In this article, we take a look at the top 10 stocks that Kayak Investment Partners is buying. You can skip our comprehensive analysis of Daryl Smith’s history, investment philosophy, and hedge fund performance, and go directly to Top 5 Stocks That Kayak Investment Partners is Buying.
Daryl Smith’s Kayak Investment Partners is a San Francisco-based long/short equity hedge fund that manages a fairly concentrated, tech-heavy portfolio. The fund, which was co-founded by Mr. Smith, traditionally devotes close to our greater than 50% of its 13F assets in the tech sector, while communications-related stocks are also among the fund’s favorites.
The fund’s 13F assets under management have ballooned in recent years, topping $700 million at the end of September 2021, an increase of more than $500 million since the end of 2019. The fund’s solid returns in recent years have surely helped it pull in more assets, as its Kayak Investment Partners Fund, L.P. delivered double-digit returns in both 2018 and 2019, which followed on the heels of 8.89% gains in 2017. From its inception in January 2013 through the first quarter of 2020, the fund’s compound annual return stands at 8.08%.
In the third quarter of 2021, Kayak Investment Partners made notable additions to several of its holdings as well as taking new stakes in several companies it sees great potential in. We’ll check out the fund’s biggest buys of Q3 in this article.
Our Methodology
We follow hedge funds like Kayak Investment Partners because Insider Monkey’s research has uncovered that their consensus stock picks can deliver outstanding returns.
Now then, let’s check out the top 10 stocks that Kayak Investment Partners is buying. Note that all hedge fund data is based on the exclusive group of 800+ funds tracked by Insider Monkey as part of our market-beating investment strategy.
Top 10 Stocks That Kayak Investment Partners is Buying
10. CrowdStrike Holdings, Inc. (NASDAQ:CRWD)
The first stock on our list is CrowdStrike Holdings, Inc. (NASDAQ:CRWD), which Kayak Investment Partners bought 22,700 shares of during Q3, opening a new position in the company. That position was valued at $5.58 million at the end of September. CrowdStrike shares had already risen five-fold from Q4 2019 until Q3 2021, but Kayak clearly believes more gains are in store.
Baron Funds agrees. In the Baron Opportunity Fund’s third-quarter 2021 investment letter, the firm believes that CrowdStrike Holdings, Inc. (NASDAQ:CRWD) has the potential to continue growing by 30% annually in the coming years even after already growing its addressable market five-fold since its IPO in the middle of 2019. Baron Funds believes that the ability for customers to try out CrowdStrike’s disruptive cybersecurity cloud tools for themselves through free trials has been a key feature driving CrowdStrike Holdings, Inc. (NASDAQ:CRWD)’s growth.
9. International Business Machines Corp. (NYSE:IBM)
Kayak Investment also opened a new stake in International Business Machines Corp. (NYSE:IBM) during Q3, buying 78,200 shares worth $10.86 million at the end of September. International Business Machines Corp. (NYSE:IBM) has largely fallen out of favor with hedge funds in recent years, sitting near 8-year lows in hedge fund ownership.
While it may be one of the oldest computing companies in the world, International Business Machines Corp. (NYSE:IBM) has done a good job at transforming itself in recent years, making big moves into disruptive and growing fields like blockchain, nanotechnology, cloud services, and AI. International Business Machines Corp. (NYSE:IBM) pulled in $2.52 in earnings per share during Q3, beating estimates by a single penny.
8. C3.ai, Inc. (NYSE:AI)
Kayak Investment Partners hiked its stake in C3.ai, Inc. (NYSE:AI), which has the enviable ticker AI, by 83% during Q3, giving it 318,398 shares of the company which provides cloud-based AI tools to the energy industry. That stake was valued at $14.76 million on September 30. 21 hedge funds were long AI at the end of Q3, down from 30 following C3.ai, Inc. (NYSE:AI)’s IPO in Q4 2020.
C3.ai, Inc. (NYSE:AI) shares ballooned following their IPO, soaring to over $140 as the market got overly excited about the latest hot tech stock. However the exuberance began to fade and reality to set in over the coming quarters, as shares have tanked all the way down to just under $31. C3.ai, Inc. (NYSE:AI) was slammed after the company’s high-flying revenue growth, which stood at 71% in its fiscal 2020, tumbled to just 16% in the first quarter of 2021. C3.ai, Inc. (NYSE:AI) was also been unprofitable throughout its history, losing over $100 million across its fiscal 2019 and 2020.
7. Uber Technologies, Inc. (NYSE:UBER)
Kayak Investment Partners more than doubled its stake in Uber Technologies, Inc. (NYSE:UBER) during Q3, giving it 369,214 shares of the transportation service provider, raising the value of its stake to $16.54 million. Uber Technologies, Inc. (NYSE:UBER) has become very popular with hedge funds over the past two years, as hedge fund ownership more than tripled between Q3 2019 and Q3 2021 even as Uber Technologies, Inc. (NYSE:UBER) faced regulatory challenges in some markets.
In its Q3 2021 investor letter, Tollymore Investment Partners explained why Uber Technologies, Inc. (NYSE:UBER) has been so successful at disrupting the taxi industry, noting that they better align monetization with value creation, while limiting externalities. The fund further added that Uber represented a good example of a rental business model that separated asset use from ownership, models which lend themselves well to expensive and durable assets like motor vehicles.
6. Netflix, Inc. (NASDAQ:NFLX)
Closing out the first half of our list of Kayak Investment Partners’ biggest stock buys is Netflix, Inc. (NASDAQ:NFLX). The fund raised its stake in the world’s most dominant streaming service by 208% during Q3, building its position up to 33,713 shares valued at $20.58 million on September 30. Hedge fund ownership of Netflix appears to have plateaued for now in recent quarters, topping out at 120 long positions in the middle of 2019. NFLX shares have gained another 50% since then however as Netflix, Inc. (NASDAQ:NFLX)’s valuation continues to balloon.
In its Q3 2021 investor letter, First Pacific Advisors declared Netflix, Inc. (NASDAQ:NFLX) one of its biggest winners of the quarter, but added that while the market takes a short-term view of Netflix, Inc. (NASDAQ:NFLX) based on subscriber counts, the fund is bullish on Netflix’s long-term potential. The fund believes that the market underestimates Netflix’s total addressable market by basing it on the number of pay TV households. The fund instead sees smartphone ownership as the more relevant figure, which would make Netflix’s market penetration outside China less than 4% compared to 30% based on pay-TV figures.
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Disclosure: None. Top 10 Stocks That Kayak Investment Partners is Buying is originally published at Insider Monkey.
