John Hurley’s Cavalry Asset Management’s Top Stock Picks

Published on November 8, 2022 at 11:26 am by Swati Goyal in Hedge Funds, News

In this article, we discuss top 10 stock picks of John Hurley’s Cavalry Asset Management. If you want to skip our detailed analysis of Hurley’s investment philosophy and portfolio construction, go directly to the Top 5 Stock Picks of John Hurley’s Cavalry Asset Management.

John Hurley established the California-based hedge fund Cavalry Asset Management which has about $2 billion in assets under management. In 1986, Mr. Hurley received a bachelor’s degree from Princeton University. He joined Fidelity Management and Research as a portfolio manager and analyst in 1993 after receiving his MBA from the GSB. He joined Bowman Capital Management in 1997 and rose to the position of managing partner before founding Cavalry Asset Management in 2002.

Cavalry Asset Management is a hedge fund manager that mainly focuses on technology. Over the last ten years, the U.S. economy has been dominated by the technology sector, which also supported the stock market during the worst coronavirus epidemic. A challenging environment for stocks resulted from the Russian invasion of Ukraine, rising oil costs, inflation not seen in 40 years, and rising interest rates. High-interest rates on loans have significantly contributed to the downfall of the IT industry since they swiftly devalue the growing revenues that analysts predict will continue to rise for years to come. Top-tier Silicon Valley businesses are already trading at fire sale prices due to the tech-heavy Nasdaq 100’s nearly 33% fall in 2022.

Photo by AlphaTradeZone

However, John Hurley’s Cavalry Asset Management employs a variety of investment strategies. Its assets may include long/short, or derivative positions in the US and non-US publicly traded common stocks, preferred stocks, private or restricted securities, options, stock warrants and rights, swaps, other derivative instruments, debt instruments, commodities, and ETFs. As of Q2 2022, Cavalry Asset Management holds a 13F portfolio valued at $1.07 billion, down from $1.31 billion in the preceding quarter. Some of the hedge fund’s prominent holdings in the second quarter included Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM), Uber Technologies, Inc. (NYSE:UBER), and QUALCOMM Incorporated (NASDAQ:QCOM).

Our Methodology

With this context and industry outlook in mind, let’s start our list of the top 10 stock picks of John Hurley’s Cavalry Asset Management. We selected these stocks from the Q2 portfolio of Hurley’s hedge fund. During the second quarter of 2022, Insider Monkey studied a vast database of 895 elite hedge funds to determine the popularity of each firm among hedge funds.

Top Stock Picks of John Hurley’s Cavalry Asset Management

10. Netflix, Inc. (NASDAQ:NFLX)

Cavalry Asset Management’s Stake Value: $41,858,000

Percentage of Cavalry Asset Management’s 13F Portfolio: 3.9%

Number of Hedge Fund Holders: 95

Netflix, Inc. (NASDAQ:NFLX) provides entertainment services with 223 million paying subscribers in more than 190 nations that enjoy TV shows, documentaries, feature films, and mobile games in various genres and languages. On October 31, Netflix acquired Spry Fox, a small independent game development firm. As a result, the streaming behemoth now has six in-house gaming studios.

On October 26, Pivotal Research analyst Jeffrey Wlodarczak upgraded Netflix, Inc. (NASDAQ:NFLX) from ‘Sell’ to ‘Buy’ with a “Street High” price objective of $375, up from $200. Cavalry Asset Management acquired a new position in Netflix, Inc. (NASDAQ:NFLX) during the second quarter of 2022, owning 239,367 shares worth $41.86 million.

Among the hedge funds being tracked by Insider Monkey, Boykin Curry’s Eagle Capital Management is a notable shareholder of Netflix, Inc. (NASDAQ:NFLX) in the third quarter of 2022, with a $1.31 billion stake in the company.

In the second quarter, fund managers decreased their holdings in Netflix, Inc. (NASDAQ:NFLX). Insider Monkey’s data shows that 95 hedge funds held stakes in the company at the end of the second quarter, down from 109 funds a quarter earlier.

Along with Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM), Uber Technologies, Inc. (NYSE:UBER), and QUALCOMM Incorporated (NASDAQ:QCOM), Netflix, Inc. (NASDAQ:NFLX) is one of the stocks that Cavalry Asset Management is monitoring.

