Top 9 Stock Picks of Eduardo Costa’s Calixto Global Investors

Published on September 29, 2022 at 11:14 am by Swati Goyal in Hedge Funds, News

In this article, we discuss the top 9 stock picks of Eduardo Costa’s Calixto Global Investors. If you want to skip our detailed analysis of Costa’s investment philosophy and performance, go directly to Top 5 Stock Picks of Eduardo Costa’s Calixto Global Investors.

Eduardo Costa, a former director of research at JAT Capital, founded the Florida-based hedge fund Calixto Global Investors. In 2014, the hedge fund was established without any initial funding. Instead of going for a seed transaction, Costa explained, “We bootstrapped and built from the ground up, raising assets from friends and family and a few important investors.” Calixto Global Investors, which he launched with a $25 million investment, now has assets worth over $300 million.

The hedge fund invests in small-caps but not micro-caps. Thus the strategy is still liquid. Eduardo Costa elaborated on his invest strategy:

“I always want to stay liquid because you never know when circumstances might invalidate a thesis, when you might just be wrong, or when a technical situation like January 2021 might crop up.”

He joined Shumway Capital Partners after receiving an MBA from Columbia Business School. His hedge fund focuses on unconventional investment strategies that provide investors a distinctive exposure, decrease the likelihood of trading simultaneously as its rivals, and often have less sell-side attention. Through June 2021, the fund gained 3.9% and returned 3.2% to investors. The hedge fund also had a very impressive 2020, with net earnings of 47% for the year.

Research, Investment, Finance

Calixto Global Investors’ Q2 2022 portfolio had a value of $99.96 million. The hedge fund’s long/short stock strategy is motivated by fundamentals and primarily targets the consumer discretionary, communications, transportation, and technology industries. The most notable stocks held by Calixto Global Investors in Q2 2022 include Airbnb, Inc. (NASDAQ:ABNB), Alibaba Group Holding Limited (NYSE:BABA), and ZTO Express (Cayman) Inc. (NYSE:ZTO).

Our Methodology

Let’s begin our list of top 9 stock picks of Eduardo Costa’s Calixto Global Investors. We chose these stocks from the Q2 portfolio of Costa’s hedge fund.

Top Stock Picks of Eduardo Costa’s Calixto Global Investors

9. Affirm Holdings, Inc. (NASDAQ:AFRM)

Calixto Global Investors’ Stake Value: $2,447,000

Percentage of Calixto Global Investors’ 13F Portfolio: 2.44%

Number of Hedge Fund Holders: 27

Affirm Holdings, Inc. (NASDAQ:AFRM) is a “buy now, pay later” company that offers clients installment loans at the time of sale. Affirm Holdings, Inc. (NASDAQ:AFRM) announced on September 23 that it had expanded its partnership with Amazon.com, Inc. (NASDAQ:AMZN) to provide Canadian customers with a buy now, pay later (BNPL) option.

Among the hedge funds tracked by Insider Monkey, 27 were bullish on Affirm Holdings, Inc. (NASDAQ:AFRM) at the end of June 2022, compared to 29 funds in the prior quarter. Colin Moran’s Abdiel Capital Advisors is the most prominent position holder in Affirm Holdings, Inc. (NASDAQ:AFRM), with 2.13 million shares worth $38.54 million.

On September 22, Mizuho analyst Dan Dolev stated that the 30-day delinquency trends for Affirm Holdings, Inc. (NASDAQ:AFRM) were encouraging. Therefore, he maintained a ‘Buy’ recommendation on the stock with a $42 price objective. Affirm Holdings, Inc. (NASDAQ:AFRM) is one of the latest acquisitions of Calixto Global Investors in Q2 2022. The hedge fund held shares worth over $2.45 million in the company, representing 2.44% of its 13F portfolio.

Like Airbnb, Inc. (NASDAQ:ABNB), Alibaba Group Holding Limited (NYSE:BABA), and ZTO Express (Cayman) Inc. (NYSE:ZTO), Affirm Holdings, Inc. (NASDAQ:AFRM) has been one of the top stock picks of Eduardo Costa’s Calixto Global Investors.

In its Q2 2022 investor letter, Bireme Capital mentioned Affirm Holdings, Inc. (NASDAQ:AFRM). Here is what the fund said:

“We recently covered our short position in Affirm Holdings, Inc. (NASDAQ:AFRM) after a rapid decline brought the share price to ~$30 – down from our entry point above $100 – in only 7 months. We discussed Affirm in our Q4 letter, saying the following:

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… While the stock has already fallen sharply from where we initiated our short position, we think it could fall another ~40% to trade at 8x FY2022 sales…(Click to read the full text).”

8. Airbnb, Inc. (NASDAQ:ABNB)

Calixto Global Investors’ Stake Value: $2,628,000

Percentage of Calixto Global Investors’ 13F Portfolio: 2.62%

Number of Hedge Fund Holders: 57

Airbnb, Inc. (NASDAQ:ABNB) and its subsidiaries run an interface that enables hosts to offer stays and experiences to visitors worldwide. Eduardo Costa initiated a new stake in Airbnb, Inc. (NASDAQ:ABNB) in the second quarter of 2022 by purchasing 29,500 shares worth $2.63 million.

