In this article, we discuss the top 10 stock picks of Thomas Steyer’s Farallon Capital. If you want to skip our detailed analysis of these stocks, go directly to Top 5 Stock Picks of Thomas Steyer’s Farallon Capital.
Thomas Steyer is an American businessman and hedge fund manager, who founded Farallon Capital in 1986, which is headquartered in San Francisco, California, managing private equity and capital for university endowments, foundations, and high net worth clients. Thomas Steyer is known for high-risk investments in volatile markets and distressed securities.
In 2012, Thomas Steyer left his position at Farallon Capital to focus on advocating for alternative energy. Farallon Capital looks to invest in value stocks, credit, merger arbitrage, and real estate in developed and emerging markets. The hedge fund is also known for “event driven” investing across international markets, looking out for distressed companies globally and assisting with corporate restructuring.
The third quarter portfolio of Farallon Capital is worth $19.7 billion as per the 13F filings, and the hedge fund has discretionary assets under management of roughly $38 billion. Investments are focused in the information technology, industrials, healthcare, finance, consumer discretionary, and communications sectors, with a top ten holdings concentration of 36.56%.
In Q3 2021, Farallon Capital’s top buys were Aramark (NYSE:ARMK), T-Mobile US, Inc. (NASDAQ:TMUS), and The New York Times Company (NYSE:NYT). Whereas, the fund reduced holdings in Willis Towers Watson Public Limited Company (NASDAQ:WTW) and Aon plc (NYSE:AON).
Some of the most significant securities held by Farallon Capital in Q3 2021 included Alphabet Inc. (NASDAQ:GOOG), Visa Inc. (NYSE:V), and Meta Platforms, Inc. (NASDAQ:FB).
Our Methodology
We used the portfolio of Thomas Steyer’s Farallon Capital for the third quarter of 2021 for this analysis. We selected the top 10 stock picks of the hedge fund, ranking the securities according to Farallon Capital’s stake value in each holding.
Top Stock Picks of Thomas Steyer’s Farallon Capital
10. Microsoft Corporation (NASDAQ:MSFT)
Farallon Capital’s Stake Value: $426,426,000
Percentage of Farallon Capital’s 13F Portfolio: 2.16%
Number of Hedge Fund Holders: 250
Microsoft Corporation (NASDAQ:MSFT) is one of the Big Five American technology companies, operating in the software development, computer hardware, consumer electronics, social networking, cloud computing, video games, and internet industries. Farallon Capital owns over 1.5 million Microsoft Corporation (NASDAQ:MSFT) shares, worth $426.4 million, representing 2.16% of the fund’s third quarter portfolio.
On January 25, Microsoft Corporation (NASDAQ:MSFT) reported its Q4 financial results, posting earnings per share of $2.48, beating estimates by $0.16. Revenue for the quarter gained 20.09% year-over-year, totaling $51.73 billion, outperforming estimates by $938.45 million.
Argus analyst Joseph Bonner kept his Buy rating and $371 price target on Microsoft Corporation (NASDAQ:MSFT) on January 27 after the company posted its Q4 earnings and guidance. The company’s strong results and outlook suggest that underlying software demand remains robust, despite the strain on the technology sector, the analyst told investors in a research note.
Microsoft Corporation (NASDAQ:MSFT) on December 7 declared a $0.62 per share quarterly dividend, in line with previous. The dividend will be paid on March 10, to shareholders of record on February 17.
Microsoft Corporation (NASDAQ:MSFT) is one of the most popular stocks among elite hedge funds. In the third quarter of 2021, 250 funds were bullish on Microsoft Corporation (NASDAQ:MSFT), with stakes equalling $65.8 billion, as compared to 238 funds in the preceding quarter, holding stakes in Microsoft Corporation (NASDAQ:MSFT) worth $62.4 billion.
