Below we take a look at The 5 Stocks That Account for 78.95% of Varenne Capital’s 13F Portfolio. For our methodology and a more comprehensive list please see The 10 Stocks That Account for 90.88% of Varenne Capital’s 13F Portfolio.
5. Warner Bros. Discovery, Inc. (NASDAQ:WBD)
Value of Varenne Capital Partners‘ 13F Position: $17.3 million
Number of Hedge Fund Shareholders: 76
Guiseppe Perrone and Marco Sormani’s Varenne Capital Partners built a new stake in Warner Bros. Discovery, Inc. (NASDAQ:WBD) during Q2, buying 1.29 million shares that were worth 4.78% of the value of the fund’s 13F portfolio. Since peaking in the first quarter of 2021, hedge fund ownership of WBD has fallen by 17% since.
Warner Bros. Discovery, Inc. (NASDAQ:WBD) was the result from another recent merger, of industry titans Discovery Communications and Warner Media. The combined entity boasts an impressive stable of entertainment brands and content, including HBO, DC Films, Warner Bros., TLC, CNN, and The Cartoon Network.
Warner Bros. Discovery, Inc. (NASDAQ:WBD) also has two streaming services, HBO Max and Discovery+, which the company plans to likewise merge into a single service. The initiative, which will include a round of layoffs, is partly intended to cut costs as part of the $3 billion in savings that CEO David Zaslav said the merger would deliver. Analysts predict the company will pull in Q2 revenue of $11.84 billion.
4. KLA Corporation (NASDAQ:KLAC)
Value of Varenne Capital Partners‘ 13F Position: $23.1 million
Number of Hedge Fund Shareholders: 52
Varenne’s stake in KLA Corporation (NASDAQ:KLAC) accounts for 6.4% of its $361 million 13F portfolio after the fund trimmed its position by 5% during Q2 to 72,361 shares. Hedge fund ownership of KLA has risen during five of the past six quarters, jumping by 58% during that time.
KLA Corporation (NASDAQ:KLAC), which provides process-monitoring systems for the semiconductor industry, reported strong fiscal Q4 results in late July, which were powered by its foundry and logic segments. The company’s $2.49 billion in revenue and $5.81 in adjusted EPS beat estimates, even in the face of ongoing supply chain headwinds. Deutsche Bank analyst Sidney Ho has a ‘Buy’ rating and $400 price target on KLAC shares, with the price target being raised from $385 earlier this month.
Vltava Fund had been waiting for the perfect opportunity to buy KLA Corporation (NASDAQ:KLAC) shares and found it recently, as it detailed in its Q1 2022 investor letter:
“We then used the money freed up to, among other things, open three new positions. The stock price declines during the Russian invasion brought a lot of good prices to the market. Out of all the possibilities we considered, we picked the stock of KLA Corporation (KLAC).
KLA Corporation develops leading-edge equipment and services that enable innovation throughout the electronics industry. It specialises in process management and control in semiconductor manufacturing and the related nanoelectronics industries. During manufacturing processes, products must be inspected for defects and correct critical dimensions in order to identify and eliminate possible sources of problems. As customers continue to enforce Moore’s Law, smaller chips must meet more precise specifications, which in turn increases the need for advanced inspection and diagnostic tools. This is a key step within the entire manufacturing process and one in which the company has built a very strong, and in places dominant, global position. We have been watching and waiting for an opportunity to acquire this stock for some time already, and this year’s drop in its price finally prompted us to buy.”
3. NIKE, Inc. (NYSE:NKE)
Value of Varenne Capital Partners‘ 13F Position: $41.5 million
Number of Hedge Fund Shareholders: 67
Varenne cut its NIKE, Inc. (NYSE:NKE) stake by 44% during Q2, just a quarter after first amassing it, slashing its exposure to the stock to 11.5% from 19.8% in the process. The position nonetheless remained the fund’s third-largest. There’s been net selling of NIKE among hedge funds during four of the past five quarters, with ownership of the stock slipping by 20% during that time.
NIKE, Inc. (NYSE:NKE) shares took a hit following the company’s fiscal Q4 results, as inventory surged by 23%, a clear indicator that even the most popular apparel brand in the world isn’t immune to the effects of falling discretionary spending. Nike indicated that it may need to adopt stronger promotional efforts in the coming quarters to clear out that inventory, which will put pressure on the company’s bottom line.