Ivan Feinseth, an analyst at Tigress Financial, decreased his price objective on Airbnb, Inc. (NASDAQ:ABNB) from $214 to $160 on September 23 while maintaining a ‘Buy’ recommendation on the stock. He predicted a short-term increase in valuation as travel demand declined from its high. Still, he insisted that the company’s substantial brand equity and position as the market leader in alternative accommodation remained unaffected.

According to Insider Monkey’s data, Airbnb, Inc. (NASDAQ:ABNB) was part of 57 hedge fund portfolios at the end of Q2 2022, compared to 66 funds in the last quarter. In addition, Jim Simons’ Renaissance Technologies is one of the leading stakeholders of the company, with 5.60 million shares worth close to $499.26 million.

Here is what ClearBridge Investments had to say about Airbnb, Inc. (NASDAQ:ABNB) in its Q2 2022 investor letter:

“Airbnb is the leading online platform for alternative accommodations globally. We believe the company is well-positioned to capitalize on the large and growing market for travel and experiences, with the potential for growth in e-travel to be higher post-pandemic due to pent-up demand and increased work from anywhere flexibility. Airbnb is highly profitable today, though we see room for further margin expansion ahead. Furthermore, secular underpinnings to growth, a more variable cost structure and strong balance sheet should help the company drive better through-cycle performance as compared to its consumer discretionary peers.”

7. Kanzhun Limited (NASDAQ:BZ)

Calixto Global Investors’ Stake Value: $5,256,000

Percentage of Calixto Global Investors’ 13F Portfolio: 5.25%

Number of Hedge Fund Holders: 25

Kanzhun Limited (NASDAQ:BZ) is a Chinese holding firm that primarily offers internet recruiting services. The company links corporate users and job searchers through its interactive BOSS Zhipin mobile application, which works in conjunction with its other mobile applications and small programs to form a network.

On September 13, Barclays analyst Jiong Shao initiated coverage of Kanzhun Limited (NASDAQ:BZ), assigning an ‘Equal Weight’ rating to the stock and a $21 price target due to the company’s proven leadership in job recruiting applications.

According to Insider Monkey’s data, 25 hedge funds were long Kanzhun Limited (NASDAQ:BZ) at the end of the second quarter of 2022, compared to 20 funds in the preceding quarter. Chase Coleman Tiger Global Management is one of the most prominent stakeholders in Kanzhun Limited (NASDAQ:BZ), with 11.66 million shares worth over $306.31 million.

Eduardo Costa’s Calixto Global Investors has owned a stake in Kanzhun Limited (NASDAQ:BZ) since Q1 2022. However, his Kanzhun Limited (NASDAQ:BZ) position was reduced by 57% in the second quarter of 2022. The hedge fund held 200,000 shares of Kanzhun Limited (NASDAQ:BZ), worth $5.26 million.

6. Avis Budget Group, Inc. (NASDAQ:CAR)

Calixto Global Investors’ Stake Value: $9,737,000

Percentage of Calixto Global Investors’ 13F Portfolio: 9.74%

Number of Hedge Fund Holders: 38

Avis Budget Group, Inc. (NASDAQ:CAR) offers mobility solutions and car rentals. Avis Budget Group’s forward P/E ratio is 2.96x. This is less than the industry average forward P/E ratio of 14.13x. On August 4, Morgan Stanley analyst Adam Jonas maintained an ‘Underweight’ rating on the shares of Avis Budget Group, Inc. (NASDAQ:CAR) and boosted his price objective from $140 to $150.

In addition to Airbnb, Inc. (NASDAQ:ABNB), Alibaba Group Holding Limited (NYSE:BABA), and ZTO Express (Cayman) Inc. (NYSE:ZTO), Avis Budget Group, Inc. (NASDAQ:CAR) is also a part of Eduardo Costa’s Q2 portfolio. He added Avis Budget Group, Inc. (NASDAQ:CAR) to his portfolio in Q2 2022, where his hedge fund purchased 66,205 shares.

In the second quarter of 2022, 38 hedge funds tracked by the database of Insider Monkey were long Avis Budget Group, Inc. (NASDAQ:CAR), down from 28 in the preceding quarter. Karthik Sarma’s SRS Investment Management is the leading stakeholder of Avis Budget Group, Inc. (NASDAQ:CAR), with 18.43 million shares worth $2.71 billion.

In its Q4 2021 investor letter, Broyhill Asset Management mentioned Avis Budget Group, Inc. (NASDAQ:CAR). Here is what the fund said:

“Avis surged 166% during the final two quarters of the year. The company hit a new record for quarterly EBITDA – third quarter EBITDA was higher than any full year in Avis history – while buying back nearly $1B of stock and announcing another $1B increase in their repurchase authorization. Shares hit an intra-day peak of $545 after reporting earnings, ultimately closing at $357, more than doubling the prior close. Frenzied retail trading, prompted by management commentary around electric vehicles adoption, prompted a dozen trading halts throughout the day. The mania grew so intense that TD Ameritrade stopped allowing short sales in Avis, as short interest represented ~ 30% of the float.”

Click to continue reading and see Top 5 Stock Picks of Eduardo Costa’s Calixto Global Investors.

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Published on October 30, 2024 at by Inan Dogan, PhD

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Click to continue reading…

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