In this article, we’ll examine Philippe Laffont’s portfolio management strategy and approach to investing in stocks. We’ll also review Philippe Laffont’s top 10 stock picks. You can skip our detailed discussion about Philippe Laffont’s investment philosophy and portfolio management strategies and jump directly to Philippe Laffont’s Top 5 Stock Picks.
Coatue Management avoided significant losses in the first-half tech stock bloodbath, thanks to Philippe Laffont’s decision to liquidate a large portion of his investment firm’s portfolio and keep 80% of its assets in cash. Laffont is well known for having a knack for predicting crises, selling positions, making significant changes to a portfolio to avoid losses, and using that cash to invest in new opportunities. In the dot-com bubble and during the great financial crisis, the tiger cub’s portfolio was comprised of 40% to 80% cash. Coatue’s secret presentation to investors pointed out that markets are likely to face a massive selloff in the future, similar to the collapse of the dot-com bubble in 2000. The presentation shows that the tech stock selloff that has pushed the NASDAQ index into bear territory in the first half of 2022 is currently in its second phase, with the final phase to come, one that could be even more brutal than the past two.
According to the presentation, in 2021, unprofitable and low-quality companies were slaughtered in the first phase of the share price collapse, similar to 2000. In the second phase, all tech companies got hammered in the first half of 2022, which is similar to what happened in the second phase of the dot-com-related price collapse, which lasted from December 2000 to March 2001. And in the final phase of the dot-com burst, companies from all sectors collapsed and the selloff lasted for almost a year. In the firm’s analysis, the current market is headed towards that final stage, when recession-driven earnings revisions and lower forecasts will cause broader market declines. According to the firm, investors should be aware of bear market rallies. Three bear market rallies occurred from June 2000 to June 2001, followed by sharp selloffs.
Preparing Shopping List
The tech-focused investment firm is pessimistic about the market but believes some risks are worth taking with an eye on long-term returns. In order to reinvest its whopping cash pile, the firm is preparing a shopping list of 40 stocks. Based on the presentation, Philippe Laffont’s Coatue is interested in buying profitable tech stocks that were unfairly knocked down by the broader market selloff. In addition, the firm is optimistic about non-profitable tech stocks that could grow and become profitable in the future. This is determined by factors such as incremental margins, unit economics, and top-level management. Non-profitable tech stocks like DoorDash, Inc. (NYSE:DASH) and Snowflake, Inc. (NYSE:SNOW) are members of Laffont’s shopping list. For large-cap stocks, the firm has high expectations for Microsoft Corporation (NASDAQ:MSFT), Amazon.com, Inc. (NASDAQ:AMZN), and Tesla, Inc. (NASDAQ:TSLA).
13F Portfolio and Philippe Laffont’s Top Stock Picks
Philippe Laffont’s Coatue Management has been making substantial changes to its 13F stock portfolio over the past several quarters. Coatue sold 35 stocks in the March quarter and reduced its stake in 18 positions. On the other hand, the firm initiated a position in 12 stocks and added to 18 of its existing positions. As of the end of March, Coatue Management held $13.6 billion in assets in its 13F securities portfolio. Philippe Laffont’s top 10 stock picks include Meta Platforms, Inc. (NASDAQ:META), Tesla, Inc. (NASDAQ:TSLA), and SQ Block, Inc. (NYSE:SQ).
Philippe Laffont of Coatue Management
Our Methodology:
We made use of Coatue Management’s 13F portfolio for this analysis. Below is the list of Philippe Laffont’s top 10 stock picks:
Philippe Laffont’s Top 10 Stock Picks
10. Visa Inc. (NYSE:V)
Coatue Management’s stake value: $524 million
Percentage of portfolio: 3.83%
Number of hedge fund holders: 163
Meta Platforms, Inc. (NASDAQ:META), Tesla, Inc. (NASDAQ:TSLA), and SQ Block, Inc. (NYSE:SQ) are among the top holdings of Philippe Laffont’s firm, which also initiated a stake in Visa Inc. (NYSE:V) during the final quarter of 2021, when its shares plunged from a 52-week high of $250.
