.”
8. Microsoft Corporation (NASDAQ: MSFT)
The technology giant Microsoft Corporation (NASDAQ: MSFT) has been a permanent member of 3G Capital’s portfolio since 2015. It is ranked eighth in the list of billionaire Jorge Paulo Lemann’s top 10 stock picks. Shares of Microsoft have extended the upside momentum in 2021, enlarging the twelve months gains to almost 70%.
Bretton Fund, which returned 11.52% for the fourth quarter, highlighted a few stocks including Microsoft in the Q4 investor letter. Here is what Bretton 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.”
7. Amazon.com, Inc. (NASDAQ: AMZN)
The Brazilian billionaire’s strategy of buying Amazon (NASDAQ: AMZN) shares at the beginning of 2020 helped in generating strong returns during the pandemic year. However, Amazon’s stock price underperformed so far in 2021 due to valuation concerns. Its stock price rallied more than 70% in 2020 on the back of significant growth in revenues. The company generated $125 billion in December quarter revenue.
Mairs & Power, an investment management firm, stated in a Q4 investor letter that Amazon’s rising margins and advertising business are among the catalysts. Here is what Mairs & Power stated:
“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.”
6. ServiceNow, Inc. (NYSE: NOW)
3G Capital benefited from its position in ServiceNow, Inc. (NYSE: NOW) last year but shares of software systems provider fell more than 14% so far in 2021. It is the sixth-largest stock holding of billionaire Jorge Paulo Lemann’s portfolio, representing 6.70% of the 13F portfolio. The firm first bought ServiceNow during the first quarter of 2020.
ServiceNow was in 96 hedge funds’ portfolios at the end of December compared to the previous all-time high for this statistic of 92. Our calculations also showed that NOW ranked 25th among the 30 most popular stocks among hedge funds (click for Q4 rankings).
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Disclosure: None. Billionaire Jorge Paulo Lemann’s Top 10 Stock Picks is originally published on Insider Monkey.
