In this article, we discuss the top 10 stock picks of Jason McDougall’s 11 Capital Partners. If you want to skip our detailed analysis of these stocks, go directly to Top 5 Stock Picks of Jason McDougall’s 11 Capital Partners.
11 Capital Partners is a New York-based equity long/short hedge fund, with a 13F portfolio worth $494 million and discretionary assets under management of $592.3 million as per the 13F filings from Q3 2021.
The hedge fund’s investments are concentrated in the transport, materials, information technology, industrials, healthcare, finance, consumer discretionary, and communications sectors. The top ten holdings comprise 73.04% of the fund’s total 13F investments.
In the third quarter of 2021, 11 Capital Partners bought 6 new stocks, made additional purchases in 5 securities, sold out of 6 equities, and reduced holdings in 7 companies.
The top buys of the hedge fund included Netflix, Inc. (NASDAQ:NFLX), Twitter, Inc. (NYSE:TWTR), and NIKE, Inc. (NYSE:NKE). Whereas, 11 Capital Partners reduced holdings in Ross Stores, Inc. (NASDAQ:ROST), Cannae Holdings, Inc. (NYSE:CNNE), and Starbucks Corporation (NASDAQ:SBUX).
The most notable securities from the Q3 portfolio of 11 Capital Partners included Amazon.com, Inc. (NASDAQ:AMZN), Alphabet Inc. (NASDAQ:GOOG), and Sea Limited (NYSE:SE).
Our Methodology
We used the third quarter portfolio of 11 Capital Partners for this analysis, selecting the top 10 holdings of the hedge fund. We have ranked the securities according to 11 Capital Partners’ stake value in each holding.
Top Stock Picks of Jason McDougall’s 11 Capital Partners
10. Alibaba Group Holding Limited (NYSE:BABA)
11 Capital Partners’ Stake Value: $21,027,000
Percentage of 11 Capital Partners’ 13F Portfolio: 4.25%
Number of Hedge Fund Holders: 115
Alibaba Group Holding Limited (NYSE:BABA) is a Chinese multinational e-commerce and technology company, specializing in cloud computing, artificial intelligence, entertainment, mobile commerce, and media. 11 Capital Partners holds 142,029 Alibaba Group Holding Limited (NYSE:BABA) shares as of Q3 2021, worth $21 million, representing 4.25% of the fund’s total investments.
On January 31, Mizuho analyst James Lee lowered the price target on Alibaba Group Holding Limited (NYSE:BABA) to $180 from $215 and kept a Buy rating on the shares. The analyst anticipates a “challenging” Q4 for the company but looks for customer management revenue growth to reach a bottom in Q1.
Alibaba Group Holding Limited (NYSE:BABA) shares fell roughly 4% on January 18, following a report that U.S. officials are investigating the Chinese internet giant’s cloud business over national security concerns. The focus of the probe is on how Alibaba Group Holding Limited (NYSE:BABA) stores U.S. clients’ data, including personal information and intellectual property, and whether the Chinese government could gain access to it.
According to the third quarter database of Insider Monkey, 115 hedge funds were bullish on Alibaba Group Holding Limited (NYSE:BABA), with stakes totaling $10.20 billion, as compared to 146 funds in the preceding quarter, holding stakes in Alibaba Group Holding Limited (NYSE:BABA) worth $16.79 billion.
Billionaire Ken Fisher’s Fisher Asset Management is the biggest Alibaba Group Holding Limited (NYSE:BABA) stakeholder as of the close of the third quarter of 2021, with 14.2 million shares valued at $2.10 billion.
Here is what Oakmark Global Fund has to say about Alibaba Group Holding Limited (NYSE:BABA) in its Q4 2021 investor letter:
“Alibaba Group (China) was a top detractor for the quarter due to increased regulation from the Chinese government on local technology businesses, which continued to pressure the company’s share price. In addition, investors were disappointed with second-quarter earnings reported in November, marked by decelerating growth and lowered revenue guidance for the full year. Alibaba’s slowing growth was attributable to decreased retail spending in China, increased e-commerce competition and the company’s reinvestments into its merchant base. Although the company currently faces several headwinds, we believe Alibaba is an important driver of innovation in China, and several of its businesses have yet to fully scale. Finally, we believe the shares are undervalued given the quality of the company’s assets and its technological know-how.”
