We recently published a list entitled Billionaire Israel Englander’s Top 10 Stock Picks for 2024. Since Salesforce Inc. (NYSE:CRM) ranks 10th in the list, it deserves a deeper look.
Billionaire Israel Englander is one of the most notable hedge fund managers in America. He founded Millennium Management back in 1989. Today, the fund’s portfolio is worth over $234 billion. Englander nabbed the top spot in Bloomberg’s list of highest-earning hedge fund managers in 2023, with a whopping $2.8 billion in net earnings including gains from personal investments and fees. Earlier this year, Bloomberg reported that Izzy Englander’s Millennium Management earned $600 million from commodities investments last year. However, in a separate report, the publication said despite installing a new chief of its commodities and making big changes, Millennium’s commodities business is lagging behind Citadel (of billionaire Ken Griffin) which made a whopping $8 billion from commodities in 2022. Bloomberg said, citing sources, that part of the reason why Millennium is struggling to post big gains is billionaire Englander’s imposition of “tight guardrails” to limit losses. To make money in the commodities business, experts say, you have to take risks and give some freedom to traders. But Englander likes to be in control. A Financial Times report earlier this year said Millennium Management manages a whopping $60 billion in assets, employs 5,400 people and has 17 offices. Yet Englander owns 100% of the firm.
The report said, citing a person who works at the fund, that this major concentration is “not a good idea.”
The FT report said Englander’s fund was up 8.3% in 2023 through October, while it returned 12.5% in 2022, 13.6% in 2021 and an impressive 25.9% in 2020.
For this article, we scanned Millennium Management’s Q1 portfolio and picked the fund’s top 10 holdings. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Israel Englander of Millennium Management
Salesforce Inc. (NYSE:CRM)
Billionaire Israel Englander’s Stake Value: $620,061,854
Billionaire Israel Englander increased his position in CRM software and Cloud company Salesforce Inc. (NYSE:CRM) by 36% in the first quarter of 2024, ending the quarter with a $620 million stake. Salesforce Inc. (NYSE:CRM) shares recently saw a bloodbath after posting mixed Q1 results and disappointing guidance. However, many Wall Street experts believe the market isn’t pricing in the AI tailwinds for Salesforce Inc. (NYSE:CRM). Mizuho Securities analyst Gregg Moskowitz thinks the company is still “well situated” to help customers in digital transformation. However, the analyst thinks Salesforce Inc. (NYSE:CRM) would do so prioritizing profitable growth. The analyst reiterated his Buy rating on the stock but cut his price target to $300 from $345.
Morgan Stanley analyst Keith Weiss, who has an Overweight rating and a $320 price target on Salesforce Inc. (NYSE:CRM), said that Salesforce’s PEG ratio of 1.2 shows the market is not pricing in operational discipline and earnings growth sustainability.
“We continue to view GenAI as a tailwind for Salesforce, with benefits likely coming in CY25, but at these levels, GenAI represents a call option.”
Salesforce Inc. (NYSE:CRM) is trading at 22x its fiscal 2026 earnings estimate of $10.99, which makes the stock attractively valued given the sector median P/E ratio of 23.85 and Salesforce’s AI growth catalysts. Salesforce Inc.’s (NYSE:CRM) revenue in fiscal 2026 is expected to growth at 9.10% while earnings are forecasted to rise by 11.00%.
Harding Loevner Global Equity Strategy stated the following regarding Salesforce, Inc. (NYSE:CRM) in its first quarter 2024 investor letter:
“Leading software companies have the advantage of high switching costs and the ability to incorporate new features into products customers already use. For example, Microsoft has added its Copilot chatbot functionality to everything from search (Bing Chat, recently renamed to just Copilot) to coding (GitHub Copilot) and workplace applications (Copilot for Microsoft 365). Software sold by Microsoft and other companies such as Salesforce, Inc. (NYSE:CRM), SAP, and ServiceNow are also already deeply integrated into their customers’ operations and workflow.
As large enterprises search for the right balance, Salesforce’s Data Cloud, a flagship offering, is designed to address a critical issue for them so they can make better use of AI tools. After a hectic buildout over the last few years of “data warehouses” and “data lakes”—two types of repositories for storing and processing data—across the various business units of large companies, many companies are left with what feels like islands of trapped data. Data Cloud solves this by creating a single platform to access and leverage all of an enterprise’s data, eliminating the need to constantly duplicate large amounts of information across different platforms. Users are then able to apply generative-AI technology, such as Salesforce’s Einstein tool, to a more comprehensive dataset, which enables them to better glean customers’ intentions, personalize marketing messages, and automate the processing of customer-service requests. As users build these systems, Einstein’s copiloting functionality helps their programmers work more efficiently so that IT departments with limited budgets and manpower can still develop the necessary tools. Salesforce’s management projects that revenue and earnings will climb about 9% and 45%, respectively, in fiscal 2025, citing the company’s operating leverage and cost discipline. We think these figures are achievable given the renewed focus on profitable growth, and so we added to the stock during the quarter.”
Overall, Salesforce Inc. (NYSE:CRM) ranks 10th on Insider Monkey’s list of Billionaire Israel Englander’s Top 10 Stock Picks for 2024. You can visit Billionaire Israel Englander’s Top 10 Stock Picks for 2024 to see other stocks in the list. While we acknowledge the potential of Salesforce Inc. (NYSE:CRM), our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than Salesforce Inc. (NYSE:CRM) but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
