In this article, we discuss 10 tech stocks that Tiger Cub Chase Coleman is selling. If you want to see more tech stocks discarded by the billionaire, check out Tiger Cub Chase Coleman is Selling These 5 Tech Stocks.
Chase Coleman is an American billionaire financier who founded Tiger Global Management in 2001, a New York-based hedge fund that focuses its investments primarily in the internet technology sector. Coleman, a graduate of Williams College, started his career with Julian Robertson’s Tiger Management in 1997. After Robertson closed his hedge fund in 2000 and handed over $25 million to Coleman, he initiated Tiger Global Management in 2001, making him one of the most notable “Tiger Cubs”.
About $17 Billion in Losses Amid Tech Selloff
In the first fiscal quarter of 2022, securities filings reveal that Tiger Global managed a portfolio worth $26.6 billion for its clients, down from approximately $46 billion in the last quarter of 2021. The hedge fund has suffered losses of roughly $17 billion so far this year amid the broader tech selloff. Tiger Global has been hit so significantly due to its concentrated tech portfolio that the selloff has erased almost two-thirds of its gains since its inception in 2001.
Tiger Global purchased only 2 new securities in Q1 2022, and made additional purchases in 21 existing stocks. Whereas, Chase Coleman’s hedge fund sold out of 83 companies entirely and reduced holdings in 46 securities. The most notable stocks in the Q1 portfolio of Chase Coleman were Meta Platforms, Inc. (NASDAQ:FB), Microsoft Corporation (NASDAQ:MSFT), and ServiceNow, Inc. (NYSE:NOW).
However, in this article we discuss the tech stocks that he sold in the first quarter of 2022.
Chase Coleman of Tiger Global
Our Methodology
We used the Q1 2022 portfolio of Chase Coleman’s Tiger Global Management for this analysis, selecting the 10 most prominent technology stocks that the fund sold in the first three months of this year.
10. Adobe Inc. (NASDAQ:ADBE)
Number of Hedge Fund Holders: 94
Adobe Inc. (NASDAQ:ADBE) is a California-based diversified software company, operating through three segments – Digital Media, Digital Experience, and Publishing and Advertising. Chase Coleman held 737,500 Adobe Inc. (NASDAQ:ADBE) shares in the fourth quarter of 2021, which he sold off entirely in Q1 2022.
Wells Fargo analyst Michael Turrin on May 18 lowered the price target on Adobe Inc. (NASDAQ:ADBE) to $525 from $600 and maintained an Overweight rating on the shares. The analyst noted that rising rates, rampant inflation, the Ukraine war, and challenging labor markets have each contributed to higher concerns around a difficult spend environment and possible recession in late 2022/2023, thus having a notable impact on software valuation levels.
Among the hedge funds tracked by Insider Monkey, 94 funds were bullish on Adobe Inc. (NASDAQ:ADBE) at the end of December 2021, with collective stakes worth $10.4 billion, compared to 95 funds in the earlier quarter, holding stakes in the company valued at $12.6 billion. Ken Fisher of Fisher Asset Management held a leading position in Adobe Inc. (NASDAQ:ADBE) in the first fiscal quarter of 2022, with 6.5 million shares worth about $3 billion.
In addition to Meta Platforms, Inc. (NASDAQ:FB), Microsoft Corporation (NASDAQ:MSFT), and ServiceNow, Inc. (NYSE:NOW), Adobe Inc. (NASDAQ:ADBE) remains a top tech stock among elite investors, although Chase Coleman discarded his stake in Q1.
