In this article, we discuss the top 10 stock picks in The Motley Fool’s 1623 Capital latest portfolio. If you want to see more top stocks in the 1623 Capital’s portfolio, check out The Motley Fool’s 1623 Capital Latest Portfolio: Top 5 Stock Picks.
An indirect, wholly-owned subsidiary of The Motley Fool, 1623 Capital was established in 2018 by Jeff Fischer and Brian Richards, the chief investment officer and chief operating officer of the hedge fund. The Virginia-based hedge fund makes use of the Innovation Long/Short Strategy, whereby which the fund seeks to identify and own the equity securities of companies that are, high-quality growth businesses, while selling short the equity securities of companies whose revenues, margins, cash flows and market positions are being disrupted by ‘innovation and change’.
Securities filings for Q2 2022 reveal that Motley Fool’s 1623 Capital added 3 new stocks to its portfolio, made additional purchases in 15, sold out of 7 companies, and reduced holdings in 2 securities in the period. The fund’s last reported 13F filing for Q2 2022 included $160.4 million in managed 13F securities and a top 10 holdings concentration of 56.77%. As of Q2 2022, 1623 Capital’s portfolio is diversified across 9 sectors, with the Consumer Discretionary sector being the heaviest — making up 16.9% of the total portfolio value.
Some of the most noteworthy stocks in 1623 Capital’s Q2 portfolio include major industry players such as Amazon.com, Inc. (NASDAQ:AMZN), Apple Inc. (NASDAQ:AAPL), and Visa, Inc. (NYSE:V), among others listed below.
Our Methodology
We made use of the Q2 portfolio of Motley Fool’s 1623 Capital for this analysis, selecting the hedge fund’s top 10 holdings.
10. The Charles Schwab Corporation (NYSE:SCHW)
1623 Capital’s Stake Value: $6.63 million
Percentage of 1623 Capital’s 13F portfolio: 4.13%
Number of Hedge Fund Holders:68
The Charles Schwab Corporation (NYSE:SCHW) is an American multinational financial services company that offers banking, commercial banking, investing and other related services. One of the largest financial institutions in the United States, Motley Fool’s 1623 Capital held 105,000 shares of The Charles Schwab Corporation (NYSE:SCHW) in Q2 2022, worth $6.63 million, representing 4.13% of the total 13F portfolio.
On July 27, The Charles Schwab Corporation (NYSE:SCHW) declared a 10% increase in its quarterly dividend to $0.22, which was paid on August 26 to the shareholders of record on August 12.
On September 27, Deutsche Bank analyst Brian Bedell raised the price target on The Charles Schwab Corporation (NYSE:SCHW) to $99 from $95 and maintained a Buy rating on the shares of the company. With the exception of Charles Schwab, Bedell had broadly reduced earnings estimates across the trust banks and online brokers he covers.
According to Insider Monkey’s data, 68 hedge funds were bullish on The Charles Schwab Corporation (NYSE:SCHW) at the end of the second quarter of 2022, down from 78 funds in the preceding quarter. Harris Associates is the largest shareholder of the company, with more than 12.7 million shares worth approximately $804.6 million.
A noteworthy stock, The Charles Schwab Corporation (NYSE:SCHW) ranks among the top 10 holdings in 1623 Capital’s portfolio, alongside the likes of Amazon.com, Inc. (NASDAQ:AMZN), Apple Inc. (NASDAQ:AAPL), and Visa, Inc. (NYSE:V).
Here is what Baron Funds specifically said about The Charles Schwab Corporation (NYSE:SCHW) in its Q2 2022 investor letter:
“Shares of online brokerage firm The Charles Schwab Corporation (NYSE:SCHW) detracted in the quarter over concerns that clients will shift assets to less profitable money market funds and declining equity markets will pressure the asset management business. We retain conviction. Despite turbulent markets, Schwab attracted over $120 billion of net new client assets in the recent quarter. Rising interest rates should lead to increased profits on the company’s nearly $600 billion of interest earning assets as well.”
9. ServiceNow, Inc. (NYSE:NOW)
1623 Capital’s Stake Value: $7.18 million
Percentage of 1623 Capital’s 13F portfolio: 4.47%
Number of Hedge Fund Holders: 99
ServiceNow, Inc. (NYSE:NOW) is an American software company that develops a cloud computing platform to help companies manage digital workflows for enterprise operations. The company specializes in workflow automation, artificial intelligence, machine learning, robotic process automation, and performance analytics, among other tech services. Securities filings for Q2 2022 reveal that Motley Fool’s 1623 Capital held 15,100 shares of Equinix, Inc. (NASDAQ:EQIX), worth $7.18 million, representing 4.47% of the total 13F portfolio.