In Q3 2021, Fisher Asset Management increased its position in Microsoft Corporation (NASDAQ:MSFT) by 3%, holding a total of 25.5 million shares worth over $7 billion. Billionaire Ken Fisher’s fund is the leading Microsoft Corporation (NASDAQ:MSFT) stakeholder.
Here is what Alger Spectra Fund has to say about Microsoft Corporation (NASDAQ:MSFT) in its Q4 2021 investor letter:
“Class A shares of the Alger Spectra Fund underperformed the Russell 3000 Growth Index during the fourth quarter of 2021. Microsoft Corp. was among the top contributors to performance. Microsoft is a Positive Dynamic Change beneficiary of corporate America’s transformative digitization. Microsoft’s CEO believes technology spending as a percent of GDP is likely to jump from about 5% today to 10% in a few years and that Microsoft will continue to take market share Microsoft’s enterprise cloud product, Azure, is rapidly growing and accruing market share. Microsoft reported that Azure grew 50% inthe past quarter. This high unit volume growth is a primary driver of the company’s higher share price, but strong operating execution has enabled margin expansion that has also helped to increase forward earnings estimates. We believe Microsoft’s subscription-based software offerings and cloud computing services have a durable growth profile because they enhance customers’ growth initiatives and help them to diminish costs. Additionally, investors appreciate Microsoft’s strong free cash flow generation and its return of cash to shareholders in the form of dividends and share repurchases.”
9. salesforce.com, inc. (NYSE:CRM)
Farallon Capital’s Stake Value: $427,962,000
Percentage of Farallon Capital’s 13F Portfolio: 2.16%
Number of Hedge Fund Holders: 119
salesforce.com, inc. (NYSE:CRM) is an American on-demand software company that provides cloud computing, enterprise software, and consulting services. The applications offered by salesforce.com, inc. (NYSE:CRM) improve customer service, marketing automation, and data analytics.
Farallon Capital, as of Q3 2021, elevated its position in salesforce.com, inc. (NYSE:CRM) by 7%, holding 1.57 million shares worth approximately $428 million. The stock represents 2.16% of Farallon Capital’s third quarter 13F portfolio.
On January 31, Deutsche Bank analyst Brad Zelnick lowered the price target on salesforce.com, inc. (NYSE:CRM) to $300 from $360 and kept a Buy rating on the shares. The analyst enters 2022 remaining bullish on software industry fundamentals, “while having a healthy respect for the market and macro backdrop.” He thinks the group “sets up well from here” but recommends a balanced approach with greater valuation sensitivity than in recent years.
According to the third quarter database of Insider Monkey, 119 hedge funds were long salesforce.com, inc. (NYSE:CRM), up from 108 funds holding stakes in the company in the quarter earlier. Arrowstreet Capital is one of the prominent stakeholders of salesforce.com, inc. (NYSE:CRM) as of Q3 2021, with 3.75 million shares worth over $1 billion.
Here is what ClearBridge Large Cap Growth Strategy has to say about salesforce.com, inc. (NYSE:CRM) in its Q3 2021 investor letter:
“On an individual stock basis, leading contributors to absolute returns in the third quarter included positions in Salesforce.com. Meanwhile, with a new CFO focused on delivering consistent growth and expanding margins, Salesforce could soon surpass SAP as the world’s largest enterprise applications provider with an all-subscription-based model. The recent acquisition of Slack should better connect the company’s products and services with its users as the messaging platform becomes more dynamic and interactive.”
8. Raytheon Technologies Corporation (NYSE:RTX)
Farallon Capital’s Stake Value: $448,280,000
Percentage of Farallon Capital’s 13F Portfolio: 2.27%
Number of Hedge Fund Holders: 48
Raytheon Technologies Corporation (NYSE:RTX) is one of the largest American multinational aerospace and defense conglomerates, manufacturing aircraft engines, aerostructures, guided missiles, air defense systems, satellites, and drones. Farallon Capital boosted its stake by 10% in Raytheon Technologies Corporation (NYSE:RTX) in Q3 2021, holding 5.2 million shares worth $448.2 million, representing 2.27% of the fund’s 13F portfolio.
