In this article we take a look at the 10 stocks John Clark’s Southpoint Capital is selling. You can skip our detailed analysis of Clark’s investment strategy and go straight to John Clark’s Southpoint Capital is Selling These 5 Stocks.
John Clark is the co-founder and co-portfolio manager at Southpoint Capital Advisors, a New York-based hedge fund he founded in 2004 with Rob Butts. Prior to this, both partners worked at David Einhorn’s Greenlight Capital. John Clark is a graduate of University of North Carolina at Chapel Hill, and went on to receive an MBA with distinction from Harvard Business School in 2002.
According to regulatory filings for the third quarter, Southpoint Capital Advisors boasts a portfolio of $4.68 billion of assets under management (AUM). The fund grew 0.81% over the last quarter, and has holdings primarily in the Financial, Technology, Services and Industrial Goods sectors. John Clark owns a majority 75% stake in the fund, which uses a fundamental methodology to make its investment choices.
Among the most significant positions in Clark’s portfolio are Meta Platforms, Inc. (NASDAQ: FB), Visa Inc. (NYSE: V), and Amazon.com, Inc. (NASDAQ:AMZN).
Our Methodology
Based on the Q3 13F holdings, here is a list of the 10 stocks that John Clark’s Southpoint Capital has completely sold off in the third quarter.
John Clark’s Southpoint Capital is Selling Caterpillar and 9 Other Stocks
10. Caterpillar Inc. (NYSE:CAT)
Total Number of Hedge Fund Holders: 46
Caterpillar Inc. (NYSE: CAT) is a firm that deals in the production of construction and mining equipment, as well as diesel and natural gas engines. The firm is based in Illinois, and operates through its segments: Construction Industries, Resource Industries, Energy and Transportation, Financial Products, and All Other.
John Clark’s Southpoint Capital sold its entire stake in the company in the third quarter.
The company recently posted earnings for the third quarter, reporting earnings per share of $2.66, which beat estimates by $0.46. The revenue over the period was $12.40 billion, a figure which missed analysts’ forecasts by $59.69 million.
At the end of the third quarter of 2021, 46 hedge funds in the database of Insider Monkey held stakes worth $4.77 billion in Caterpillar Inc. (NYSE: CAT), in comparison to 62 hedge funds holding shares worth $5.26 billion in the preceding quarter.
Among the hedge funds being tracked by Insider Monkey, investment firm Bill & Melinda Gates Foundation Trust is the leading shareholder in Caterpillar Inc. (NYSE: CAT), with 9,685,132 shares worth more than $1.85 billion.
Investment firm Oakmark Funds mentioned Caterpillar Inc. (NYSE: CAT) in its Q2 investor letter. Here’s what the fund said:
“Having followed the company closely for north of a decade, Caterpillar is a name we know well. For much of its history, the operating efficiency of the company left much to be desired, but its underlying competitive position was rarely in doubt. A series of actions over the past decade (e.g., LEAN implementation, improved service mix, optimized manufacturing footprint) helped to narrow the gap between Caterpillar’s potential and its realized results, driving material margin expansion and strong share price performance. In our view, the company remains among the highest quality industrials in the market, but its underlying business is cyclical, which can translate to large swings in both performance and investor sentiment over short time periods. Our ability to focus on the long-term, sustainable earnings power of a business (rather than getting distracted by near-term fluctuations) is our most significant edge when investing in cyclical businesses. Due to the inherent volatility in Caterpillar’s end markets and operating performance, we suspect we’ll have a future opportunity to own this high-quality business at a more attractive price once the cycle turns and today’s enthusiasm wears off.”
Along with Meta Platforms, Inc. (NASDAQ: FB), Visa Inc. (NYSE: V), and Amazon.com, Inc. (NASDAQ: AMZN), Caterpillar Inc. (NYSE: CAT) is one of the stocks on the radar of institutional investors.
9. Alibaba Group Holding Limited (NYSE:BABA)
Total Number of Hedge Fund Holders: 115
Alibaba Group Holding Limited (NYSE: BABA) operates Alibaba.com, the world’s largest online commerce platform for B2B trade. In Q3 2021, 115 hedge funds held shares worth $10.20 billion in the Chinese company. This shows a downward trend from last quarter where 146 hedge funds held shares worth $16.79 billion.
John Clark’s Southpoint Capital sold its entire stake in the company in the third quarter.
Amid regulatory pressure on the gaming, education and technology sectors in China, shares of Alibaba are trading low as the market continues to see volatility. Alibaba Group President Jack Ma’s disappearance from public appearances for three months after his open criticism of his government’s financial policies in November 2020 led to the firm losing $76 billion of its stock value and the postponement of Ma’s Antgroup IPO.
The company posted an EPS of $1.75 for the third quarter of 2021, missing estimates by -$0.19. Quarterly revenue was below analysts’ forecasts by $638.61 million, standing at $31.43 billion.
