In this article, we will discuss the top 10 stocks being bought by George Baxter’s Sabrepoint Capital as of the second quarter of 2021. If you want to skip our detailed analysis of Baxter’s history, investment philosophy, and hedge fund performance, go directly to George Baxter’s Sabrepoint Capital is Buying These 5 Stocks.
George Baxter, a CFA charterholder, is the president and portfolio manager at Sabrepoint Capital Management, a hedge fund based in Dallas, Texas. After graduating from the University of Texas School of Law, Baxter practiced corporate law before becoming an investment professional. From 2014 to 2016, he was a partner with an equity-based hedge fund named Hirzel Capital Management. Baxter also worked as a senior associate at Weil, Gotshal, and Manges from 2004 to 2007. In February 2016, George Baxter founded Sabrepoint Capital Management.
Sabrepoint Capital Management is a private value-based investment firm in Dallas, Texas. In the latest 13F filings, Sabrepoint Capital disclosed 30 holdings and reported a portfolio value of $317.4 million, compared to 32 holdings in the previous quarter, valued at $308.2 million. The hedge fund’s top 10 holding concentration is 54.05% for the second quarter of 2021.
Some of Baxter’s popular stock picks as of the second quarter of 2021 include Upwork Inc. (NASDAQ: UPWK), Lyft, Inc. (NASDAQ: LYFT), and Walker & Dunlop, Inc. (NYSE: WD).
Upwork Inc. (NASDAQ: UPWK) is one of the fastest-growing freelancing platforms. Based on the latest 13F holdings for the second quarter of 2021, Sabrepoint Capital owns 360,000 shares in Upwork Inc. (NASDAQ: UPWK) worth over $20.98 million.
In Lyft, Inc. (NASDAQ: LYFT), George Baxter’s Sabrepoint Capital owns 300,000 shares worth $18.1 million. As of the second quarter of 2021, 43 hedge funds out of the 873 funds tracked by Insider Monkey held stakes in Lyft, Inc. (NASDAQ: LYFT), in comparison to 60 in the preceding quarter. The total value of these stakes is over $1.38 billion.
Walker & Dunlop, Inc. (NYSE: WD) is a commercial real estate finance corporation that offers financing and loan services to owners of commercial real estate. Sabrepoint Capital owns 195000 shares in Walker & Dunlop, Inc. (NYSE: WD), worth $20.3 million. On October 7, JMP securities’ analyst Steven Delaney raised the price target on Walker & Dunlop, Inc. (NYSE: WD) stock from $130 to $140.
Source: pexels
Our Methodology
For this article, we picked the top 10 stocks from the second quarter portfolio of George Baxter’s Sabrepoint Capital.
Why should we pay attention to Sabrepoint Capital’s stock picks? 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 86 percentage points since March 2017. Between March 2017 and July 2021, our monthly newsletter’s stock picks returned 186.1%, vs. 100.1% for the SPY. Our stock picks outperformed the market by 86 percentage points (see the details here). 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.
George Baxter’s Sabrepoint Capital is Buying UPWK, MSFT, and More
10. Microsoft Corporation (NASDAQ:MSFT)
Baxter’s Stake Value: $12,732,000
Percentage of George Baxter’s 13F Portfolio: 4.01%
Number of Hedge Fund Holders: 238
Ranked 10th on our list is Microsoft Corporation (NASDAQ: MSFT). Sabrepoint Capital has increased its stake in the company from $11.08 million in the first quarter of 2021 to $12.7 million in the second quarter, representing a 0.42% increase in the portfolio weightage.
On September 30, the tech giant announced the expansion of its Xbox gaming service to Japan, Brazil, Australia, and Mexico. Microsoft Corporation (NASDAQ: MSFT) had been testing its Xcloud technology in these countries for a couple of months. With the expansion, the service is now available in 26 countries across the globe.
The company’s ventures have translated into positive financial results. For the second quarter of 2021, Microsoft Corporation (NASDAQ: MSFT) recorded an EPS of $2.17, beating the analysts’ estimate by $0.24. The company also beat the analysts’ revenue estimate of $44 billion by $1.85 billion.
Owing to the strong Q2 results, investment advisory Tigress Financial raised the price target on Microsoft Corporation (NASDAQ: MSFT) from $303 to $336 and maintained a Buy rating on the stock on September 17.