Publishing its fourth quarter results on January 25, Raytheon Technologies Corporation (NYSE:RTX) posted earnings per share of $1.08, beating estimates by $0.06. Revenue over the period totaled $17.04 billion, up 3.81% year-over-year, but missed estimates by $236.71 million.
Raytheon Technologies Corporation (NYSE:RTX) on February 1 was awarded a $105 million indefinite-delivery contract for technical collections and communications field representatives services in support of the U.S. Special Operations Command Special Reconnaissance. The work will be performed in various locations in the United States and other countries, and is expected to be completed by March 31, 2027. U.S. Special Operations Command based in Tampa, Florida, is the contractor of the operation.
On January 26, Baird analyst Peter Arment raised the price target on Raytheon Technologies Corporation (NYSE:RTX) to $106 from $100 and kept an Outperform rating on the shares. The analyst said that Raytheon Technologies Corporation (NYSE:RTX) posted a solid print and outlook with the recovery towards healthy cash generation continuing, aided by the recovery in air travel and stability within defense.
In the third quarter of 2021, 48 hedge funds were bullish on Raytheon Technologies Corporation (NYSE:RTX), down from 53 funds in the quarter earlier. Alkeon Capital Management is one of the leading stakeholders of the company, with 2.6 million shares worth roughly $227 million.
In addition to Alphabet Inc. (NASDAQ:GOOG), Visa Inc. (NYSE:V), and Meta Platforms, Inc. (NASDAQ:FB), Raytheon Technologies Corporation (NYSE:RTX) is growing in popularity among smart investors.
Here is what Davis Opportunity Fund has to say about Raytheon Technologies Corporation (NYSE:RTX) in its Q3 2021 investor letter:
“In the industrial space, we own a select list of well-entrenched market leaders, such as Raytheon Technologies in aerospace. These have recovered this year from their lulls in 2020, yet continue to trade at reasonable multiples of subdued earnings, creating a potential setup for the double play of recovering multiples on recovering earnings.”
7. Alphabet Inc. (NASDAQ:GOOG)
Farallon Capital’s Stake Value: $480,974,000
Percentage of Farallon Capital’s 13F Portfolio: 2.43%
Number of Hedge Fund Holders: 156
Alphabet Inc. (NASDAQ:GOOG), a leading American tech company, is one of the most significant holdings of Farallon Capital’s Q3 13F portfolio. The hedge fund owns 180,457 shares of Alphabet Inc. (NASDAQ:GOOG), worth roughly $481 million, representing 2.43% of the total 13F securities.
In its Q4 earnings report, published on February 1, Alphabet Inc. (NASDAQ:GOOG) posted earnings per share of $30.69, beating estimates by $3.41. Revenue for the quarter jumped 32.39% year-over-year, reaching $75.33 billion, exceeding estimates by $3.50 billion. The stock gained 11% after the Q4 results went live.
On February 2, Jefferies analyst Brent Thill raised the price target on Alphabet Inc. (NASDAQ:GOOG) to $3,600 from $3,500 and kept a Buy rating on the shares after “another strong quarter at scale”, which was driven by the company’s “massive and diverse audience reach”, combined with its expanding and innovative portfolio of ad formats, according to the analyst.
Among the hedge funds tracked by Insider Monkey, 156 hedge funds were long Alphabet Inc. (NASDAQ:GOOG), with stakes totaling roughly $35 billion. TCI Fund Management is the leading Alphabet Inc. (NASDAQ:GOOG) stakeholder, owning a $7.8 billion position in the company.