9. Teledyne Technologies Incorporated (NYSE:TDY)
11 Capital Partners’ Stake Value: $21,830,000
Percentage of 11 Capital Partners’ 13F Portfolio: 4.41%
Number of Hedge Fund Holders: 38
Teledyne Technologies Incorporated (NYSE:TDY) is a California-based technology conglomerate with business divisions including digital imaging, instrumentation, engineered systems, aerospace, and defense electronics. 11 Capital Partners owns 50,816 Teledyne Technologies Incorporated (NYSE:TDY) shares as of the third quarter of 2021, worth $21.8 million, representing 4.41% of the fund’s 13F securities. 11 Capital Partners increased its stake in Teledyne Technologies Incorporated (NYSE:TDY) by 4% in Q3.
Needham analyst James Ricchiuti on January 28 lowered the price target on Teledyne Technologies Incorporated (NYSE:TDY) to $520 from $560 but kept a Buy rating on the shares. The company’s Q4 results were “much stronger than expected” with “broad-based performance” across its business portfolio, the analyst told investors in a research note. The analyst further noted that following the market selloff, Teledyne Technologies Incorporated (NYSE:TDY) shares are now trading at an “attractive” 21-times his expected 2023 earnings estimate multiple.
Among the hedge funds tracked by Insider Monkey in Q3 2021, 38 funds were bullish on Teledyne Technologies Incorporated (NYSE:TDY), with collective stakes amounting to $1.70 billion. Select Equity Group is the largest stakeholder of the company, with 1.88 million shares worth $808.90 million.
In addition to Amazon.com, Inc. (NASDAQ:AMZN), Alphabet Inc. (NASDAQ:GOOG), and Sea Limited (NYSE:SE), Teledyne Technologies Incorporated (NYSE:TDY) is one of the top holdings from the Q3 portfolio of 11 Capital Partners.
Here is what Artisan Small Cap Fund has to say about Teledyne Technologies Incorporated (NYSE:TDY) in its Q1 2021 investor letter:
“Teledyne Technologies is a supplier of ultra-sensitive components and sensors to various end markets. We initiated our campaign in 2012 as the company was divesting its defense sector-related business to transition to a more asset-light business exposed to several compelling secular trends. Over the course of our campaign, the company repositioned its business into higher-growth and higher-margin areas such as instrumentation, digital imaging and defense electronics. In Q1, Teledyne announced its intention to acquire FLIR Systems, the largest provider of thermal imaging systems for military and industrial applications. We expect the combined entity to far exceed our small-cap market cap mandate, and we ended our successful campaign.”
8. Autodesk, Inc. (NASDAQ:ADSK)
11 Capital Partners’ Stake Value: $22,740,000
Percentage of 11 Capital Partners’ 13F Portfolio: 4.60%
Number of Hedge Fund Holders: 54
Autodesk, Inc. (NASDAQ:ADSK) is an American multinational software corporation that provides software products and services to the industrial bioscience, architecture, engineering, construction, media, education, and entertainment sectors. 11 Capital Partners owns 79,741 Autodesk, Inc. (NASDAQ:ADSK) shares, worth $22.74 million, accounting for 4.60% of the fund’s third quarter portfolio.
Autodesk, Inc. (NASDAQ:ADSK) announced on January 19 the acquisition of Moxion, which is a New Zealand-based developer of a cloud-based platform for digital dailies used by filmmakers. Autodesk, Inc. (NASDAQ:ADSK) explained that the acquisition of Moxion’s talent and technology will expand Autodesk, Inc. (NASDAQ:ADSK)’s cloud platform for the Media and Entertainment upstream. The transaction will have no material impact on Autodesk, Inc. (NASDAQ:ADSK)’s Q4 and FY2022 guidance presented on November 23, 2021.