Baron Opportunity Fund mentioned Microsoft Corporation (NASDAQ: MSFT) in its Q2 2021 investor letter and shared its stance on the firm:
“Shares of Microsoft Corporation, a cloud-software leader and provider of software productivity tools and infrastructure, rose during the quarter following a strong earnings report highlighting solid demand for its broad product stack and continued momentum migrating its business to the cloud. Microsoft was a top contributor in the period because it trades at reasonable free cash flow and earnings valuations, has cloud and digital transformation tailwinds at its back, reported a solid March quarter, and beat Street expectations by a wide margin. Microsoft’s results continued to be strong across the board, with Azure cloud computing revenues up 46% in constantcurrency (“cc”) terms and commercial cloud bookings growth of 38% cc, the best in years. Microsoft also reported robust profitability growth, with operating income expanding 31% and GAAP earnings up 45%. We believe the company is well positioned for continued solid growth and profitability through market share gains as more companies look to transform and digitize their businesses as they move operations to the cloud.”
Even though the stock witnessed a decrease in hedge fund sentiment recently, it delivered annual returns of 32.61%. As of the second quarter of 2021, 238 hedge funds out of the 873 funds tracked by Insider Monkey held stakes in Microsoft Corporation (NASDAQ: MSFT), in comparison to 251 in the preceding quarter. The total value of these stakes is over $62.4 billion.
In addition to Microsoft Corporation (NASDAQ: MSFT), Upwork Inc. (NASDAQ: UPWK), Lyft, Inc. (NASDAQ: LYFT), and Walker & Dunlop, Inc. (NYSE: WD) are some of the premium stocks gaining hedge funds’ attention as of the second quarter of 2021.
9. Cannae Holdings, Inc. (NYSE:CNNE)
Baxter’s Stake Value: $13,055,000
Percentage of George Baxter’s 13F Portfolio: 4.11%
Number of Hedge Fund Holders: 34
Cannae Holdings, Inc. (NYSE: CNNE) operates through multiple subsidiaries and manages a significant group of companies and investments, particularly in the hospitality sector. Cannae Holdings, Inc. (NYSE: CNNE) has had exponential growth in expanding its investment network since its establishment.
As per the latest 13F filings, Sabrepoint Capital owned 385,000 shares in the company at the end of the second quarter of 2021, worth over $13 million. Investment management firm Nitorum Capital is the leading investor in Cannae Holdings, Inc. (NYSE: CNNE), with a stake worth $111.9 million.
Cannae Holdings, Inc. (NYSE: CNNE) was mentioned in investment management firm Madison Funds’ Q2 2021 investor letter. Here’s what the fund said:
“Cannae Holdings is an investment holding company chaired by Bill Foley, an investor-executive with one of the most impressive long-term entrepreneurial track records in corporate America. Over the past three and a half decades, he has been responsible for buying and growing numerous software, data analytics, and fintech businesses, including four that are publicly traded today, with market caps of $9 billion, $12 billion, $13 billion, and $90 billion. Cannae itself became independently public several years ago, and has amassed a strong record of market-beating results.
We purchased Cannae stock at an approximately 30% discount to its net asset value (“NAV”). As the large majority of Cannae’s value is in publicly-traded companies, its NAV can be reliably estimated, which makes the discount somewhat puzzling. Two investments account for a substantial portion of the value: minority stakes in Dun & Bradstreet and Ceridian HCM Holding, both of which were acquired by Cannae in leveraged buyout transactions and have returned multiples of the initial equity invested. Ceridian has matured as an investment position, and Cannae has been selling down its stake for the past year and we expect that to continue. Dun & Bradstreet is still in the middle innings of the investment timeline, and we expect Cannae to benefit greatly from further growth in value. We also own a separate position in Dun & Bradstreet in our portfolio. Cannae also has investments in a myriad of venture-stage companies and companies beginning to truly monetize their scale. Some of them look very promising, and one or two winners would add tremendously to growth in NAV.”
Of the 873 elite funds tracked by Insider Monkey, 34 were long Cannae at the end of the second quarter, down from 36 in the first quarter of 2021. The total value of these stakes is over $522.3 million.
Like Upwork Inc. (NASDAQ: UPWK), Lyft, Inc. (NASDAQ: LYFT), and Walker & Dunlop, Inc. (NYSE: WD), Cannae Holdings, Inc. (NYSE: CNNE) is one of the top stocks in George Baxter’s portfolio at the end of the second quarter of 2021.
8. Clearwater Paper Corporation (NYSE:CLW)
Baxter’s Stake Value: $13,648,000
Percentage of George Baxter’s 13F Portfolio: 4.3%
Number of Hedge Fund Holders: 9
Clearwater Paper Corporation (NYSE: CLW) is a private company focused on producing high-quality paper-board products. The company uses pulp and paper to manufacture premium tissues, including paper towels, facial tissues, sanitary napkins, and multiple paper products.
Sabrepoint Capital is the leading investor in Clearwater Paper Corporation (NYSE: CLW), with over 471,100 shares worth over $13.6 million. Overall, 9 hedge funds out of the 873 funds tracked by Insider Monkey held stakes in Clearwater Paper Corporation (NYSE: CLW) as of the second quarter of 2021, worth $19.4 million, in comparison to 14 in the preceding quarter, worth $31.3 million.
