In this article, we discuss the 5 stocks that billionaire Philippe Laffont is selling. If you want to see more stocks that the billionaire discarded in Q1, click Billionaire Philippe Laffont is Selling These 10 Stocks.
5. Pfizer Inc. (NYSE:PFE)
Number of Hedge Fund Holders: 79
Pfizer Inc. (NYSE:PFE) is an American multinational biopharmaceutical firm that commercializes medicines, biosimilars, and vaccines. Philippe Laffont owned 10.3 million shares of Pfizer Inc. (NYSE:PFE) in the fourth quarter of 2021, worth about $609 million, representing 2.70% of the total portfolio. The billionaire’s hedge fund dumped the position entirely in Q1 2022.
Morgan Stanley analyst Terence Flynn on July 8 lowered the price target on Pfizer Inc. (NYSE:PFE) to $49 from $52 and kept an Equal Weight rating on the shares after adjusting estimates ahead of the company’s Q2 report. He expects biopharma revenues to remain robust if economic activity dampens and continues to believe firms that can deliver revenue growth are best positioned among the group, the analyst said.
Among the hedge funds tracked by Insider Monkey, Cliff Asness’ AQR Capital Management is the leading position holder in the company, with 10.70 million shares worth over $554 million. Overall, Pfizer Inc. (NYSE:PFE) was part of 79 hedge fund portfolios at the conclusion of Q1 2022, down from 83 funds in the preceding quarter.
Here is what ClearBridge Investments Value Equity Strategy has to say about Pfizer Inc. (NYSE:PFE) in its Q4 2021 investor letter:
“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 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.
4. Activision Blizzard, Inc. (NASDAQ:ATVI)
Number of Hedge Fund Holders: 80
Activision Blizzard, Inc. (NASDAQ:ATVI) is an American interactive entertainment company. On July 25, MoffettNathanson analyst Clay Griffin upgraded Activision Blizzard, Inc. (NASDAQ:ATVI) to Outperform from Market Perform with an unchanged price target of $95. The merger arbitrage spread has been wide ever since Microsoft agreed to acquire Activision Blizzard, Inc. (NASDAQ:ATVI) for $95 per share, observed the analyst. Given an approximately 20% discount to the deal price, purchasing Activision Blizzard, Inc. (NASDAQ:ATVI) stock at this point is “an uncorrelated return opportunity that we find increasingly compelling,” he added.
Philippe Laffont initially invested in Activision Blizzard, Inc. (NASDAQ:ATVI) back in Q4 2014 and consistently held the position until the end of 2019. In Q1 2020, the billionaire’s fund disposed of its Activision Blizzard, Inc. (NASDAQ:ATVI) stake and purchased back shares of the company in Q4 2021, only to dump the $60 million position again in Q1 2022.
According to Insider Monkey’s data, 80 hedge funds were bullish on Activision Blizzard, Inc. (NASDAQ:ATVI) at the end of Q1 2022, up from 70 funds in the prior quarter. Warren Buffett’s Berkshire Hathaway featured as the biggest stakeholder of the company, with 64.3 million shares worth $5.15 billion.
Here is what FPA U.S. Core Equity Fund has to say about Activision Blizzard, Inc. (NASDAQ:ATVI) in its Q1 2022 investor letter:
“One of the Fund’s biggest winners in the first quarter was Activision Blizzard. On January 18, 2022 Microsoft (NASDAQ:MSFT) agreed to purchase ATVI for $95.00 per share in an all-cash transaction. The Fund has been invested in ATVI since the second quarter of 2018.
The investment thesis was threefold. First, the greater than $200 billion gaming industry is the largest and fastest growing form of entertainment in the world. More than three billion people play games currently and the population of global gamers is expected to grow faster than global population growth this decade.14 Second, ATVI has some of the best intellectual property in the gaming industry including Warcraft, Diablo, Overwatch, Call of Duty and Candy Crush in addition to global eSports activities through Major League Gaming. Third, ATVI has had a pristine balance sheet with net cash over the past four years, generated robust free cash flow and traded at an undemanding valuation.
ATVI closed the quarter at $80.11—a nearly 16% discount to the acquisition price. Assuming it takes about a year for the deal to close, a 18.6% return seems to be good upside relative to the risk of a deal not closing due to anti -trust concerns. If the transaction closes it would make Microsoft the third-largest company in gaming by revenue behind Tencent and Sony. There is plenty of competition from these larger players as well as smaller competitors such as EA, Take-Two Interactive, Roblox and Epic Games’ Fortnite. The Fund remains invested in ATVI given the significant discount, but should the discount narrow in the coming quarters the Fund could reduce or eliminate the position.”
3. Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM)
Number of Hedge Fund Holders: 81
Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) manufactures and sells integrated circuits and semiconductor devices in Taiwan, China, Europe, the Middle East, Africa, Japan, and the United States. Coatue Management added Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) to its portfolio in Q4 2021 by purchasing 858,277 shares worth $103.26 million. The hedge fund discarded the stock in the next quarter.
Susquehanna analyst Mehdi Hosseini on July 14 lowered the firm’s price target on Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) to $88 from $90 and kept a Neutral rating on the shares. The analyst observed the company’s robust revenues in 2022 actually make the 2023 estimates more challenging. He told investors that it is encouraging to hear Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) announcing a wide inventory correction, but said the 1H23 inventory correction will be more difficult than anticipated.