On November 29, Deutsche Bank analyst Johannes Schaller lowered the price target on Autodesk, Inc. (NASDAQ:ADSK) to $330 from $370 and kept a Buy rating on the shares. Autodesk, Inc. (NASDAQ:ADSK)’s fiscal Q3 results were mixed with solid business momentum and improving renewal rates overshadowed by commentary regarding demand headwinds from labor constraints, supply chain disruption, and construction activity in China decelerating the pace of recovery in end demand, the analyst told investors in a research note.
According to the third quarter database of Insider Monkey, Cantillon Capital Management held the largest stake in Autodesk, Inc. (NASDAQ:ADSK), with 1.19 million shares worth $341.6 million. Overall, 54 hedge funds were bullish on Autodesk, Inc. (NASDAQ:ADSK), down from 64 funds in the quarter earlier.
Here is what Polen Capital has to say about Autodesk, Inc. (NASDAQ:ADSK) in its Q3 2021 investor letter:
“Shares of Autodesk have lagged recently due to expectations of short-term headwinds to free cash flow as the company transitions its billing structure to annual payments from multi-year up-front subscription payments. We view this as a transient issue and believe Autodesk’s attractive long-term growth profile remains in place.”
7. Liberty Broadband Corporation (NASDAQ:LBRDA)
11 Capital Partners’ Stake Value: $22,976,000
Percentage of 11 Capital Partners’ 13F Portfolio: 4.65%
Number of Hedge Fund Holders: 24
Liberty Broadband Corporation (NASDAQ:LBRDA) owns interests in multiple communications businesses, with the primary assets consisting of Charter Communications, Inc. (NASDAQ:CHTR) and its subsidiary GCI, which is the largest communications provider in Alaska.
In the third quarter of 2021, 11 Capital Partners held 133,040 Liberty Broadband Corporation (NASDAQ:LBRDA) shares, worth approximately $23 million, representing 4.65% of the fund’s total 13F securities.
On December 15, Pivotal Research analyst Jeffrey Wlodarczak lowered the price target on Liberty Broadband Corporation (NASDAQ:LBRDA) to $212 from $267 and kept a Buy rating on the shares. The analyst updated his sum-of-the-parts valuation after a $200 reduction in Charter Communications, Inc. (NASDAQ:CHTR)’s target price to $800.
Eagle Capital Management is the largest stakeholder of Liberty Broadband Corporation (NASDAQ:LBRDA) as of Q3 2021, owning 8.85 million shares worth $1.53 billion. Overall, 24 hedge funds were long Liberty Broadband Corporation (NASDAQ:LBRDA) in the third quarter, down from 28 funds in the preceding quarter.
Liberty Broadband Corporation (NASDAQ:LBRDA) is a significant stock from the Q3 portfolio of 11 Capital Partners, just like Amazon.com, Inc. (NASDAQ:AMZN), Alphabet Inc. (NASDAQ:GOOG), and Sea Limited (NYSE:SE).
Here is what Weitz Investment Management, Inc. (NASDAQ:LBRDA) has to say about Liberty Broadband Corporation in its Q4 2021 investor letter:
“Finally, a couple of old favorites. Liberty Broadband owns 26% of Charter Communications, the second-largest U.S. cable company. Charter finished the year -20.6% from its recent high, and we believe it is a cheap stock in its own right. Liberty Broadband, whose primary asset is its Charter shares, offers Charter ownership at a discount. Another Liberty company, Liberty SiriusXM, owns over 80% of SiriusXM Satellite Radio. We believe that SiriusXM is undervalued and that the Liberty SiriusXM structure allows us to own the company at a discount. Both Charter Communications and SiriusXM are growing nicely, generating prodigious amounts of free cash flow and buying back lots of their own stock. John Malone controls both of these Liberty securities, and we believe he will find ways to close the discounts and extract maximum value for shareholders. Both Liberty securities were stock market duds in 2021, but we expect them to be contributors in 2022 regardless of what the general market does.”