Here is what Baron Durable Advantage Fund has to say about Adobe Inc. (NASDAQ:ADBE) in its Q1 2022 investor letter:
“Shares of Adobe Inc. (NASDAQ:ADBE), the leading provider of content creation, document management, and marketing software, were weak in the quarter, down 19.7% along with the overall software industry. Continued investor fears around the possibility of pandemic-driven pull forward in demand, increasing competition, and earnings results that were in line with expectations also weighed on shares. While Adobe is seeing slower year-over-year volume growth due to tougher compares, it continues to execute well, with management calling out strong engagement and retention rates in Digital Media, in line with pre-COVID levels while the company continues innovating rapidly, broadening its offering. We continue to believe that Adobe is well positioned given its marquee brand and best-in-class technology, which helps content creators and marketing professionals better reach, communicate, and sell their companies’ products in an increasingly digitally connected world.”
9. Affirm Holdings, Inc. (NASDAQ:AFRM)
Number of Hedge Fund Holders: 41
Affirm Holdings, Inc. (NASDAQ:AFRM) was founded in 2012 and is headquartered in San Francisco, California. The company operates a platform for digital and mobile-based commerce in the United States and Canada, offering point-of-sale payment solutions for consumers and merchant commerce solutions. Securities filings for Q1 2022 reveal that Tiger Global Management discarded the 200,000 shares of Affirm Holdings, Inc. (NASDAQ:AFRM) it owned in Q4 2021, worth over $20 million.
Mizuho analyst Dan Dolev on May 17 slashed the price target on Affirm Holdings, Inc. (NASDAQ:AFRM) to $50 from $79 and reiterated a Buy rating on the stock after the Q1 results. After notable de-ratings of stocks, the second half of 2022 “could prove a boon for several companies” in the financial technology sector, the analyst told investors in a research note. The analyst believes the payments sector is attractive for the second half of 2022, and if the economy remains stable, reaccelerating growth rates could lead to positive stock reactions for several companies in the fintech space.
According to Insider Monkey’s Q4 database, 41 hedge funds reported owning stakes in Affirm Holdings, Inc. (NASDAQ:AFRM), collectively worth $1.5 billion, compared to 39 funds in the last quarter, holding stakes in the company amounting to $1.4 billion. Colin Moran’s Abdiel Capital Advisors is a significant shareholder of Affirm Holdings, Inc. (NASDAQ:AFRM) as of Q1 2022, with 1.6 million shares worth $78.10 million.
Here is what Bireme Capital has to say about Affirm Holdings, Inc. (NASDAQ:AFRM) in its Q4 2021 investor letter:
“We opened a more idiosyncratic short position in a company called Affirm (AFRM) in Q4.
Affirm is a “Buy Now, Pay Later” (BNPL) company founded by former PayPal CTO and cofounder Max Levchin. They provide installment loans to consumers, partnering with retail companies looking to drive higher sales. They have two primary products: a zero-fee installment loan for consumers with the best credit scores, and a more traditional product with 20%+ interest rates for subprime borrowers. Their stated plan is to disrupt the credit industry with more transparent, lower-fee loans.
At a roughly $28b market cap at the start of 2022, AFRM stock was priced at more than 20x trailing sales, a steep price for a money-losing lender. While their early lead in online BNPL transactions and partnerships with fast-growing retailers like Peloton has fueled significant historical growth, a wave of competition has arrived.”
8. PayPal Holdings, Inc. (NASDAQ:PYPL)
Number of Hedge Fund Holders: 110
PayPal Holdings, Inc. (NASDAQ:PYPL) is a technology firm that enables digital payments worldwide. Chase Coleman’s Tiger Global first invested in PayPal Holdings, Inc. (NASDAQ:PYPL) in Q4 2019. In the first fiscal quarter of 2022, the hedge fund disposed of its entire PayPal Holdings, Inc. (NASDAQ:PYPL) stake, worth about $169 million as of Q4 2021.
On May 10, Morgan Stanley analyst James Faucette reduced the price target on PayPal Holdings, Inc. (NASDAQ:PYPL) to $137 from $139 and maintained an Overweight rating on the shares. The analyst believes that the market is discounting PayPal Holdings, Inc. (NASDAQ:PYPL)’s outperformance as it continues to beat underlying e-commerce growth. Although its top-line trajectory has normalized after the pandemic, the analyst thinks some investors are viewing this as a structural problem and questioning if PayPal Holdings, Inc. (NASDAQ:PYPL)’s growth is beginning to lag the e-commerce market. However, he remains “confident this is not the case”, he added.
