2. Accenture plc (NSE:ACN)
Number of Hedge Fund Holders: 52
Accenture plc (NSE:ACN) shares have surged sharply during the past two years. Steve Cohen’s Point72 missed capitalizing on the bulk of that period, initiating a position in the company during the third quarter of 2021. Nonetheless, by the time the fund dumped its entire stake just a quarter later, its position had potentially gained 30% or more in value.
In its fourth quarter investor letter, Third Point Management shared its bullish analysis on Accenture plc (NSE:ACN). Here is what Third Point Management stated:
“Accenture, the gold standard in IT Services, is a high-quality compounder at the nexus of two post-Covid megatrends: the acceleration of digitization across industries globally and an emerging IT talent war. It specializes in the highest value work and is the leader in digital and cloud transformations. For the past two decades, Accenture has compounded free cashflow per share at 12% per year on a fully unlevered basis. It has been able to sustain these high rates of compounding due to rising IT spend, rising IT outsourcing, and consistent market share gains. Accenture is positioned to benefit from skyrocketing demand for IT services, partially due to the coronavirus pandemic, which dramatically accelerated the need for digitization across industries. As companies urgently undertake large scale digital and cloud transformations, tech laggards with historically poor IT hiring capabilities must digitize to survive. We believe that as IT services demand accelerates and shifts towards digital transformation projects (where Accenture is particularly well-positioned), Accenture’s market share gains will sustainably accelerate.
Accenture’s growth will also be supported by an increasingly constrained supply of IT talent. Remote work is decoupling employment from location, globalizing the IT talent pool and enabling leading technology companies to compete for talent outside their home markets much more proactively than in the past. That dynamic is making it increasingly difficult for companies in other industries to hire IT professionals at a time of their greatest need. This IT talent “supply shock” is a tremendous opportunity for Accenture, whose best-in-class brand and talent recruiting give the company a growing supply-side advantage which we believe should translate into further market share gains going forward.
Taken together, we believe these concurrent demand and supply shocks should enable Accenture to sustainably accelerate its growth algorithm going forward. We expect revenue growth to accelerate from high single-digit historical levels to mid-teens in the coming years, while free cashflow per share growth accelerates from low-teens to roughly 20% or better. Accenture’s recent guidance for a material acceleration in fiscal year 2022 is the first evidence of this dynamic unfolding. We expect elevated growth to persist for years to come, and are excited to be long-term owners of the stock.”
