In this article, we will be taking a look at the Rob Citrone Podcast and his stock picks. To skip our detailed analysis of the podcast and Discovery Capital Management’s holdings, you can go directly to see the second part of Rob Citrone Podcast and Top 5 Stock Picks.
Today, Rob Citrone is an American billionaire hedge fund manager and one of the co-founders of Discovery Capital Management. However, a quick dive into his background shows that Citrone comes from “modest roots,” as he himself put it in a Capital Allocators with Ted Seides podcast last July. Citrone began by saving up and sticking his money in money market funds and mutual funds. From here, Citrone began investing in stocks and developed a love for the investment field. During the start of his career on Wall Street, Citrone became involved in emerging markets through his work during the Latin American debt crisis. He moved on to Fidelity Investments in Boston and began heading the company’s emerging markets fixed income and currency group. After this, he jumped to Tiger Management, where he worked as a portfolio manager as well before he eventually founded Discovery Capital.
Citrone’s Comparisons: The Economy of the Past Versus 2022
In this podcast, Citrone offers valuable insights into the state of the US economy today while drawing comparisons between past financial crises in emerging markets and the US markets today. Here are some of his comments on his experience during the 1987 stock market crash:
“I can remember the crash in ’87, and I can remember it was one of the longest days that I ever experienced. I think we just stared at the screens and we were just in shock that the equity market was down 20 some percent in a day. But then the Fed came in and just eased liquidity massively. It was an interesting time to buy, obviously, and we could see that and feel that. That’s why things recovered very quickly. The amount of liquidity they pumped into the system had a huge impact.”
On noting the above, Citrone added that the situation back then was different from how it was in 2022. He noted the following:
“Today the problem is we can’t do that, we’ve already done that. Now we have to go the other way, actually take liquidity out of the market. Even if the market will crash, there’s not much the Fed can do because of the inflation issue.”
The way Citrone saw it, by July 2022, the US market was entering the second phase of the market correction, the first phase being inflation. In the second phase, Citrone expected to see a “significant withdrawal of liquidity” from the market. While comparing the US economy in the present to the way it used to be, he also noted a significant difference, considering the fact that significantly more people have their wealth circulating in the market today compared to in 1987.
Positions and Opinions On Global Markets and Industries
Moving forward, Citrone was questioned on the positions he was taking in the market. On this front, he noted that the Chinese currency is “a great short,” making it one of his larger positions. In fact, Citrone mentioned that he had been shorting China since August 2021. However, he had decided to “temper” this position in the event either that President Xi Jinping did not get a second term or that he got the second term and ended up surrounded by “reformers.” For Citrone, these events would result in him altering his bearish view of China. In terms of the rest of the world, Citrone mentioned that he was bullish on the US and on India, with the latter being dubbed by him as “the new growth country of the world.” He also expected Latin America, particularly Brazil, to go through a recovery period which would make it an excellent investment opportunity. However, he views Africa as a difficult region to approach because of political instability in countries like South Africa.
As the podcast progressed, Citrone was questioned on his opinion on the technology industry. He said the following:
“Technology is still a fantastic area to invest in going forward, but I still think that the multiples are too high for most companies. Anytime a company’s still being priced to sales, or they’re talking about the TAM, I want nothing to do with that company.”
While he noted that he expects technology companies to be challenged during 2023, he did add that the industry was a good long-term investment opportunity. All in all, Citrone highlighted some important viewpoints on a number of issues during the podcast, ranging from his past experiences and his opinions on various global markets to specific industries and businesses such as the technology industry and the hedge fund business. He has managed to successfully maintain a portfolio including several major companies, such as Alphabet Inc. (NASDAQ:GOOG), Alibaba Group Holding Limited (NYSE:BABA), and UnitedHealth Group Inc. (NYSE:UNH) through the years, highlighting his keen eye for profitable investment opportunities as they spring up. The performance of his portfolio has also been commendable. According to Bloomberg, Discovery Capital ended 2022 up 18%, and in January, the fund gained 4%. The January gain made it one of the only hedge funds actually to make money during the market instability seen at the start of 2023. As a result, Citrone has established himself as an investor to follow today, leading us to compile a list of his top holdings.
