In this article, we will discuss should you follow Christian Leone into these tech and consumer stocks? If you want to skip our detailed analysis of Leone’s history, investment philosophy performance, you can go directly to Should You Follow Christian Leone Into These 5 Tech and Consumer Stocks?.
Rising interest rates, regional banking crisis, concerns over inflation, and rising geopolitical tensions have done little to dent investor’s sentiment about US equities. The overall stock market has been on a roll, depicted by the S&P 500 rallying by about 21% in 2023, a significant improvement from a 19% loss in 2022. The rally has been fueled by technology sector gains that have exploded amid the artificial intelligence frenzy.
Tech-heavy Nasdaq index is already up by about 45% for the year as tech stocks remain the preferred investment pick for investors eyeing exposure to changing technologies like artificial intelligence. While the consumer staple sector has come under pressure amid high-interest rates that have taken a significant toll on consumer spending power, it has remained resilient, as depicted by the S&P 500 Consumer Staples tanking by only 4%.
Luxor Capital Group is an event-driven hedge fund that has found its swagger in 2023, benefiting from its strong stock picks in the consumer cyclical and technology sectors. Founded in 2002 by Christian Leone, the $4.4 billion hedge fund boasts a relatively balanced structure focusing on new opportunities based on fundamentals valuation and secular trends.
Having previously worked at Goldman Sachs, where he accrued significant experience, Leone founded Luxor Capital as an equity and fixed-income hedge fund. The event-driven hedge fund tries to profit from various market cycles by relying on data-oriented strategies.
Nevertheless, it was not all rosy in 2022 as Luxor capital felt the full brunt of a bearish run in the market. The hedge fund was down by about 35% in the first six months of the year, hurt mainly by its exposure to tech giants, including Amazon.com, Inc. (NASDAQ:AMZN), Microsoft Corporation (NASDAQ:MSFT), and Alphabet Inc. (NASDAQ:GOOG), under immense pressure. The hedge fund gained 70% in 2017, 35% in 2018, 53% in 2019, and 68% in 2020.
Its fortunes started dwindling in 2021 as Luxor Capital Group only gained 22%, a significant drop from the solid gains in the previous years. Fast forward, the hedge fund has found its footing in the market, gaining about 60% for the year’s first nine months.
The hedge fund was up by 9.5% in the third quarter, outperforming the S&P 500. The strong performance in 2023 stems from significant exposure in some big tech companies benefiting from the artificial intelligence frenzy. Long positions in Amazon.com Inc (NASDAQ:AMZN), Alphabet Inc. (NASDAQ:GOOG), and Meta Platforms, Inc. (NASDAQ:META) account for about 60% of the portfolio.
Christian Leone of Luxor Capital Group
Luxor Capital Group has also benefited from diversifying its portfolio across the sectors and beyond tech and consumer staple stocks. Communication Services stocks remain among the most significant holdings of the fund, with utilities and financials also accounting for a substantial chunk.
Our Methodology
We have analyzed Luxor Capital Group 13F Fillings for the third quarter, focusing on Leone’s tech and consumer staple stock picks.
Should You Follow Christian Leone Into These Tech and Consumer Stocks?
10. The Beauty Health Company (NASDAQ:SKIN)
Luxor Capital Group’s Equity stake: $37.90 Million
Year-to-date gain: -69%
Number of Hedge Fund Holders: 15
The Beauty Health Company (NASDAQ:SKIN) is one of Christian Leone’s consumer defensive investments as it designs, develops, manufactures, and sells aesthetic technologies and products worldwide. The Beauty Health Company (NASDAQ:SKIN)’s flagship product includes HydraFacial.
The Beauty Health Company (NASDAQ:SKIN) has underperformed the overall market, going down 69% year to date. Luxor Capital Group trimmed its stock exposure by 2% in Q3 2023 to $6.3 million shares valued at $37.90 million.
9. Sunrun Inc. (NASDAQ:RUN)
Luxor Capital Group’s Equity stake: $4.34 Million
Year-to-date gain: -43%
Number of Hedge Fund Holders: 26
Sunrun Inc. (NASDAQ:RUN) is a technology company that designs, develops, and installs solar energy systems across the United States. Sunrun Inc. (NASDAQ:RUN) mainly targets residential homeowners.
Sunrun Inc. (NASDAQ:RUN) has been one of the biggest disappointments in Leone’s portfolio, going down by about 43% year to date. Luxor Capital Group held 6 million shares in Sunrun Inc. (NASDAQ:RUN), valued at $4.34 million as of Q3 2023.