In the March quarter of 2022, the firm raised its stake in the financial technology company by 5% to 3.83% portfolio weighting. Visa Inc. (NYSE:V) is one of the best stocks to hold for the long-term amid given its dividend factor and solid business model. Visa Inc. (NYSE:V) has raised its dividend payments each of the last 13 years and its dividend growth rate has averaged around 17% over the past five years. In addition to the dividend factor, shares of Visa Inc. (NYSE:V) are poised to grow in the long term, supported by its potential to generate sustainable growth in revenue and earnings. In the June quarter of 2022, Visa Inc. (NYSE:V) topped Wall Street’s revenue and earnings expectations by $230 million and $0.23 per share, respectively. With June quarter payments volumes up 12% and cross-border volumes up 40%, Visa Inc. (NYSE:V) continues to see strong growth.
In its first quarter investor letter, Polen Capital, an investment management firm, expressed confidence in the future fundamentals of Visa Inc. (NYSE:V). Here is what the firm stated about Visa Inc. (NYSE:V):
“We added to both Visa and Mastercard during the final quarter of 2021, based on the belief that both businesses were trading at attractive prices and poised to deliver, double-digit returns over the next three to five years. Cross-border transactions–a highly profitable business segment for both companies–represent roughly 10% of Visa and Mastercard’s volumes and 25% of their gross revenues, so lockdowns have severely impacted this segment due to stifled travel. While it was impossible to know when people would begin traveling again, we accepted this reality with the belief that travel would eventually return. Both companies have commented that as soon as a country or geography reopens, cross-border volumes reignite, amplifying each business’s growth and profitability. We think these near-term headwinds have created an attractive long-term investment opportunity.”
9. Netflix, Inc. (NASDAQ:NFLX)
Coatue Management’s stake value: $539 million
Percentage of portfolio: 3.94%
Number of hedge fund holders: 109
Netflix, Inc. (NASDAQ:NFLX) is one of the long-running members of Philippe Laffont’s top 10 stock picks list. His firm first initiated a position in Netflix, Inc. (NASDAQ:NFLX) in 2012. In the March quarter of 2022, the firm raised its existing stake in the company by 55% to capitalize on the share price selloff. Netflix, Inc. (NASDAQ:NFLX) is among the hardest hit companies in the past couple of quarters due to concerns over slower growth in the post-pandemic environment.
Shares of Netflix, Inc. (NASDAQ:NFLX) are currently trading around $200, down significantly from the all-time high of $700 that they hit late in 2021. The shares gained some momentum recently after Netflix, Inc. (NASDAQ:NFLX) posted better than expected June quarter results and issued solid guidance. In the second quarter, Netflix, Inc. (NASDAQ:NFLX) lost 0.97 million net global paid subscribers compared to Wall Street’s expectations for a loss of 2 million subscribers. In addition, Netflix, Inc. (NASDAQ:NFLX) expects to add 1 million new subscribers in the third quarter of 2022.
In its second quarter investor letter, Oakmark Funds, an investment management firm, mentioned a few stocks, including Netflix, Inc. (NASDAQ:NFLX). Here is what the firm stated about Netflix, Inc. (NASDAQ:NFLX).
“Netflix‘s stock price was down considerably after providing a weaker than expected outlook for both subscriber growth and profit margins. After meeting with management and scrutinizing our investment thesis, we lowered our estimate of business value to account for the company’s softer near-term guidance. However, we believe the decline in the company’s share price more than adjusts for this. Indeed, Netflix now trades for a discount to the S&P 500 Index on next year’s GAAP earnings despite our view that the company remains a much better than average business run by a highly accomplished management team. We believe the company’s lead in streaming remains intact and we expect terminal operating margins to be substantially higher than they are today. Furthermore, we are encouraged by Netflix’s potential to enhance revenue growth through advertising, the monetization of password sharing and further penetrating international markets.”
8. Microsoft Corporation (NASDAQ:MSFT)
Coatue Management’s stake value: $592 million
Percentage of portfolio: 4.33%
Number of hedge fund holders: 262
Microsoft Corporation (NASDAQ:MSFT) is one of the best-performing large-cap tech stocks in recent years and ranks eighth on the list of Philippe Laffont’s top 10 stock picks. Like Visa Inc. (NYSE:V) and Netflix, Inc. (NASDAQ:NFLX), Microsoft Corporation (NASDAQ:MSFT) is also one of the solid tech stocks to hold for the long term.
