Sands Capital Management recently disclosed its portfolio updates for the third quarter of 2020, which ended on Sept. 30.
Founded in 1992 by Frank M. Sands Sr., Sands Capital Management is a staff-owned independent investment management firm that invests in high-quality growth business. Frank Sands (Trades, Portfolio) Jr. joined the firm in 2000 and now serves as CEO and chief investment officer. The Arlington, Virginia-based firm has two main concentrated growth strategies: Select Growth, which chooses innovative businesses, and Global Growth, which diversifies holdings in countries outside of the U.S. Sands Capital Management has achieved success by focusing on its six investment criteria: sustainable above-average earnings growth, leadership position in a promising business space, a clear mission with a focus on value, good financial strength, rational valuation and significant competitive advantages.
Based on the firm's investment criteria, its top buys for the third quarter were Match Group Inc. (MTCH, Financial), Snowflake Inc. (SNOW, Financial) and iRhythm Technologies Inc. (IRTC, Financial).
Match Group
The firm established a new holding of 10,227,126 shares in Match Group, impacting the equity portfolio by 2.45%. During the quarter, shares traded for an average price of $105.79.
Match Group is an online dating services company based in Dallas. It operates a near-complete monopoly on major online dating services worldwide with 45 brands in total, including Tinder, Match.com, Meetic, OkCupid, Hinge, PlentyOfFish, Ship and OurTime.
On Nov. 20, shares of Match Group traded around $130.57 for a market cap of $34.73 billion. The stock price has gained 23% since the company split off from parent company IAC (IAC, Financial) on July 1. The transaction granted one share of the new IAC stock and 2.1584 shares of the new Match stock for each share of old IAC stock previously held.
GuruFocus gives the company a financial strength rating of 4 out of 10 and a profitability rating of 7 out of 10. However, this is based largely on the history of the parent company before the split, and since Match is getting the parent company's history on paper (the old IAC stock was re-named to Match stock while IAC was actually spun off as a new entity), any accurate metrics will need to be derived mostly from Match's operations after the split.
As of the end of the third quarter, Sands' firm is the largest guru shareholder of the company with 3.85% of shares outstanding, followed by Steve Mandel (Trades, Portfolio) with 2.95% and Pioneer Investments (Trades, Portfolio) with 0.13%.
Snowflake
The firm also took a stake of 2,381,409 shares in newly public Snowflake, impacting the equity portfolio by 1.24%. Shares traded for an average price of $238.10 during the quarter.
Snowflake's core product is a cloud-based data warehouse that seamlessly operates across the three major public clouds. Founded in 2012, it seems that the founders of the company anticipated the shift to the cloud, as they began to build a cloud computing data warehouse right near the beginning of the cloud's rise in popularity.
On Nov. 20, shares of Snowflake traded around $266 for a market cap of $73.60 billion. Shares have gained a little less than 1% since the company's initial public offering on Sept. 16 at a price of $245 per share.
GuruFocus gives the company a financial strength rating of 5 out of 10. The cash-debt ratio is 2.93, though the company is not yet profitable.
Warren Buffett (Trades, Portfolio)'s Berkshire Hathaway (BRK.A) (BRK.B) is the biggest shareholder of the company with 2.21% of shares outstanding, followed by Philippe Laffont (Trades, Portfolio) with 1.46% and Sands with 0.86%.
IRhythm Technologies
The firm made a new investment worth 1,905,800 shares in iRhythm Technologies, impacting the equity portfolio by 0.98%. During the quarter, shares traded for an average price of $176.49.
IRhythm is a health care technology company focused on digital medical devices to treat cardiac arrhythmias. Its key product offering is Zio, a complete ambulatory cardiac monitoring solution that can be worn for up to 14 days at a time
On Nov. 20, shares of iRhythm traded around $224.62 for a market cap of $6.49 billion. The GuruFocus Value chart rates the stock as significantly overvalued.
The company has a financial strength rating of 6 out of 10 and a profitability rating of 3 out of 10. The cash-debt ratio of 2.3 and Altman Z-Score of 24.13 suggest a fortress-like balance sheet, though the operating margin and net margin are both around -25%, indicating the company is still operating at a loss.
Portfolio overview
As of the quarter's end, the firm held shares in 77 stocks valued at $46.22 billion. The top holdings were Sea Ltd. (SE) with 8.56% of the equity portfolio, Amazon.com Inc. (AMZN) with 6.76% and Netflix Inc. (NFLX) with 5.52%.
In terms of sector weighting, the firm was most invested in communication services, technology and consumer cyclical.
Disclosure: Author owns no shares in any of the stocks mentioned. The mention of stocks in this article does not at any point constitute an investment recommendation. Portfolio updates reflect only common stock positions as per the regulatory filings for the quarter in question and may not include changes made after the quarter ended.
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