Alongside Clearwater Paper Corporation (NYSE: CLW), Upwork Inc. (NASDAQ: UPWK), Lyft, Inc. (NASDAQ: LYFT), and Walker & Dunlop, Inc. (NYSE: WD) are a few of the popular stock picks of George Baxter’s Sabrepoint Capital as of the second quarter of 2021.
7. Spotify Technology S.A. (NYSE:SPOT)
Baxter’s Stake Value: $15,157,000
Percentage of George Baxter’s 13F Portfolio: 4.77%
Number of Hedge Fund Holders: 48
Spotify Technology S.A. (NYSE: SPOT) is a Sweden-based technology company and one of the world’s largest and most popular digital music-streaming mobile apps. It has a user base of over 365 million monthly active users, which includes 165 million paying subscribers.
13F filings show that Sabrepoint Capital owned 55000 shares in Spotify Technology S.A. (NYSE: SPOT) at the end of the second quarter of 2021, worth over $15.1 million. ARK Investment Management is the leading investor in Spotify Technology S.A. (NYSE: SPOT), with a stake worth over $1.3 billion.
On September 13, investment advisory Goldman Sachs initiated coverage of Spotify Technology S.A. (NYSE: SPOT) with a price target of $260 and a Neutral rating, citing “ample opportunities” for growth in the industry.
Investment management firm Worm Capital LLC shared its stance on Spotify Technology S.A. (NYSE: SPOT) in its Q3 2021 investor letter. Here’s what the firm said:
“The beauty of continuously accumulating marginal gains is that it has a profound compounding effect over time: If your goal as an individual, organization, investor—whatever you are—is trained on the belief that you should always be improving, there is the potential for exponential growth.
Spotify is a wonderful example of this dynamic as well.
Although the market has pummeled this position in recent months, falling more than 35% from all-time highs—and has contributed significantly to our negative year-to-date performance—the company is meeting and often exceeding our internal expectations. Spotify is expanding territory, reducing frictions for creators, enabling the next-generation of audio advertising (a high margin opportunity), and continuously experimenting to improve the experience for both creators and fans to create an essential platform.
Spotify is, in many ways, building the essential audio infrastructure for the Internet, much like Google built the search infrastructure to power Web 2.0 or Apple built the hardware infrastructure power the app economy. We think the valuation represents one of the wider deviations between price and value in the market today, but we think time will be on our side here—like all our positions, we maintain a long-term view on the company and certain theses may take multiple years to play out.
In our view, Daniel Ek’s vision for Spotify is far grander than most may realize, and we encourage you to listen to his recent podcast with Patrick O’Shaughnessy. “The value of what you are building is the sum of all the problems that you solve,” Daniel says. “I still think we’re early days with Spotify. There’s so many problems left to be solved.” (We agree.)
Two charts below that help contextualize both Spotify’s lead (largely as a result of aggregating marginal gains, and passing those gains to consumers) as well as a chart that represents just how early we are in the streaming audio era.
Like most great growth business stories, the market tends to vastly underestimate the total addressable market in its early days. We believe Spotify will ultimately prove out to be the Google of audio, and it should command a far higher multiple today. For those interested, Eric spoke in detail about our investment thesis on Spotify with John Rotonti in September – link here. Again, in terms of fund performance, we understand this year has been frustrating. And we want to again thank you for your trust and patience.”
6. O’Reilly Automotive, Inc. (NASDAQ:ORLY)
Baxter’s Stake Value: $15,288,000
Percentage of George Baxter’s 13F Portfolio: 4.81%
Number of Hedge Fund Holders: 44
O’Reilly Automotive, Inc. (NASDAQ: ORLY) is an automotive retailer that deals in auto parts, tools, supplies, accessories, and equipment. The company’s customer base varies from individual customers to professional automotive service providers. As per the latest 13F filings, Sabrepoint Capital owned 27,000 shares in O’Reilly Automotive, Inc. (NASDAQ: ORLY) at the end of the second quarter of 2021, worth over $15.2 million.
Investment firm Akre Capital Management is the leading investor in the company, with a stake worth $895.5 million. Overall, 45 hedge funds out of the 873 funds tracked by Insider Monkey reported owning stakes in O’Reilly Automotive, Inc. (NASDAQ: ORLY), up from 44 in the preceding quarter.
On September 17, O’Reilly Automotive, Inc. (NASDAQ: ORLY) was downgraded to Neutral from Buy with an unchanged price target of $680 by BofA analyst Elizabeth Suzuki. Despite viewing the company as a “high quality” retailer, Elizabeth pointed out that there was only a 13% upside to her unchanged price target at the given trading levels.
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Disclosure: None. George Baxter’s Sabrepoint Capital is Buying UPWK, MSFT, and More is originally published on Insider Monkey.