Shares of Microsoft Corporation (NASDAQ:MSFT) have been under pressure year to date due to the broader market selloff and lofty valuations. However, Microsoft Corporation (NASDAQ:MSFT) continues to generate robust financial growth despite slowing revenue trends in the tech industry. Microsoft Corporation (NASDAQ:MSFT) expects to generate double-digit revenue and operating income growth for 2022. For the June quarter, Microsoft Corporation (NASDAQ:MSFT) posted revenue of $51.9 billion, representing a 12% growth from the past year’s period.
In the fund’s first quarter investor letter, Carillon Tower Advisers, an investment management firm, highlighted a few stocks including Microsoft Corporation (NASDAQ:MSFT). Here is what the firm stated about Microsoft Corporation (NASDAQ:MSFT):
“Stock selection contributed the most while sector allocation was also positive. An underweight to communication services and an overweight to energy helped performance, while an underweight to consumer staples and an overweight to materials detracted. Stock selection was strong within healthcare and materials but was weak within information technology and industrials. Microsoft (NASDAQ:MSFT) reported positive results driven by personal computing strength, but analysts were especially positive on its growth outlook for its Azure cloud-computing services.”
7. Snowflake Inc. (NYSE:SNOW)
Coatue Management’s stake value: $603 million
Percentage of portfolio: 4.41%
Number of hedge fund holders: 81
Coatue Management has been holding a stake in Snowflake Inc. (NYSE:SNOW) since its public debut in 2020. However, the firm lowered its stake in Snowflake Inc. (NYSE:SNOW) from 5.24 million shares at the beginning of 2021 to 2.1 million shares by the end of the year. In the March quarter of 2022, the firm again started increasing its stake in Snowflake Inc. (NYSE:SNOW), apparently seeking to take advantage of the sharp stock price selloff. Shares of Snowflake Inc. (NYSE:SNOW) are down around 50% since the beginning of this year.
In its presentation to investors, Coatue Management also highlighted its interest in Snowflake Inc. (NYSE:SNOW). Unlike Microsoft Corporation (NASDAQ:MSFT) and Visa Inc. (NYSE:V), Snowflake Inc. (NYSE:SNOW) doesn’t offer dividends. Therefore, only value and growth investors are likely to consider Snowflake Inc. (NYSE:SNOW).
In its second quarter investor, ClearBridge Investments, an investment management firm, mentioned a few stocks including Snowflake Inc. (NYSE:SNOW). Here is what the first stated about Snowflake Inc. (NYSE:SNOW):
“Snowflake operates a cloud-based data platform for small and medium-sized businesses and enterprise customers. The company is a key beneficiary of software spending moving to the cloud, as well as the increasing strategic importance of data. With the potential to address the large and growing market for data cloud, a roughly $250 billion plus opportunity by 2026, we see a long runway for growth ahead. Although the company is already profitable, we believe Snowflake still has significant room for free cash flow margin expansion.”
6. DoorDash, Inc. (NYSE:DASH)
Coatue Management’s stake value: $618 million
Percentage of portfolio: 4.52%
Number of hedge fund holders: 52
Like Snowflake Inc. (NYSE:SNOW), DoorDash, Inc. (NYSE:DASH) is another non-profitable tech stock Philippe Laffont is buying after the stock’s massive share price collapse. Shares of DoorDash, Inc. (NYSE:DASH) are down close to 45% since the beginning of the year due to a broader market selloff.
The San Francisco-based online delivery platform posted 29.8% revenue growth for the June quarter compared to last year, which helped ease fears about slowing online delivery demand during a post-pandemic era. DoorDash, Inc. (NYSE:DASH) expects to sustain its revenue growth momentum for the rest of 2022 despite slowing economic growth. Coatue Management expressed confidence in DoorDash, Inc. (NYSE:DASH) after its price plunge in the past few quarters, as the firm increased its stake in DoorDash, Inc. (NYSE:DASH) during the March quarter by 81% to 4.52% of its 13F portfolio weighting.
Like Meta Platforms, Inc. (NASDAQ:META), Tesla, Inc. (NASDAQ:TSLA), and SQ Block, Inc. (NYSE:SQ), DoorDash, Inc. (NYSE:DASH) is one of the favorite stocks of hedge funds. DoorDash, Inc. (NYSE:DASH) was in 52 hedge funds’ portfolios as of the end of March, up significantly from 40 positions in the previous quarter. Wildcat Capital Management was the leading stakeholder in DoorDash, Inc. (NYSE:DASH).
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Disclosure: None. Philippe Laffont’s Top 10 Stock Picks is originally published on Insider Monkey.