Here is what Polen Capital has to say about Netflix, Inc. (NASDAQ:NFLX) in its Q3 2022 investor letter:

“We have spent months analyzing Netflix, Inc. (NASDAQ:NFLX)’s ability to monetize shared passwords, as there are over 100 million households that use, but do not pay for, Netflix. We believe Netflix has outlined reasonable plans for cracking down on password sharing and now expect the company to be able to monetize roughly 30% of that user base in the short term, which has the potential to add billions of dollars to annual free cash flow. In addition, we have analyzed the opportunity for an advertising-supported subscription model, and Netflix has also made meaningful progress in this area by partnering with Microsoft and attracting new digital advertising talent. .…” (Click here to read the full text)

9. Snowflake Inc. (NYSE:SNOW)

Cavalry Asset Management’s Stake Value: $44,889,000

Percentage of Cavalry Asset Management’s 13F Portfolio: 4.19%

Number of Hedge Fund Holders: 65

Snowflake Inc. (NYSE:SNOW) is a company that sells data analytics and management software that runs on cloud computing platforms. At the end of the second quarter of 2022, 65 hedge funds in the database of Insider Monkey held stakes worth $5.12 billion in Snowflake Inc. (NYSE:SNOW), down from 81 in the preceding quarter worth $9.74 billion.

On October 20, Piper Sandler analyst Brent Bracelin maintained an ‘Overweight’ rating on the shares of Snowflake Inc. (NYSE:SNOW) while lowering his price objective from $220 to $218. The analyst listed several variables that might prevent the expected increase in billings, revenue, and free cash flow through 2023, including prolonged sales cycles, a change in customers’ payment schedules, larger currency headwinds, and budgetary constraints that could trigger a recession in 2023.

In the second quarter of 2022, Cavalry Asset Management held 322,806 shares of Snowflake Inc. (NYSE:SNOW) worth over $44.89 million, representing 4.19% of the firm’s total portfolio. The hedge fund increased its stake in Snowflake Inc. (NYSE:SNOW) by 103% in the second quarter of 2022. As of September 30, Bailard Inc owned 13,646 shares of Snowflake Inc. (NYSE:SNOW) and is the company’s prominent shareholder.

8. Trip.com Group Limited (NASDAQ:TCOM)

Cavalry Asset Management’s Stake Value: $48,850,000

Percentage of Cavalry Asset Management’s 13F Portfolio: 4.56%

Number of Hedge Fund Holders: 34

Trip.com Group Limited (NASDAQ:TCOM), a Chinese company that conducts business globally online, provides services including hotel booking, ticketing for transportation, packaged tours, and corporate trip management.

On October 28, Barclays analyst Jiong Shao reiterated an ‘Overweight’ rating on the shares while reducing his price objective on Trip.com Group Limited (NASDAQ:TCOM) to $30 from $35. By the end of 2022, the analyst revised the forecasts and 12-month price projections for all the Chinese tech and internet firms that were surveyed.

34 hedge funds were long Trip.com Group Limited (NASDAQ:TCOM) at the end of the second quarter, up from 32 in the preceding quarter. The total value of Q2 hedge fund holdings stood at $1.58 billion. Richard S. Pzena’s Pzena Investment Management, with 9.78 million shares worth $268.37 million, is the most significant stakeholder of Trip.com Group Limited (NASDAQ:TCOM) as of the second quarter of 2022.

Cavalry Asset Management first invested in Trip.com Group Limited (NASDAQ:TCOM) in the second quarter of 2021. However, the hedge fund cut its stake in Trip.com Group Limited (NASDAQ:TCOM) by 10% in the second quarter of 2022. John Hurley’s Cavalry Asset Management still holds 1.78 million shares of TCOM, worth more than $48.85 million.

Artisan Partners, an asset management firm, mentioned Trip.com Group Limited (NASDAQ:TCOM) in its Q2 2022 investor letter. Here is what the fund said:

“Trip.com Group Limited (NASDAQ:TCOM) is China’s leading online travel agent or OTA. Prior to the pandemic, Trip.com was a profitable business with a large competitive advantage built around its position in both inbound and outbound international travel. That advantage was based on considerable investment in support centers, a large sales force outside of China focused on hotel supply agreements, partnerships with Chinese language tour providers, and other services to support the Chinese traveler. Trip.com was a healthy and growing business—the number of Chinese outbound tourists grew to 155 million (larger than the population of Japan) in 2019 from just 57 million in 2010. As it did with so many travel entities, the pandemic upended the business, and Chinese outbound tourists in 2021 fell to just under 26 million, devastating the company’s profits and the share price, which fell from the high 30s to the low 20s.

Generally speaking, OTAs are great businesses. Effectively, these companies take a commission for booking travel for providers. In addition, an OTAs app attracts advertising revenue from airlines, hotels, and other tourist destinations. Trip.com’s appeal is enhanced by a management team thoughtful enough to operate with significant net cash on the balance sheet.”

7. Zoom Video Communications, Inc. (NASDAQ:ZM)

Cavalry Asset Management’s Stake Value: $50,968,000

Percentage of Cavalry Asset Management’s 13F Portfolio: 4.75%

Number of Hedge Fund Holders: 44

Zoom Video Communications, Inc. (NASDAQ:ZM) is a communications technology business based in the United States. With about 10.89 million shares valued at $801.49 million, ARK Investment Management is a notable shareholder of Zoom Video Communications, Inc. (NASDAQ:ZM) in the third quarter of 2022. 44 hedge funds in our database held stakes in Zoom Video Communications, Inc. (NASDAQ:ZM)’s at the end of the second quarter, compared to 43 funds in the first quarter.

