Wedgewood Partners, a St. Louis, Missouri-based investment management firm, released its Q1 2020 Investor letter – a copy of which is available for download here. Wedgewood Partners returned -16.30% for the first quarter. Meanwhile, the benchmark Russell 1000 Growth Index and the S&P 500 Index lost 14.10% and 19.60%, respectively.
In the said letter, Wedgewood Partners highlighted a few stocks and Booking Holdings Inc. (NASDAQ:BKNG) is one of them. Booking Holdings is the world’s leader in online travel. Year-to-date, BKNG stock lost 26.0% and on April 29th it had a closing price of $1520.53. Its market cap is of $62.4 billion. Here is what Wedgewood Partners said:
“Booking Holdings has borne the brunt of the COVID-19 crisis, with global inbound and outbound travel at an unprecedented standstill. Booking has $3 billion in net cash ($12 billion in gross cash and about $9 billion in debt) and has very little in the way of net working capital commitments or capital equipment requirements, which positions the Company quite well to withstand this unprecedented disruption. Nevertheless, we trimmed our holdings in Booking to fund purchases in Facebook and Motorola Solutions, both of which are trading at similar and historically depressed multiples, but with less direct exposure to the effects of COVID-19. We still hold a small weighting in Booking as we continue to monitor the potential for multiyear headwinds to leisure travel, offset by what are already relatively pessimistic long-term growth assumptions embedded in Booking’s current valuation.”
In Q4 2019, the number of bullish hedge fund positions on BKNG stock decreased by about 15% from the previous quarter (see the chart here).
Wedgewood Partners comments on Facebook
In the said letter, Wedgewood Partners also highlighted Facebook Inc (NASDAQ:FB) stock. Facebook is a social media and technology company based in California. Here is what Wedgewood Partners said:
“Facebook reported strong revenue growth; +26% currency adjusted and +21% growth in adjusted operating income during its fourth quarter. The stock has sold off since COVID-19 spread to Western economies, where Facebook generates the majority of its profits. However, we estimate Facebook has relatively small exposure to travel and hospitality advertising – so far, the most negatively affected industries – while we also believe the Company’s platforms are well positioned to benefit from a reprioritizing of marketing budgets toward digital channels during this crisis. During the first quarter 2020, Facebook’s stock traded as low as 13X 2021 consensus estimates, which is much too pessimistic for a company with Facebook’s long-term position as a winner in enabling advertising and commerce, combined with a massive net cash pile and spiking user engagement during the crisis. As such, we added to our already overweight position in Facebook.”
In Q4 2019, the number of bullish hedge fund positions on FB stock increased by about 3% from the previous quarter (see the chart here).
Disclosure: None. This article is originally published at Insider Monkey.