Earlier this August, Guggenheim analyst John DiFucci initiated coverage of ServiceNow, Inc. (NYSE:NOW) with a Neutral rating and $510 price target. Although the analyst considers ServiceNow to be a “a very well-run company,” he believes that it will likely fall short of its long-term subscription revenue targets in 2024 and 2026. According to the analyst, the most recent quarter “could be signaling something more than just the macro environment as ServiceNow has had a long run of successes, which at some point equates to simply difficult compares.”
According to the second quarter database of Insider Monkey, 99 hedge funds were bullish on ServiceNow, Inc. (NYSE:NOW) with combined stakes worth $5.2 billion, up from 90 funds in the prior quarter worth $7.5 billion.. Fisher Asset Management held shares worth $693.89 million in ServiceNow, Inc. (NYSE:NOW).
Ensemble Capital recently published its Q2 2022 investor letter. Here is what the fund specifically said about ServiceNow, Inc. (NYSE:NOW):
“ServiceNow is an enterprise software company that helps their corporate customers integrate all of their various software products into a unified platform. Their products are a key element of driving the digital transformation nearly every large company is undergoing. At the recent JP Morgan investor day, CEO Jamie Dimon explained that while the company could reduce expenses if needed should the economy slow, that their spending on digital transformation would continue as this spending was critical to the company managing costs and maximizing revenue over time. As an example of this type of spending, Dimon specifically pointed to ServiceNow, calling out that the company’s products now oversaw the single largest collection of JP Morgan data and highlighted that working with them had saved JP Morgan $50 million over the past few years.
While we have high expectations for ServiceNow’s long-term growth rate, at the company’s investor day in late May they offered an increased growth outlook for the next five years as they target even higher levels of growth than we have been expecting.”
8. Amazon.com, Inc. (NASDAQ:AMZN)
1623 Capital’s Stake Value: $7.2 million
Percentage of 1623 Capital’s 13F portfolio: 4.5%
Number of Hedge Fund Holders: 252
Amazon.com, Inc. (NASDAQ:AMZN) is a leading online retailer and one of the highest-grossing e-commerce aggregators. During Q2 2022, The Motley Fool’s 1623 Capital held a total stake value of $7.2 million in the retail giant, making up 4.5% of its portfolio value.
Amazon.com, Inc. (NASDAQ:AMZN)’s Amazon Web Services and SK Telecom announced that the two companies will co-develop a new set of computer vision services at the Mobile World Congress held on September 29 in Las Vegas. The end-goal of this collaboration is to make it easier and more cost effective for customers to build, use, and scale computer vision applications, which enhance productivity.
On September 29, Citi analyst Ronald Josey reiterated a Buy rating on Amazon.com, Inc. (NASDAQ:AMZN) with a $185 price target, stating that the company’s refreshed device line-up furthers its connected home vision. According to the analyst, Amazon remained his top pick due to its Prime Early Access Sale ahead of the Holiday season, improved Prime member engagement, steady Web Services growth, and progress on cost efficiencies.
At the end of Q2 2022, 252 hedge funds were eager on Amazon.com, Inc. (NASDAQ:AMZN) and held stakes worth $30 billion in the company. As of June 30, Fisher Asset Management owns more than 46 million shares of Amazon.com, Inc. (NASDAQ:AMZN) and is the most prominent investor in the company.
Here is what Lakehouse Capital specifically said about Amazon.com, Inc. (NASDAQ:AMZN) in its investor letter:
“Amazon.com, Inc. (NASDAQ:AMZN) proved resilient in the face of ongoing macro pressures and delivered a strong quarterly result along with “better-than-feared” guidance for the third quarter. Net sales increased 7% year-on-year (10% constant currency) to $121.2 billion, while operating profit declined 57% to $3.3 billion. The drop in operating profit was attributable not only to external macro factors, such as elevated shipping and fuel costs, but also lower productivity and efficiency costs as a result of some overcapacity on the back of its recent investment cycle. It was pleasing to see that the company has begun to make progress on the more controllable costs, particularly productivity and staffing, with headcount, for example, down almost 100,000 over the quarter. We continue to believe Amazon is well positioned to manage these short-term issues and remains on track to deliver significant profit improvements over the next twelve months.
Management also confirmed that they have not seen any deterioration in Prime membership growth or retention following the 17% increase in Prime fees put through earlier in the year. This is not surprising to us, as in our view, the price increase was more than justified given the tremendous amount of customer value that has been added since the last price increase was implemented back in 2018, which includes the doubling of its fulfilment network and workforce, significant expansion of free same-day delivery and considerable investments in video and music content. Ultimately, we remain positive about Amazon’s future and believe that the company’s scale and market leadership will continue to drive growth for many years to come.”
