VGI Partners Global Investments Limited, an investment management company, released its 2022 annual investor letter. A copy of the same can be downloaded here. The firm returned -22.3% (net) for the year ended 31st December 2022. 2022 was a challenging year for the global equity market, the S&P 500 declined -19% during the period, the NASDAQ Composite retreated -33%, and the MSCI World Index fell -19% in the same period. In addition, please check the fund’s top five holdings to know its best picks in 2022.
VGI Partners highlighted stocks like SAP SE (NYSE:SAP) in the 2022 annual investor letter. Headquartered in Walldorf, Germany, SAP SE (NYSE:SAP) is an enterprise application software products provider. On March 31, 2023, SAP SE (NYSE:SAP) stock closed at $126.55 per share. One-month return of SAP SE (NYSE:SAP) was 5.70%, and its shares gained 12.51% of their value over the last 52 weeks. SAP SE (NYSE:SAP) has a market capitalization of $147.707 billion.
VGI Partners made the following comment about SAP SE (NYSE:SAP) in its 2022 annual investor letter:
“SAP SE (NYSE:SAP) is in the midst of a multi-year transition of its business to the cloud which continues to gain momentum. We attribute much of its success – which has not been without challenges and setbacks – to the strategy initiated by Christian Klein after he became sole CEO in mid-2020, in particular “RISE with SAP.” Launched in January 2021, RISE is a commercial construct to migrate customers onto SAP cloud products such as S/4HANA Cloud (Cloud ERP) and SAP’s Business Technology Platform (BTP).
Late last year, we travelled to Germany and met with SAP management to learn more about BTP specifically. The platform offers data and application services which customers and partners can use to integrate SAP and non-SAP applications, in effect a “digital core” with powerful flywheel effects. It is foundational to SAP’s RISE offering with 80% of customers adopting the platform. The BTP business has a sales run rate exceeding €1.5 billion with high margins and we expect it to grow substantially over the next few years.
SAP’s cloud transition has resulted in some one-time and duplicative costs (infrastructure, R&D and sales), resulting in a circa €200 million lower operating profit in 2022 versus 2019, despite circa €3 billion higher sales. Having studied these transitions, we believe the shift is camouflaging the underlying earnings power of what will be higher quality earnings (>80% recurring revenue). We expect the one-time and duplicative costs will dissipate from 2023 onwards, resulting in positive operating leverage and sustainable double-digit operating profit growth…” (Click here to read the full text)
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SAP SE (NYSE:SAP) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 18 hedge fund portfolios held SAP SE (NYSE:SAP) at the end of the fourth quarter which was 17 in the previous quarter.
We discussed SAP SE (NYSE:SAP) in another article and shared the list of best growth stocks to buy for the next 5 years. In addition, please check out our hedge fund investor letters Q4 2022 page for more investor letters from hedge funds and other leading investors.
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Disclosure: None. This article is originally published at Insider Monkey.