Here is what Weitz Investment Management has to say about Alphabet Inc. (NASDAQ:GOOG) in its Q4 2021 investor letter:
“A couple of other platform companies deserve a mention as well. Meta Platforms and Alphabet have both been under regulatory scrutiny that has affected their valuations. The threats of punitive action are real, but we have tried to be imaginative about how onerous any fines, rule changes or forced divestitures might be, and we believe that the five year outlook for each is well above average under almost any scenario. So, we include these two in the list of the under-appreciated.”
6. Westinghouse Air Brake Technologies Corporation (NYSE:WAB)
Farallon Capital’s Stake Value: $512,531,000
Percentage of Farallon Capital’s 13F Portfolio: 2.59%
Number of Hedge Fund Holders: 38
Westinghouse Air Brake Technologies Corporation (NYSE:WAB) is a California-based company that manufactures rail braking systems, locomotives, and air condition and heat exchanging systems, in addition to locomotive servicing, overhaul, and repair. Farallon Capital boosted its position in Westinghouse Air Brake Technologies Corporation (NYSE:WAB) by 13% in Q3 2021, holding 5.9 million shares worth $512.5 million. The stock accounts for 2.59% of the fund’s 13F portfolio.
On October 26, Westinghouse Air Brake Technologies Corporation (NYSE:WAB) declared a quarterly dividend of $0.12 per share, in line with previous, which was paid on November 29.
Wells Fargo analyst Allison Poliniak-Cusic raised the price target on Westinghouse Air Brake Technologies Corporation (NYSE:WAB) to $110 from $105 and kept an Overweight rating on the shares on February 2. The analyst views Westinghouse Air Brake Technologies Corporation (NYSE:WAB) as best positioned to benefit from the increase in technology investments.
According to the third quarter database of Insider Monkey, 38 hedge funds were bullish on Westinghouse Air Brake Technologies Corporation (NYSE:WAB), down from 46 funds in the preceding quarter. Pzena Investment Management is the biggest stakeholder of the company, owning 10.1 million shares worth $878.2 million.
Westinghouse Air Brake Technologies Corporation (NYSE:WAB) is a notable stock pick of Farallon Capital as of Q3 2021, just like Alphabet Inc. (NASDAQ:GOOG), Visa Inc. (NYSE:V), and Meta Platforms, Inc. (NASDAQ:FB).
Here is what TGV Intrinsic Fund has to say about Westinghouse Air Brake Technologies Corporation (NYSE:WAB) in its Q2 2021 investor letter:
“The second change concerns the American railway supplier Westinghouse Air Brake Technologies (Wabtec). Wabtec took over the railway division from General Electric (GE) in 2019. As part of this, Rafael Santana – who had come over from GE – became the new CEO of Wabtec. The previous CEO, Ray Betler, is one of the best corporate leaders I know, and I particularly appreciated the decentralized corporate culture he embodied. The operating figures have developed nicely since 2019 under Rafael Santana. However, from conversations with current and former employees of Wabtec, it is becoming increasingly clear to me that the GE culture, which is designed to achieve short-term corporate goals, is establishing itself within the company. This culture is not necessarily bad – but it is a culture that does not fit the long-term orientation of the TGV Intrinsic.
Accordingly, I recommended the sale of all Wabtec shares despite the decent operational development. Wabtec is a good example of a distinction between “process” and “result”. In the long run, the right process typically leads to a good result and the wrong process to a bad one. In the short term, however, even a wrong process can lead to a good result. Considered by itself, Wabtec’s financial development since 2019 (result) is not sufficient to make an investment recommendation for the future. Changes in the corporate culture (process) often only become noticeable in the financial figures after several years and are therefore a more meaningful indicator of long-term operational development than short-term historical business development. Accordingly, my discussions with current and former Wabtec employees about changes in the corporate culture are the crucial reason for the sell recommendation, as I assume that the GE culture will lead to worse operating results in the long term.”
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Disclosure: None. Top 10 Stock Picks of Thomas Steyer’s Farallon Capital is originally published on Insider Monkey.