Among the hedge funds tracked by Insider Monkey, 81 funds were long Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) at the end of March, up from 72 funds in the earlier quarter. Fisher Asset Management is the largest stakeholder of the company, with more than 26 million shares valued at $2.73 billion.
Here is what Baron New Asia Fund has to say about Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) in its Q1 2022 investor letter:
“Semiconductor giant Taiwan Semiconductor Manufacturing Company Ltd. detracted in the first quarter due to rising geopolitical tensions, macroeconomic uncertainties, and concerns over softening demand for consumer electronics. We retain conviction that Taiwan Semi’s technological leadership, pricing power, and exposure to secular growth markets, including high-performance computing, automotive, and IoT, will allow the company to deliver above its 15% to 20% revenue growth target over the next several years.”
2. Datadog, Inc. (NASDAQ:DDOG)
Number of Hedge Fund Holders: 82
Datadog, Inc. (NASDAQ:DDOG) is a New York-based data monitoring and analytics platform. Philippe Laffont’s Coatue Management added Datadog, Inc. (NASDAQ:DDOG) to its portfolio initially in the third quarter of 2019. The hedge fund held the stake consecutively until disposing it in Q3 2021. Coatue Management purchased 62,193 shares of Datadog, Inc. (NASDAQ:DDOG) in Q4 2021, which it dumped entirely in Q1 2022.
On July 25, RBC Capital analyst Matthew Hedberg lowered the price target on Datadog, Inc. (NASDAQ:DDOG) to $115 from $167 on shrinking peer multiples but maintained an Outperform rating on the shares ahead of its Q2 results. After a “strong” Q1, the analyst is focused on the company’s macro outlook, the effect of consumption pricing, ongoing success around its platform strategy, and multiple product adoption. He added that he still likes the potential for long-term growth and margin improvement at Datadog, Inc. (NASDAQ:DDOG).
According to Insider Monkey’s data, 82 hedge funds were bullish on Datadog, Inc. (NASDAQ:DDOG) at the end of March 2022, up from 73 funds in the last quarter. Stephen Mandel’s Lone Pine Capital is the largest stakeholder of the company, with roughly 3 million shares worth $449.15 million.
Here is what Baron Global Advantage Fund has to say about Datadog, Inc. (NASDAQ:DDOG) in its Q1 2022 investor letter:
“Another example is Datadog, the leading infrastructure monitoring, application performance monitoring and log management software platform. Datadog’s stock declined 15% during the quarter, despite reporting sparkling operational results, with revenues accelerating to a growth rate of 84% year-over-year with 33% free cash flow margins, while guiding for 2022 significantly above expectations. Datadog added 4,600 new customers in the quarter, while existing customers continued to increase their spending on Datadog products at a rapid pace with the number of customers using four or more products increasing to 33% from 22% last year. While Datadog’s stock was down, its intrinsic value has undoubtedly increased. This is enabled by rapid innovation (Datadog released 13 new products in 2021) into a market that is benefiting from the secular growth in cloud, digital transformation, and the explosion in complexity as the number of vendors, diversity of technologies and related infrastructure continued to expand.”
1. Mastercard Incorporated (NYSE:MA)
Number of Hedge Fund Holders: 136
Mastercard Incorporated (NYSE:MA) is an American multinational financial services corporation that provides payment-related products and services worldwide. Philippe Laffont’s Coatue Management held 777,508 Mastercard Incorporated (NYSE:MA) shares in the fourth quarter of 2021, which it disposed of completely in Q1 2022.
On July 26, Citi analyst Ashwin Shirvaikar lowered the price target on Mastercard Incorporated (NYSE:MA) to $415 from $453 and kept a Buy rating on the shares. The analyst expects “good” June quarter results from Mastercard Incorporated (NYSE:MA) and his estimates exceed Street consensus. While the aggregate spend environment “appears to remain encouraging” particularly for the richer demographic, there might be a potential spending slowdown in certain geographies. The analyst updated models to account for conservatism regarding the macro environment and future spend patterns.
Among the hedge funds tracked by Insider Monkey, 136 funds were bullish on Mastercard Incorporated (NYSE:MA) at the end of Q1, down from 144 funds in the last quarter. Charles Akre’s Akre Capital Management held the leading position in the company, with 5.85 million shares worth over $2 billion.
Here is what Polen Global Growth Fund has to say about Mastercard Incorporated (NYSE:MA) in its Q1 2022 investor letter:
“We added to both Visa and Mastercard during the final quarters of 2021, based on the belief that both businesses were trading at attractive prices and poised to deliver double-digit returns over the next three to five years. Cross-border transactions–a highly profitable business segment for both companies–represent roughly 10% of Visa and Mastercard’s volumes and 25% of their gross revenues, so lockdowns have severely impacted this segment due to stifled travel. While it was impossible to know when people would begin traveling again, we accepted this reality with the belief that travel would eventually return. Both companies have commented that as soon as a country or geography reopens, cross-border volumes reignite, amplifying each business’s growth and profitability. We think these near- term headwinds have created an attractive long-term investment opportunity.”
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