7. Equinix, Inc. (NASDAQ:EQIX)
1623 Capital’s Stake Value: $7.29 million
Percentage of 1623 Capital’s 13F portfolio: 4.54%
Number of Hedge Fund Holders: 38
Equinix, Inc. (NASDAQ:EQIX) is an American multinational company that specializes in Internet connection and data centers. The company’s data centers provide services to more than 260 of the world’s fortune 500 companies and has over 10,000 customers. Securities filings for Q2 2022 reveal that Motley Fool’s 1623 Capital held stakes worth $7.29 million in Equinix, Inc. (NASDAQ:EQIX), representing 4.54% of the total 13F portfolio.
JPMorgan analyst Richard Choe maintained an Overweight rating on Equinix, Inc. (NASDAQ:EQIX) with an $850 price target after hosting a meeting with management on August 28. Based on the analyst’s remarks, Equinix has continued to see strong demand trends from both, enterprise and cloud service providers, and its pricing actions will add to its revenue growth. Although Choe believes that higher costs will offset some revenue gains, an improved efficiency and operating leverage may benefit funds due to operations growth.
38 hedge funds that Insider Monkey tracks owned shares in Equinix, Inc. (NASDAQ:EQIX) at the end of the second quarter of 2022 with AEW Capital Management owning 373,148 shares.
Here is what Baron Real Estate Income Fund has to say about Equinix, Inc. (NASDAQ:EQIX) in its Q2 2022 investor letter:
“Equinix, Inc. is a network dense global data operator of over 240 data centers in 69 metros and 30 countries. Its customers place high value on the ecosystem of customers that Equinix has curated within its data centers over many years so that they are able to interconnect within the data center facility instead of having data travel through the public internet (latency sensitive applications as well as data security considerations). Customers value the global network with 90% of customers in multiple metropolitan areas and 75% in multiple geographic regions.
Equinix has a diverse but valuable customer base with no single customer greater than 2.6% of recurring monthly revenues. COVID-19 has accelerated digital transformation priorities for many organizations, and we believe that Equinix will be poised to benefit from: i) organic growth through new bookings and pricing power (the majority of incremental bookings are from existing customers); ii) growth of high margin cross-connect revenue (approximately 20% of total); and iii) continued geographic expansion through development and select M&A. We believe the combination of these factors will allow the company to grow annual cash flow in the high singledigit range.”
6. Broadridge Financial Solutions, Inc. (NYSE:BR)
1623 Capital’s Stake Value: $8 million
Percentage of 1623 Capital’s 13F portfolio: 5%
Number of Hedge Fund Holders: 17
Broadridge Financial Solutions is a public corporate services and financial technology company that offers proxy statements, annual reports, and other financial data to public companies. Motley Fool’s 1623 Capital owns 56,300 shares of Broadridge Financial Solutions, Inc. (NYSE:BR) as of Q2 2022, worth approximately $8 million.
Earlier this September, Broadridge Financial Solutions, Inc. (NYSE:BR) announced a partnership with Coinbase, offering interoperability between Coinbase Prime and Broadridge Trading and Connectivity Solutions’ NYFIX order-routing network. This solution allows NYFIX clients to route order flow to Coinbase Prime via the FIX protocol, while simultaneously allowing buy-side traders to source crypto liquidity from Coinbase and trade right from their OMS.
According to Insider Monkey’s database, 17 hedge funds were bullish on Broadridge Financial Solutions, Inc. (NYSE:BR) at the end of Q2 2022, the same as the previous quarter. D. E. Shaw is the leading position holder in the company, with 206,587 shares worth $26.50 million.
Much like Amazon.com, Inc. (NASDAQ:AMZN), Apple Inc. (NASDAQ:AAPL), and Visa, Inc. (NYSE:V), The Motley Fool’s 1623 Capital holds significant investments in Broadridge Financial Solutions, Inc. (NYSE:BR).
Here is what Wedgewood Partners specifically said about Broadridge Financial Solutions, Inc. (NYSE:BR) in its Q2 2022 investor letter:
“Broadridge Financial Solutions, Inc. (NYSE:BR) grew its core recurring revenue at a +6% organic rate driven by the increase in the number of open equity and ETF positions at its platform customers. We think this increase in position count was a pleasant surprise compared to the downturn in asset prices seen during most of the quarter. Broadridge customers include large online brokerage providers that have expanded into the mass market. As more investors carry more positions and instruments (regardless of size) Broadridge’s services are necessary to connect these investors with corporate governance communications from issuers and other service providers. All told, we think the expansion of capital markets is a healthy long-term trend that Broadridge should continue to benefit from.”
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Disclosure: None. The Motley Fool’s Latest Portfolio: Top 10 Stock Picks is originally published on Insider Monkey.