In the fourth quarter of 2021, elite hedge funds pulled out of PayPal Holdings, Inc. (NASDAQ:PYPL). In Q4, 110 funds were long PayPal Holdings, Inc. (NASDAQ:PYPL), down from 123 funds in the earlier quarter. In the first quarter of 2022, Terry Smith’s Fundsmith LLP disclosed a prominent stake in the company, with 10.4 million shares worth $1.2 billion.
Here is what ClearBridge Investments Large Cap Growth Strategy has to say about PayPal Holdings, Inc. (NASDAQ:PYPL) in its Q1 2022 investor letter:
“We entered a position in PayPal in December well aware of the electronic payment platform’s ambitious goals for user growth. The company has started to experience a reduction in revenue growth due to weakening in the macro environment and a deceleration in e-commerce broadly due to reopening headwinds and difficult comps. This led to a sharply reduced outlook for 2022 revenue and long-term earnings that has weighed on the stock. We initiated a position after the shares had already fallen 40% from their all-time high but were wrong in modeling that a muted outlook was already priced in. Nevertheless, we believe PayPal is fundamentally holding share in the industry and is set up for continued growth in e-commerce once reopening headwinds pass. The company onboarded nearly 120 million net new users over the last few years; naturally, many users will churn off the platform. We also see the company’s strategy to add additional use cases to its wallet such as investing, crypto, savings accounts and bill pay as catalysts to accelerate revenue growth over time.”
7. Cloudflare, Inc. (NYSE:NET)
Number of Hedge Fund Holders: 55
Cloudflare, Inc. (NYSE:NET) was incorporated in 2009 and is headquartered in San Francisco, California, operating as a cloud services provider that specializes in public cloud, private cloud, on-premise, software-as-a-service applications, and IoT devices. Tiger Global purchased 175,000 Cloudflare, Inc. (NYSE:NET) shares in Q3 2019, worth $3.25 million. In the fourth quarter of 2021, the fund’s stake was valued at $23 million, and it was discarded entirely in the first fiscal quarter of 2022.
Needham analyst Alex Henderson slashed the price target on Cloudflare, Inc. (NYSE:NET) on May 16 to $100 from $245 but maintained a Buy rating on the shares. The analyst reduced the price target multiples in his valuation model, with forecasted FY23 sales of 23-times, down from 64-times, due to the selloff in growth equities. However, the analyst maintained that Cloudflare, Inc. (NYSE:NET) should be a primary long-term contender in all growth portfolios and recommended that investors buy the recent dip. The analyst also added that Cloudflare, Inc. (NYSE:NET) is “unique” and its Analyst Day presentation reaffirmed its robust position in delivering the cloud network to connect users and applications remotely.
According to Insider Monkey’s Q4 data, 55 hedge funds were bullish on Cloudflare, Inc. (NYSE:NET), up from 50 funds in the prior quarter. The total stakes owned in Q4 amounted to $1.5 billion, compared to $958.4 million in Q3. D E Shaw reported a prominent stake in Cloudflare, Inc. (NYSE:NET) in Q1 2022, with 1.5 million shares worth $184 million.
Here is what Baron Fifth Avenue Growth Fund has to say about Cloudflare, Inc. (NYSE:NET) in its Q1 2022 investor letter:
“Cloudflare, Inc., another new purchase during the quarter, is a web infrastructure and website security provider. Cloudflare disrupts legacy networking vendors by enabling customers to rent their network solutions in the cloud (and pay for usage) instead of buying firewalls, load balancers and secure web gateway devices. Using a global network in over 100 countries, Cloudflare delivers content and security within 50 milliseconds of 95% of the internet-connected population in the world. Shares contributed 12bps to results on impressive fourth quarter earnings as it continues to successfully layer high-value services such as zero trust, network services, and edge programmability on top of its modern global network. The company is attracting a broader set of investors as Cloudflare now matches durable 50%-plus top-line growth (this was the fifth straight quarter of 50%-plus revenue growth, and 56% current bookings growth suggests strong durability into 2022) with positive operating margins and break-even free cash flow. We believe that Cloudflare will benefit from long-duration of growth disrupting a $100 billion addressable market across application services, network services, and zero-trust services.”