On November 28, research firm Goldman Sachs’ analyst Piyush Mubayi removed Alibaba Group Holding Limited (NYSE: BABA) from his firm’s Conviction List, and kept a ‘Buy’ rating on the shares with a revised price target of $215, down from $252. The analyst noted that Alibaba has been increasing its investments to acquire new users and build multiple traffic sources, and expects revenue growth to decelerate to 13%/16% in Q3/Q4 as retail spending slows down in a very competitive market.
Investment management firm Artisan Partners recently released its Q3 investor letter, in which the fund mentioned Alibaba Group Holding Limited (NYSE: BABA). Here’s what it said:
“We also find Alibaba’s valuation compelling despite the prospect of increased regulation. The share price declined 35% during the quarter. Alibaba is China’s largest e-commerce business and is one of the highest return businesses in the world. The company’s core ecommerce operation dominates China’s retail industry. That business continues growing at a low-teens rate and operates with an incredible 62% profit margin. The company also operates several promising new businesses which have been a drag on the bottom line, though the company overall remains highly profitable and cash flow generative. The market cap today is about $440 billion. The company has large investments in cloud, financial services and other businesses worth an estimated $100 billion, leaving the core operations valued at $340 billion. Core operations over the last 12 months generated about $27 billion of after-tax profits, resulting in a trailing P/E of 12.5X. Alibaba certainly faces increased competition and a marginal increase in regulation. As a result, we expect modest growth in earnings over the next few years. However, a company with Alibaba’s operating and financial strength should trade at a premium, rather than a significantly discounted valuation.”
8. Aon plc (NYSE:AON)
Total Number of Hedge Fund Holders: 47
Aon plc (NYSE: AON) is another stock John Clark’s Southpoint Capital is selling. The Dublin-based global financial services provider reported earnings per share of $1.74, beating estimates by $0.04.
On November 18, Jefferies analyst Yaron Kinar initiated coverage of Aon plc (NYSE: AON) with a ‘Hold’ rating, and set the price target at $313.
Out of 867 hedge funds tracked by Insider Monkey, 47 hedge funds reported owning stakes in Aon plc (NYSE: AON) worth $6.00 billion by the end of September. This shows a sell-off by investors over the last quarter, as 68 hedge funds held $8.12 billion worth of stocks in the company a quarter ago.
John Clark’s Southpoint Capital sold its entire stake in the company in the third quarter.
7. PayPal Holdings, Inc. (NASDAQ:PYPL)
Total Number of Hedge Fund Holders: 123
PayPal Holdings, Inc. (NASDAQ: PYPL) is a leading provider of online payment and transaction services.
John Clark’s Southpoint Capital sold the stock in the September quarter.
On November 17, research firm UBS assumed coverage of PayPal Holdings, Inc. (NASDAQ: PYPL) with a ‘Buy’ rating and a $263 price target. Analyst Rayna Kumar noted that PayPal seems set to benefit from the accelerated growth of digital payments sparked by the pandemic, and the pull back after the Q3 earnings release presents a good buying opportunity.
As of the third quarter of 2021, 123 hedge funds out of 867 tracked by Insider Monkey reported owning positions in PayPal Holdings, Inc. (NASDAQ: PYPL) worth $12.88 billion.
Alger, an investment management firm, released its Q3 investor letter, in which the fund mentioned PayPal Holdings, Inc. (NASDAQ: PYPL). Here’s what it said:
“PayPal Holdings, Inc. was among top detractors from performance. PayPal is a pure play on e-commerce and electronic payments which is driving the company’s high unit volume growth. As a digital payments company, it is helping to facilitate the shift to a cashless society. The coronavirus pandemic has significantly accelerated the adoption of e-commerce and the utilization of digital payments platforms. In our view, PayPal is currently positioned to benefit the strength in e-commerce trends, including increasing net new active users and increased engagement per user. PayPal also has launched a service enabling its customers to buy, hold and sell cryptocurrency directly from their PayPal account. PayPal’s vision is to become a Super App that integrates payments, commerce and financial services, as well as crypto capabilities. After outperforming earlier in the year, the performance of PayPal shares weakened in the third quarter with the company facing potentially higher transaction expenses and credit losses. The higher transaction expenses are driven by a shift by consumers to the higher cost travel and entertainment categories which skew toward less profitable credit transactions.”
6. Blink Charging Co. (NASDAQ:BLNK)
Total Number of Hedge Fund Holders: 6
Another stock sold by John Clark by the end of September is Blink Charging Co. (NASDAQ: BLNK), a company that produces electric vehicle (EV) charging equipment and builds EV charging station infrastructure across the United States. The company recently opened an office in India, as part of its global expansion efforts and to meet the consumer needs of the Asia Pacific and the Middle East region.
On November 22, analyst Gabe Daoud of research firm Cowen downgraded Blink Charging Co. (NASDAQ: BLNK) from ‘Outperform’ to ‘Market Perform’, revising the price target from $41 to $40.
For the third quarter of 2021, the firm posted an EPS of -$0.36, missing estimates by -$0.09.
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Disclosure: None. John Clark’s Southpoint Capital is Selling Caterpillar and 9 Other Stocks is originally published on Insider Monkey.