Our Methodology
We have selected Discovery Capital Management’s top 10 holdings, according to the hedge fund’s 13F holdings filed this March on Insider Monkey. They are ranked based on the percentage they make up of the hedge fund’s portfolio, from the lowest to the highest.
Rob Citrone Podcast and Stock Picks
10. Micron Technology Inc. (NASDAQ:MU)
Number of Hedge Fund Holders: 73
Number of Shares Held by Discovery Capital Management: 400,000
Portfolio Percentage: 2.74%
Christopher Danely at Citigroup holds a Buy rating on Micron Technology Inc. (NASDAQ:MU) shares as of June 30, alongside a price target of $75.
Micron Technology Inc. (NASDAQ:MU) is an information technology and semiconductor manufacturing company. It is based in Boise, Idaho.
There were 73 hedge funds long Micron Technology Inc. (NASDAQ:MU) in the first quarter, with a total stake value of $2.7 billion.
9۔ Denbury Inc. (NYSE:DEN)
Number of Hedge Fund Holders: 39
Number of Shares Held by Discovery Capital Management: 290,515
Portfolio Percentage: 2.89%
Denbury Inc. (NYSE:DEN) is an oil and gas exploration and production company. It is based in Plano, Texas.
John Royall at JPMorgan initiated coverage of Denbury Inc. (NYSE:DEN) shares with a Neutral rating and a $96 price target on June 15.
In the first quarter, 39 hedge funds were long Denbury Inc. (NYSE:DEN), with a total stake value of $1.2 billion.
Pentwater Capital Management held the most shares in Denbury Inc. (NYSE:DEN) at the end of the first quarter, amounting to 2.4 million shares.
Like Alphabet Inc. (NASDAQ:GOOG), Alibaba Group Holding Limited (NYSE:BABA), and UnitedHealth Group Inc. (NYSE:UNH), Denbury Inc. (NYSE:DEN) is among Citrone’s top holdings this year.
8. Alphabet Inc. (NASDAQ:GOOG)
Number of Hedge Fund Holders: 155
Number of Shares Held by Discovery Capital Management: 302,300
Portfolio Percentage: 3.56%
Justin Post at BofA holds a Buy rating on Alphabet Inc. (NASDAQ:GOOG) shares as of June 15, alongside a $128 price target.
Alphabet Inc. (NASDAQ:GOOG) is a big tech company operating in the interactive media and services industry. It is based in Mountain View, California.
There were 155 hedge funds long Alphabet Inc. (NASDAQ:GOOG) in the first quarter, with a total stake value of $18.6 billion.
Manole Capital Management mentioned Alphabet Inc. (NASDAQ:GOOG) in its second-quarter 2023 investor letter:
“Despite this, the S&P 500 is up 7% this year and the Nasdaq is up +11%. Technology rebounded from a challenging 2022 and many large tech companies are performing quite well this year. Through mid-May 2023, year-to-date performance of some of the most popular and largest names tech names is impressive. For tech companies with market capitalizations over $1 trillion, Apple is up +35%, Microsoft +33%, Amazon +39%, and Alphabet Inc. (NASDAQ:GOOG) is +40%. If you add in Nvdia, Google and Meta, you have three quarters of the entire S&P 500’s year-to-date return.
For our purposes, we are just going to focus on software digital wallets, as they are much more common and accessible. If you own an iPhone, then you have an Apple Pay pre-loaded digital wallet. If you have a Samsung phone, you have Samsung Pay available for use. Those two, along with Google Pay and PayPal, are the four most popular digital wallets today. According to the Payments Journal, PayPal has been used (over the last 12 months) by 62% of American consumers, followed by Apple Pay at 41% and Google Pay at 32%.
We are loyal Apple users (iPhones, iPads, iMac) and find their Apple Pay to be a convenient and safe digital wallet to use. It is currently accepted at more than 90% of US retailers, so it clearly has widespread adoption. Samsung and Google users also seem pleased with their preferred digital wallets. In our opinion, these new entrants are “a bit too late to the party” to make a meaningful dent versus established players.
As of today, both Apple Pay, Samsung Pay and Google Pay have a distinct advantage in the digital wallet arena. These three firms have spent billions of dollars ensuring that their apps are easy to use on their smartphones. Plus, and maybe more importantly, the consumer experience is embedded and native to the operating system. This ties their digital wallet to the device, which cannot be replicated.”