On October 11, Zoom Video Communications, Inc. (NASDAQ:ZM) was downgraded from ‘Overweight’ to ‘Equal Weight’ by Morgan Stanley analyst Meta Marshall with a revised price objective of $90, down from $130. According to Marshall, who cautioned investors in a research note that the overhang on the company is likely to linger over the next six months, Zoom’s online business may not recover until early next year.

According to its 13F filing for the second quarter of 2022, Cavalry Asset Management held 472,054 shares of Zoom Video Communications, Inc. (NASDAQ:ZM), amounting to $50.97 million, representing 4.75% of the fund’s 13F portfolio. In addition, the hedge fund increased its stake in the company by 8% during Q2.

Horos Asset Management mentioned Zoom Video Communications, Inc. (NASDAQ:ZM) in its Q1 2022 investor letter. Here is what the fund said:

“What about the other asset class that has attracted the most attention from the investment community in recent times? Here we can distinguish three major groups. First, those companies without earnings that had convinced investors of their great future growth prospects, pushing up their valuations to irrational levels. A clear example of this, which we mentioned almost two years ago (see here) is Zoom Video Communications (“Zoom”), whose market cap exceeded that of companies such as IBM or came close to that of Cisco Systems. Well, from the time we wrote about this odd situation until today, Zoom shares have collapsed nearly 80%.

Therefore, if interest rates rise (or are expected to rise), company valuations are negatively impacted. This is especially true for those businesses that generate little cash today and the market expects them to generate a lot of cash in the future. Hence the severe losses in companies that promised a lot of cash generation in the future (such as Zoom).”

6. Booking Holdings Inc. (NASDAQ:BKNG)

Cavalry Asset Management’s Stake Value: $54,250,000

Percentage of Cavalry Asset Management’s 13F Portfolio: 5.06%

Number of Hedge Fund Holders: 93

Booking Holdings Inc. (NASDAQ:BKNG) offers online travel and associated services to customers and local partners in more than 220 countries and territories. Natixis Global Asset Management’s Harris Associates is the leading shareholder of Booking Holdings Inc. (NASDAQ:BKNG), with 616,383 shares worth approximately $1.08 billion as of June 30.

Booking Holdings Inc. (NASDAQ:BKNG) is a significant stock in Cavalry Asset Management’s portfolio, along with Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM), Uber Technologies, Inc. (NYSE:UBER), and QUALCOMM Incorporated (NASDAQ:QCOM). John Hurley’s Cavalry Asset Management increased its hold in Booking Holdings Inc. (NASDAQ:BKNG) by 21% in the second quarter, ending the period with 31,018 shares of the company.

On October 28, Truist analyst Naved Khan retained a ‘Buy’ rating on Booking Holdings Inc. (NASDAQ:BKNG) while decreasing his price objective from $2,600 to $2,500. The analyst stated in a research note to investors that the group’s Q3 earnings should be solid given the high demand, traffic trends, and comments from Alphabet Inc. (NASDAQ:GOOGL) and Meta Platforms, Inc. (NASDAQ:META) on the growth in Travel ad spend.

According to Insider Monkey’s second-quarter database, 93 hedge funds placed long bets on Booking Holdings Inc. (NASDAQ:BKNG), compared to 99 funds in the earlier quarter. As a result, the total stakes owned in the second quarter amounted to $5.45 billion, down from $7.59 billion in the first quarter of 2022.

In its Q3 2022 investor letter, RiverPark Funds mentioned Booking Holdings Inc. (NASDAQ:BKNG). Here is what the firm had to say:

“We also bought back a small position in Booking Holdings during the quarter. Booking is the world’s leader in online travel, operating in 200 countries with brands including Booking.com, priceline.com, agoda.com, Kayak, Rentalcars.com and OpenTable. The company has been a dominant on-line travel agency for more than a decade with a high margin business model (40% EBITDA margin for 2019 and 28% for 2021) that requires limited capital expenditures, typically less than 3% of revenue, producing $4.5 billion free cash flow for 2019 and $2.5 billion for 2021 (due to the vast COVID disruption). The company has used its free cash flow for episodic acquisitions as well as to return cash to shareholders. BKNG is well positioned in travel as the largest player in online lodging bookings and the second largest player in alternative accommodations. Like all travel companies, Booking was hit hard by the pandemic, but with its high international exposure, we expect the company’s recovery to be equally strong as travel returns.”

Click to continue reading and see Top 5 Stock Picks of John Hurley’s Cavalry Asset Management.

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Published on December 13, 2024 at by Inan Dogan, PhD

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Published on November 16, 2024 at by Insider Monkey Staff

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