Cooper Investors, an investment management firm, published its ‘Cooper Investors Global Equities Fund (Hedged)’ fourth-quarter 2020 Investor Letter – a copy of which can be downloaded here. A return of 9.96% was recorded by the fund for the Q4 of 2020, below its MSCI ACWI benchmark that returned 12.24%. You can view the fund’s top 10 holdings to have a peek at their top bets for 2021.
Cooper Investors, in their Q4 2020 Investor Letter said that they acquired a position in Workday, Inc. (NASDAQ: WDAY) because they see great fundamentals in the company. Workday, Inc. is a financial and human capital management software company that currently has a $54.5 billion market cap. For the past 3 months, WDAY delivered a 4.98% return and settled at $223.45 per share at the closing of January 27th.
Here is what Cooper Investors has to say about Workday, Inc. in their investor letter:
“Workday (“WDAY”) is the Cloud leader in Human Capital Management (HCM) and Financials software. We first met WDAY 7 years ago as a much smaller enterprise but today it’s on the verge of reporting ~US$4bn in revenues. WDAY has had great success in its HCM offering particularly with the world’s largest companies. However its Financials product has seen more muted growth with customers reluctant to shift such a core function to the Cloud, success here tending to be in the mid-market. Financials comprise only 20% of company revenues today but with the pandemic forcing remote work and benefits, and reliability of Cloud applications becoming clear WDAY’s Financials solutions appear ripe for mainstream adoption.
For all WDAY’s success and averaging over 35% p.a. sales growth the share has barely outperformed the S&P500 since early 2014 as its sales multiple declined from 26x to 10x. WDAY now trades on a more reasonable but still elevated FCF multiple of 43x. However on our view of normalised margins this multiple of FCF would be even lower, below 30x. The nature of the accounting for SAAS (Software-as-a-Service) businesses is that most growth investment goes through the income statement in R&D or Sales and Marketing, versus capex for a typical industrial business. So growth investment tends to depress reported
earnings. WDAY is investing to grow its top line 20-25% and if they were to slowdown and grow in line with the market (around 10%) we would expect to see a typical 30%+ software margin, up from the 17% reported margin today. WDAY is led by its founders who own 25% of the company – Chairman David Duffield is an industry pioneer previously founding Peoplesoft (eventually acquired by Oracle) while CEO Aneel Bhusri was Vice Chairman of Peoplesoft.”
Pixabay/Public Domain
Last November 2020, we published an article telling that Workday, Inc. (NASDAQ: WDAY) was in 74 hedge fund portfolios, its all time high statistics. WDAY delivered a 21.58% return in the past 12 months.
Our calculations show that Workday, Inc. (NASDAQ: WDAY) does not belong in our list of the 30 most popular stocks among hedge funds.
The top 10 stocks among hedge funds returned 216% since the end of 2014 and outperformed the S&P 500 Index ETFs by more than 121 percentage points. We know it sounds unbelievable. You have been dismissing our articles about top hedge fund stocks mostly because you were fed biased information by other media outlets about hedge funds’ poor performance. You could have doubled the size of your nest egg by investing in the top hedge fund stocks instead of dumb S&P 500 ETFs. Below you can watch our video about the top 5 hedge fund stocks right now. All of these stocks had positive returns in 2020.
Video: Top 5 Stocks Among Hedge Funds
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Disclosure: None. This article is originally published at Insider Monkey.