7. Arista Networks, Inc. (NYSE:ANET)
Number of Hedge Fund Holders: 48
Number of Shares Held by Discovery Capital Management: 216,489
Portfolio Percentage: 4.13%
At the end of the first quarter, 48 hedge funds were long Arista Networks, Inc. (NYSE:ANET). Their total stake value was $1.4 billion.
On May 2, Jim Kelleher at Argus Research maintained a Buy rating on Arista Networks, Inc. (NYSE:ANET) shares, alongside placing a $195 price target on the stock.
Arista Networks, Inc. (NYSE:ANET) is an information technology company. It is based in Santa Clara, California.
Giverny Capital Asset Management, LLC said the following about Arista Networks, Inc. (NYSE:ANET) in its first-quarter 2023 investor letter:
“Our holding Arista Networks, Inc. (NYSE:ANET) continues to generate extraordinary results, which the market recognizes. Arista rose 38% during the first quarter and became our largest holding. Arista makes switches, routers and operating software that power enormous data networks, such as for cloud computing. Microsoft’s Azure cloud business and Meta Platforms’ Facebook and Instagram networks are Arista’s two most important customers. Roughly speaking, Arista has tripled its revenue and profit over the past five years and seems poised to continue growing rapidly for the foreseeable future. Demand for hyperscale computing networks may accelerate as artificial intelligence (AI) chat applications grow. By some estimates, the computer power required to answer Al chat queries is roughly seven times more than for a Google or Bing search. I think the realization that data network capacity needs to be much larger to accommodate Al has driven recent enthusiasm for Arista.
In general, I think when a stock blows through my price target the right answer is to bask in the glory and maybe splurge on a latte rather than my usual morning coffee. Don’t get itchy about locking in a profit. In this case, Arista became our largest holding and roughly 8.5% of the portfolio, while also being one of the most expensive businesses we own on a price-to-earnings basis. Arista earned $4.27 in 2022 and I believe there is good reason to expect it to double EPS again, perhaps by 2026 or 2027. But as the stock traded into the $160s, that represents a PE of 20x estimated earnings in four years. While I believe strongly in Arista’s competitive position, I know that tech giants are facing budget constraints and a pause in their own intense pace of infrastructure growth would not surprise anyone….” (Click here to read the full text)
Like Alphabet Inc. (NASDAQ:GOOG), Alibaba Group Holding Limited (NYSE:BABA), and UnitedHealth Group Inc. (NYSE:UNH), Arista Networks, Inc. (NYSE:ANET) is a highly popular stock among hedge funds today.
6. Alibaba Group Holding Limited (NYSE:BABA)
Number of Hedge Fund Holders: 128
Number of Shares Held by Discovery Capital Management: 422,065
Portfolio Percentage: 4.9%
Citadel Investment Group was the most prominent shareholder in Alibaba Group Holding Limited (NYSE:BABA) at the end of the first quarter, holding 11.4 million shares.
Alibaba Group Holding Limited (NYSE:BABA) is a leading Chinese company operating in the broad-line retail and e-commerce spaces. It is based in Hangzhou, China.
In total, 128 hedge funds were long Alibaba Group Holding Limited (NYSE:BABA) in the first quarter, with a total stake value of $5.9 billion.
A Buy rating was reiterated on Alibaba Group Holding Limited (NYSE:BABA) shares on June 21 by Fawne Jiang at Benchmark, who also maintained a $180 price target on the stock.
Here’s what Baron Funds had to say about Alibaba Group Holding Limited (NYSE:BABA) in its first-quarter 2023 investor letter:
“Alibaba Group Holding Limited (NYSE:BABA) is the largest retailer and e-commerce company in China. Alibaba operates shopping platforms Taobao and Tmall and owns 33% of Ant Group, which operates Alipay, China’s largest third-party online payment provider. Shares of Alibaba were up this quarter, given meaningful margin expansion, guidance to stabilize core commerce market share in China, and an announced plan to split the company into six units which could further unlock value. We retain conviction that Alibaba is well positioned to benefit from China’s reopening and the ongoing growth in online commerce and cloud in China.”
Click to continue reading and see Rob Citrone’s Top 5 Stock Picks.
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Disclosure: None. Rob Citrone Podcast and Stock Picks is originally published on Insider Monkey.
