Coatue Management recently disclosed its portfolio updates for the third quarter of 2020, which ended on Sept. 30.
Founded in 1999 and headquartered in New York, Coatue Management is an employee-owned private hedge fund sponsor. It launches and manages various hedge funds for clients and is perhaps best known for its tech-focused hedge fund. The firm mainly invests in U.S. and non-U.S. publicly traded equity securities, but it also has short positions and investments in private equity and hedging markets. Chief Investment Officer Philippe Laffont (Trades, Portfolio), who founded the firm after leaving Tiger Management, takes a top-down approach to stock picking and focuses on the information technology sector.
Based on its investing criteria, the firm's top buys for the quarter were Snowflake Inc. (SNOW, Financial) and Tesla Inc. (TSLA, Financial), while its top sells were Boeing Co. (BA, Financial) and Liberty Broadband Corp. (LBRDK, Financial).
Snowflake
The firm established a new stake of 4,044,220 shares in the recently-IPO'd Snowflake, impacting the equity portfolio by 5.33%. 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. 24, shares of Snowflake traded around $282.10 for a market cap of $78.06 billion. Shares have gained about 15% 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 of 2.93 is higher than 53% of other companies in the industry, though the company is not yet profitable.
Warren Buffett (Trades, Portfolio)'s Berkshire Hathaway (BRK.A) (BRK.B) is the biggest guru shareholder of the company with 2.21% of shares outstanding, followed by Laffont with 1.46% and Frank Sands (Trades, Portfolio) with 0.86%.
Tesla
The firm upped its Tesla investment by 1,557,790 shares, or 100.54%, for a total holding of 3,107,175 shares. The trade had a 3.51% impact on the equity portfolio. During the quarter, shares traded for an average price of $353.47 (split-adjusted).
Tesla is most famous for its electric vehicles. Considered by many investors to be a tech stock from its outset, the Palo Alto, California-based company is also involved in solar energy through its SolarCity acquisition. Tesla's CEO, Elon Musk, is also the founder of SpaceX, a private space travel company.
On Nov. 24, shares of Tesla traded around $555.38 for a market cap of $526.45 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 interest coverage ratio of 2.63 suggests low short-term liquidity, but the Altman Z-Score of 11.09 indicates that the company is not likely in danger of bankruptcy over the next two years. The weighted average cost of capital exceeds the return on invested capital, indicating the company is investing more funds than it is earning.
Boeing
The firm exited its 2,750,028-share stake in Boeing, impacting the equity portfolio by -4.44%. Shares traded for an average price of $170.60 during the quarter.
Boeing is a multinational aerospace company based in Chicago. It designs, manufactures and produces commercial and private aircraft, rockets, satellites, telecommunications equipment, missiles and more. It is widely regarded as the backbone of the U.S. commercial aircraft space.
On Nov. 24, shares of Boeing traded around $218.49 for a market cap of $123.34 billion. The GuruFocus Value chart rates the stock as fairly valued.
The company has a financial strength rating of 3 out of 10 and a profitability rating of 6 out of 10. The Piotroski F-Score of 2 out of 10 and Altman Z-Score of 1.35 indicate that the company's financials are in very poor condition. The operating margin and net margin have both been in the negatives since mid-2019.
Liberty Broadband
The firm reduced its investment in Liberty Broadband Corp. by 1,588,438 shares, or 81.29%, for a remaining holding of 365,677 shares. The trade had a -1.73% impact on the equity portfolio. During the quarter, shares traded for an average price of $137.22.
Liberty Broadband is a holding company for two subsidiaries, Charter Communications and TruePosition, that operate in the cable, broadband and mobile location technology businesses. The company's headquarters is in Englewood, Colorado.
On Nov. 24, shares of Liberty Broadband traded around $158.64 for a market cap of $28.30 billion. The price-earnings ratio of 128.55 and forward price-earnings ratio of 36.71 both suggest significant overvaluation (estimates of future earnings are based on data from Morningstar analysts).
The company has a financial strength rating of 3 out of 10 and a profitability rating of 6 out of 10. While the cash-debt ratio of 0.3 is below the industry median of 0.88, the Altman Z-Score of 7.6 indicates the company is not likely in danger of bankruptcy in the short term. Both the revenue and the earnings per share without non-recurring items have been in a downtrend in recent years due to the many changes happening in the company's corporate structure – mainly its separation from Liberty Media Corp. in 2014 and its investment in Charter Communications, Time Warner Cable and Bright House Networks in 2016.
Portfolio overview
As of the quarter's end, the equity portfolio consisted of holdings in 73 stocks valued at $19.05 billion. The firm made 24 new buys, sold out of 39 stocks and added to or reduced several other positions for a turnover of 32% during the period.
The top holdings were PayPal Holdings Inc. (PYPL, Financial) with 7.01% of the equity portfolio, Tesla with 7.00% and The Walt Disney Co. (DIS, Financial) with 6.14%. In terms of sector weighting, the firm was most invested in technology, communication services 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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