6. Netflix, Inc. (NASDAQ:NFLX)
11 Capital Partners’ Stake Value: $25,422,000
Percentage of 11 Capital Partners’ 13F Portfolio: 5.14%
Number of Hedge Fund Holders: 106
11 Capital Partners owns 41,652 Netflix, Inc. (NASDAQ:NFLX) shares as of the close of the third quarter of 2021, worth $25.4 million, representing 5.14% of the hedge fund’s Q3 portfolio. Netflix, Inc. (NASDAQ:NFLX) is an American company that offers streaming media, pay television, video on demand, and film production.
In its Q4 earnings report published on January 20, Netflix, Inc. (NASDAQ:NFLX) posted earnings per share of $1.33, beating estimates by $0.51. Revenue for the quarter jumped 16.03% year-over-year to $7.71 billion, exceeding estimates by $2.24 million.
Citi analyst Jason Bazinet upgraded Netflix, Inc. (NASDAQ:NFLX) on January 31 to Buy from Neutral with a price target of $450, down from $595. Subscriber-based stocks have come under significant pressure and the equity returns now lag the S&P 500 Index since January 2020, the analyst told investors in a research note. However, the analyst’s enterprise value per subscriber analysis suggests prevailing equity values don’t assume material subscriber growth or improving subscriber economics beyond 2023. He believes Netflix, Inc. (NASDAQ:NFLX) has “ample pricing power.”
According to the Q3 database of Insider Monkey, 106 hedge funds were long Netflix, Inc. (NASDAQ:NFLX), down from 113 funds in the quarter earlier. Matrix Capital Management is one of the leading stakeholders of Netflix, Inc. (NASDAQ:NFLX), with 2 million shares worth $1.22 billion.
Here is what Rowan Street Capital has to say about Netflix, Inc. (NASDAQ:NFLX) in its Q4 2021 investor letter:
“It’s always good to remind ourselves of what we are trying to really do here in the first place?
As we constantly repeat this in almost all annual letters, our goal from day one was to compound our investor’s capital at double-digit returns over the long run.
Now, everyone loves outsized returns. We could compare a strong track record of long-term returns to a fit body. Both need a lot of patience, discipline and both require you to “pay the price.” The reality is that the majority of people lack patience, lack discipline and are just not willing to “pay the price.” We all know what paying the price in fitness really means, but let’s take a look at what that means in investing.
Let’s look at an example of Netflix stock performance since 2010 and compare that to the S&P 500 index. As you can tell from the chart below, the difference over the past 12 years has been absolutely staggering and leaves anyone salivating over these kinds of returns (6,981% for NFLX vs. 312% for the S&P 500).
(Click here to see the charts)
With that, now let’s take a look at the “Cost of Admission” in order to generate these kinds of returns. We want to show you the painful drawdowns over the same time period since 2010. Here, you had a couple of 80% drawdowns back in the 2011-2013 time period, a bunch of 40% drawdowns, and countless 20%+ drawdowns.
So, the question is how many people do you think actually were able to withstand the volatility of Netflix stock over the last 12 years, pay the price and hold it all the way through? During the investment period shown above, Netflix was up almost seventy-fold, and this volatility is the price you had to pay to get it. A lot of market participants are striving for these outsized returns, but just don’t want to pay that price. It seems too risky and they try to cling towards safety without realizing that this is the cost of admission for above average returns.
The good news is that at Rowan Street we do have the patience, the discipline and are very willing to ’pay the price’ in order to achieve the long-term results we have outlined. All that we ask of you, our Limited Partners, is to trust our process and to allow us to do what we do best — compound your hard-earned capital over time. If you can do that, our partnership will work like magic — we are confident in that! In addition, you should derive some comfort in that the majority of our net worth is invested in Rowan Street alongside you (we like to eat our own cooking). We want our partners’ financial fortunes to move in lockstep with ours.”
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Disclosure: None. Top 10 Stock Picks of Jason McDougall’s 11 Capital Partners is originally published on Insider Monkey.