8. Bumble Inc. (NASDAQ:BMBL)
Luxor Capital Group’s Equity stake: $15.05 Million
Year-to-date gain: -35%
Number of Hedge Fund Holders: 28
Bumble Inc. (NASDAQ:BMBL) is a technology company that provides online dating and social networking platforms.
Bumble Inc. (NASDAQ:BMBL) is the latest addition to Christian Leone’s portfolio, with the acquisition of 1 million shares valued at $15.05 million as of Q3 2023.
Here is what Polen U.S. Small Company Growth Strategy said about Bumble Inc. (NASDAQ:BMBL) in its Q1 2023 investor letter:
“The most significant detractors from the Portfolio’s relative performance in the quarter included Azenta, Warby Parker, and Bumble Inc. (NASDAQ:BMBL). Finally, Bumble, a leading online dating app known for its strong, women-centric brand, was another detractor. We do not believe the stock’s poor performance is driven by fundamentals, which have remained strong amidst an uncertain economic backdrop. As one measure of this, the Bumble app recently became the most downloaded dating app in key markets such as the US, Canada, Australia, the UK, and Germany—all without a commensurate increase in marketing spend. We believe the stock was weighed down by fears sparked by the poor performance of competitor Match Group, which is experiencing growth challenges as the Tinder platform matures, as well as a pickup in secondary activity from private equity owner selling. We used this volatility to add to our position in Bumble.”
7. Oatly Group AB (NASDAQ:OTLY)
Luxor Capital Group’s Equity stake: $577,194
Year-to-date gain: -33%
Number of Hedge Fund Holders: 14
Headquartered in Malmö, Sweden, Oatly Group AB (NASDAQ:OTLY) is an oat milk company providing plant-based dairy products. Luxor Capital Group held 644,118 shares in the company as of Q3 2023, valued at $577,194 and accounting for 0.01% of the portfolio.
The number of hedge funds that held stakes in Oatly Group AB (NASDAQ:OTLY) rose from 13 to 14 in the third quarter of 2023, according to Insider Monkey’s data on 910 hedge funds. Steve Cohen’s Point72 Asset Management is the most significant shareholder of the company, with 1.23 million shares.
6. Alphabet Inc. (NASDAQ:GOOG)
Luxor Capital Group’s Equity stake: $370.33 Million
Year-to-date gain: 50%
Number of Hedge Fund Holders: 221
Mountain View, California-based Alphabet Inc. (NASDAQ:GOOG) is one of the largest internet companies in the world, offering various products and platforms.
Alphabet Inc. (NASDAQ:GOOG) is up by about 50% for the year, with Luxor Capital Group increasing its exposure on the stock by 559% in Q3 2023 through call options valued at $370.33 million.
As of the end of the third quarter of 2023, 221 hedge funds reported owning stakes in Alphabet Inc. (NASDAQ:GOOG). The biggest stakeholder of Alphabet Inc. (NASDAQ:GOOG) was Ken Fisher’s Fisher Asset Management which owns a $5.72 billion stake in the company.
This is what RiverPark Advisors wrote about Alphabet Inc. (NASDAQ:GOOG) in its Q3 2023 investor letter:
“Alphabet Inc. (NASDAQ:GOOG): Internet services leader Alphabet was a top contributor in the third quarter following a strong 2Q23 earnings report in July. All divisions performed better than investors’ expectations, including stabilization of Search revenue growth, a return to growth for YouTube, and expanded profitability for Google Cloud. Management highlighted AI tools (according to the company, 80% of advertisers use at least one of the company’s advertising AI tools) as well as a re-acceleration in advertising growth. In addition, YouTube benefited from mass user adoption of YouTube Shorts (2+ billion monthly users) and growing advertiser adoption of Connected TV offerings. Google Cloud continued its strong growth and market share gains (28% y/y revenue growth) and even more impressive operating margin gains (+14 points y/y).
With its high-margin business model (25% operating margin last quarter), continued strength across its core Search and YouTube franchises, and emerging strength and profitability in its still relatively small Cloud business, we continue to view Alphabet as among the best-positioned secular growth franchises in the market. Additionally, GOOG shares trade at a compelling 20x the Street’s 2024 EPS estimate, a discount to the Russell 1000 Growth Index.”
According to Insider Monkey’s data, 16 hedge funds were long Pegasystems Inc. (NASDAQ:PEGA) at the end of Q3 2023, compared to 17 funds in the earlier quarter. Brian Bares’ Bares Capital Management held the leading position in the company, consisting of 5.77 million shares worth $250.53 million.
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Disclosure: None. Should You Follow Christian Leone Into These Tech and Consumer Stocks? is originally published on Insider Monkey.