RiverPark Funds, an investment management firm, published its “RiverPark Large Growth Fund” third quarter 2021 investor letter – a copy of which can be downloaded here. The RiverPark Large Growth Fund (the “Fund”) returned -3.23% for the third quarter of 2021, while its benchmarks, the S&P 500 Total Return Index (“S&P”) advanced 0.58%, the Russell 1000 Growth Total Return Index (“RLG”) returned 1.16%, while the Morningstar Large Growth Category returned -0.07%. Spare some time to check the fund’s top 5 holdings to have a clue about their top bets for 2022.
RiverPark Large Growth Fund, in its Q4 2021 investor letter, mentioned Block, Inc. (NYSE: SQ) and discussed its stance on the firm. Block, Inc. is a San Francisco, California-based financial services company with a $62.5 billion market capitalization. SQ delivered a -32.59% return since the beginning of the year, while its 12-month returns are down by -54.71%. The stock closed at $108.87 per share on February 4, 2022.
Here is what RiverPark Large Growth Fund has to say about Block, Inc. in its Q4 2021 investor letter:
“Block (formerly Square): Block declined on mixed quarterly results, management commentary on slowing Cash App growth, and a delay in the closing of the AfterPay acquisition (Block announced the takeover of the global “buy now, pay later” platform in August). Still, SQ reported a strong quarter overall with gross profit growth at 43% year over year (due to passthrough costs, gross profit is more reflective of top-line growth), with gross profit from its Sellerecosystem growing 48% to $606 million and from its Cash App growing 33% to $512 million. Still, some investors focused on the weaker-than-expected gross profit growth in the company’s Cash App division, creating pressure on the company’s shares. Importantly, Adjusted EBITDA beat expectations, growing 28% to $233 million.
Through one integrated system, SQ is a hybrid of two businesses: its Seller Business (charging small and medium-sized businesses about 3% for transaction payment processing, plus other services such as instant funds access, and software for everything from customer engagement to payroll), and its Cash App (originally for person-to-person cash transfers and now a growing digital financial services provider for consumers, representing half of first quarter’s gross profit). The combined business has grown gross profit at a 37% CAGR over the past five years to $2.7 billion for 2020, and we believe that the company has an enormous long-term runway, as it has less than a 2% share of a more than $160 billion market. It is our view that the company’s Cash App (which has grown from nothing in 2015 to $512 million gross profit last quarter) has a particularly large opportunity with its powerful ecosystem of digital financial services, including digital wallets, direct deposits, stock trading, bitcoin trading, and business and tax services, which are all relatively new. The vast majority of Cash App’s more than 36 million users are younger and, importantly, are willing to replace their bank and other financial services accounts with the app. We estimate that the company can grow its gross profit more than 30% and EBITDA more than 50% annually for the foreseeable future, and while half of the company’s current profit is from its Seller Business, we believe most of Block’s future value will come from its Cash App business.”
Our calculations show that Block, Inc. (NYSE: SQ) ranks 18th on our list of the 30 Most Popular Stocks Among Hedge Funds. SQ was in 98 hedge fund portfolios at the end of the third quarter of 2021, compared to 94 funds in the previous quarter. Block, Inc. (NYSE: SQ) delivered a -54.14% return in the past 3 months.
In January 2022, we published an article that includes SQ in the 5 Best Crypto Stocks To Buy Now. You can find more than 100 investor letters from hedge funds and prominent investors on our hedge fund investor letters 2021 Q4 page.
Disclosure: None. This article is originally published at Insider Monkey.
