RiverPark Advisors, LLC an independently-owned investment firm, recently published its first-quarter RiverPark Large Growth Fund commentary – a copy of which can be downloaded here. During the first quarter of 2020, the RiverPark Large Growth Fund returned -14.9%, compared to the total return of -14.1% by the Russell 1000 Growth Index and -19.6% by the S&P 500 Index.
In the said letter, RiverPark Advisors highlighted a few stocks and RingCentral Inc. (NYSE:RNG) is one of them. RingCentral offers cloud-based communications and collaboration solutions for businesses. Year-to-date, RNG stock gained 36.0% and on May 1st it had a closing price of $218.10. Its market cap is of $20.2 billion. Here is what RiverPark Advisors said:
“RingCentral is the largest and fastest growing pure play Unified Communications as a Service (UCaaS) vendor. Traditionally, business communications have been comprised of on-premise hardware-based private branch exchanges (PBX), which primarily support voice-only desktop phones. These systems do not support employees who now communicate from anywhere with any device, using voice, video, text, messaging and social media. UCaaS encompasses solutions addressing all these needs in a capital and labor light model for customers.
RNG is the UCaaS market leader with two million users in an extremely fragmented market, strong financial metrics (free cash flow positive and $344 million of cash at 2019 year-end), and fast growth. The company started in the small-and-medium business market and has migrated to also serving larger enterprises, which is the main driver of recent growth. Last quarter, revenue grew 34% year over year, surpassing a $1 billion annual revenue run-rate. RING’s recent partnerships with Avaya and Atos are expected to open up vast new markets.
The company’s Non-GAAP gross margin was strong at 76% last quarter with subscription gross margin even higher at 82%. The company’s increasing scale from its growing recurring revenue should improve operating margins, allowing the company to achieve its long-term target of 20%- 25% net margins.”
In Q4 2019, the number of bullish hedge fund positions on RNG stock increased by about 19% from the previous quarter (see the chart here).
RiverPark Advisors comments on Lockheed Martin
In the said letter, RiverPark Advisors also highlighted Lockheed Martin Corp (NYSE:LMT) stock. Lockheed Martin operates as a global security and aerospace company. Here is what RiverPark Advisors said:
“Lockheed Martin is the world’s largest aerospace and defense contractor. With about 70% of its $60 billion in revenue from the U.S. government, the company is well positioned to benefit from U.S. defense budget growth, historically 5-6% per year, as well as increased global military spending. With a $144 billion backlog and deliveries forecast to reach 180 aircraft per year in 4- 5 years, we believe the company could grow at a significantly higher rate than overall defense budget growth over the next several years. The Street expects mid-single-digit revenue growth for the company, in-line with overall market growth. Due to its exposure to faster-growing programs, we believe the company can exceed that growth rate, and add margin expansion from increased scale. Further, strategic acquisitions, debt pay down, a 2% dividend yield, and continued share buybacks from $6 billion per year of free cash flow should lead to even greater shareholder returns.
We are also excited about LMT’s new – CEO James Taiclet – a military veteran and, over the previous 10 years the highly respected CEO of American Tower, a long-time Fund holding. Under Jim’s leadership, AMT grew its market capitalization from $2 billion to $100 billion and as both a shareholder and US citizen we look forward to him bringing his vast array of leadership skills to LMT.”
In Q4 2019, the number of bullish hedge fund positions on LMT stock decreased by about 8% from the previous quarter (see the chart here).
Disclosure: None. This article is originally published at Insider Monkey.