6. Dropbox, Inc. (NASDAQ:DBX)
Number of Hedge Fund Holders: 44
Dropbox, Inc. (NASDAQ:DBX) is a California-based company that offers a content collaboration platform to customers worldwide in the professional services, technology, media, education, industrial, retail, and financial services industries. Chase Coleman’s Tiger Global acquired 200,000 shares of Dropbox, Inc. (NASDAQ:DBX) in Q1 2018, worth $6.25 million. The Dropbox, Inc. (NASDAQ:DBX) stake in Q4 2021 was valued at $4.90 million, which the hedge fund discarded completely in Q1 2022.
Dropbox, Inc. (NASDAQ:DBX) reported its Q1 results on May 5, posting earnings per share of $0.38, in line with consensus estimates. The revenue grew 9.93% year-over-year to $562.40 million, topping analysts’ predictions by $3.31 million. Dropbox, Inc. (NASDAQ:DBX) raised its 2022 non-GAAP operating margin guidance to 29%-29.5%, up from the prior guidance of about 29%. The company also maintained its free cash flow guidance to fall between $760 million to $790 million.
According to Insider Monkey’s database, Dropbox, Inc. (NASDAQ:DBX) was found in 44 public hedge fund portfolios at the end of December 2021, up from 41 funds in the prior quarter. Seth Klarman’s Baupost Group revealed a leading position in the company at the conclusion of Q1 2022, with 10.5 million shares worth $245.7 million.
Unlike Meta Platforms, Inc. (NASDAQ:FB), Microsoft Corporation (NASDAQ:MSFT), and ServiceNow, Inc. (NYSE:NOW), Chase Coleman’s Tiger Global disposed of its Dropbox, Inc. (NASDAQ:DBX) stake in the first fiscal quarter of 2022.
Here is what RGA Investment Advisors has to say about Dropbox, Inc. (NASDAQ:DBX) in its Q4 2021 investor letter:
“Dropbox really let us down this quarter, not because they did anything wrong, but because during our entire tenure holding this stock, it outperformed in periods where long duration assets (aka higher growth) sold off. This time it did not. Despite people asserting this market bifurcation is about selling growth and buying value, Dropbox shares suffered one of their worst stock market quarters in recent years. It’s hard to identify a specific reason, though one story out there is how some investors thought the company could raise the bar on its 30% targeted operating margin upon achieving those levels. Along with the company’s earnings report, instead of raising the bar, they explained how there is more room to drive margin, but in the mean-time the preference at the company is for investing the potential excesses to drive further growth.
This year, the company will have repurchased nearly 9% of its diluted shares outstanding (perhaps more given the Q4 route in shares) and will have delivered a free cash flow yield upwards of 7.5% on its year-end stock price, while growing upwards of 12%. This is a potent recipe for outstanding returns, yet in a market that’s theoretically seeking cash flow, the stock was punished. We think this is one of the most nonsensical moves of them all and find Dropbox to be an especially compelling opportunity heading into 2022. The top line is certainly growing, as the company continues to withstand competition from Microsoft, Google and Box. Plus management continues to make smart tuck-in acquisitions, showing what may emerge as a scalable, repeatable recipe for deepening their relationship with existing customers, thus driving down churn and setting the stage for prolonged ARPU growth. This potential strategy started with HelloSign, and is further validated with the acquisition of DocSend…” (Click here to see the full text)
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Disclosure: None. Tiger Cub Chase Coleman is Selling These 10 Tech Stocks is originally published on Insider Monkey.