The ClearBridge All Cap Growth Strategy sees a number of potential future catalysts for NIKE, Inc. (NYSE:NKE)’s shares, discussing the company in its Q4 2021 investor letter:
“Nike is another play on e-commerce as well as the anticipated growth in consumer spending as we learn to live with COVID-19. After selling out of the stock in 2016 due to competitive concerns, we were motivated to repurchase shares because of optimism around a new management team’s focus on accelerating Nike’s shift toward e-commerce and direct-to-consumer (DTC) distribution. Near-term supply chain issues in Vietnam and retail weakness in China that we see as ephemeral provided a good buying opportunity. We do not believe the market is giving proper credit to Nike’s potential to deliver attractive, high-single-digit revenue growth while delivering operating margin expansion as more merchandise is sold direct. Nike is also still underindexed to the women’s category, which we see as a significant ongoing catalyst.
2. Dollar General Corporation (NYSE:DG)
Value of Varenne Capital Partners‘ 13F Position: $105 million
Number of Hedge Fund Shareholders: 53
Varenne trimmed its Dollar General Corporation (NYSE:DG) position by 9% during Q2, reducing its share count to 429,480. The fund’s 13F exposure to the stock nonetheless jumped to 29.23% from 21.14%, as DG had a strong Q2 relative to most other companies, gaining 10%. Hedge fund ownership of Dollar General rose by 20% during Q1.
Dollar General Corporation (NYSE:DG) is the perfect portfolio complement to a discretionary stock like Nike, as the discount consumables retailer typically excels during lean economic periods. Dollar General had a 31-year streak of positive same-store sales growth snapped in 2021 due to frenetic buying of certain products during the early days of the pandemic in 2020. The company expects to return to positive comps in 2022.
Gordon Haskett analyst Chuck Grom recently upgraded Dollar General Corporation (NYSE:DG) to ‘Buy’ from ‘Hold’. He has a $280 price target on the stock.
1. Alphabet Inc. (NASDAQ:GOOG)
Value of Varenne Capital Partners‘ 13F Position: $115 million
Number of Hedge Fund Shareholders: 372
Topping the list is Alphabet Inc. (NASDAQ:GOOG), which Varenne Capital’s 13F portfolio has 32% exposure to. Surprisingly, that would only rank it third in terms of exposure to GOOG among the funds in our database based on Q1 data. Alphabet is the most popular stock among hedge funds, with 372 owning both classes of the company’s shares.
Despite slowing ad spending, Alphabet Inc. (NASDAQ:GOOG) was still able to grow revenue by 13% during Q2, which included a strong 14% year-over-year growth rate for its Search division. Alphabet is also pouring money into its stock at an opportune time, with shares down 18% this year. The company bought back $15 billion worth of shares in Q2, putting its $12.5 billion in free cash flow generation to good use.
The Oakmark Global Select Fund expects Alphabet Inc. (NASDAQ:GOOG) to generate strong advertising growth this year, saying this about the company in its Q2 2022 investor letter:
“Alphabet (NASDAQ:GOOG), a global communication services provider, was a top detractor to the Fund’s performance for the quarter. Investors were disappointed by the company’s first-quarter earnings report, though its results were largely in line with analysts’ expectations, including 23% revenue growth to $68 billion and a total operating margin of 30%. Search revenue improved 28% in constant currency, led by retail and the ongoing recovery in travel. Although YouTube’s brand advertising was strong, segment revenue decelerated due to difficult comparable sales and the adverse effects of the Russia/Ukraine war. However, share repurchases for the first quarter amounted to $13.3 billion and were tracking in line with our full-year estimate, and the company authorized an additional $70 billion for buybacks, adding to our confidence in management’s commitment to adding value for its shareholders. While an industry-wide trend of slowing advertising revenues persisted in the second quarter, we believe Alphabet’s total advertising business is still positioned to grow in the mid-teens in 2022 and that the stock remains an attractive holding.”
For more of the latest stock picks worth considering for your portfolio, check out Top 10 Stocks to Buy Now According to Billionaire Seth Klarman and 10 Dividend Stocks to Buy According to John Allison’s Unio Capital.
Disclosure: None.
