New York-based Caxton Associates (Trades, Portfolio) has revealed its portfolio for the second quarter of the year. Top trades include an addition to the firm’s top-tracked holding in Baidu Inc. (BIDU, Financial), reductions in its Facebook Inc. (FB, Financial), Alphabet Inc. (GOOGL, Financial) and Microsoft Corp. (MSFT, Financial) holdings and a new buy into Tesla Inc. (TSLA, Financial).
The trading and investment firm was founded in 1983 by Bruce Kovner. The firm’s primary business is to manage client and proprietary capital through global macro hedge fund strategies. Their assets are managed via a broad mandate to trade in a variety of global markets and instruments.
Portfolio overview
At the end of the quarter, the firm’s portfolio contained 459 stocks with 239 new holdings. It was valued at $912 million and has seen a turnover rate of 35%. Top holdings include Baidu, Sunrun Inc. (RUN, Financial), Aptiv PLC (APTV, Financial), Tesla and Microsoft.
The top represented sectors are technology (23.08%), consumer cyclical (20.43%) and communication services (14.33%).
Baidu
After the firm re-established its holding in Baidu (BIDU, Financial) during the first quarter, it boosted the holding by 515.9% with the purchase of 349,830 shares. Throughout the quarter, the shares traded at an average price of $200.59. Overall, the purchase had a 7.82% impact on the equity portfolio and GuruFocus estimates the total loss of the holding at 9.52%.
Baidu is the largest internet search engine in China with a 75% share of the search engine market in March 2021 as per Statcounter. The firm generated 68% of revenue from online marketing services and the rest from other segments in 2020. Baidu is a technology-driven company and has been investing in artificial intelligence technology, such as autonomously driven cars.
On Aug. 26, the stock was trading at $154.57 per share with a market cap of $53.97 billion. According to the GF Value Line, the stock is trading at a fair value rating.
GuruFocus gives the company a financial strength rating of 6 out of 10, a profitability rank of 8 out of 10 and valuation rank of 10 out of 10. There are currently three severe warning signs issued for assets growing faster than revenue, a declining operating margin and a declining gross margin. A medium warning sign is issued for the return on invested capital being less than the weighted average cost of capital, indicating the company is struggling with capital efficiency.
Other top guru shareholders in Baidu (BIDU, Financial) include Primecap Management, Dodge & Cox, Baillie Gifford (Trades, Portfolio) and John Rogers (Trades, Portfolio).
The firm cut its Facebook (FB, Financial) position by 93.82% with the sale of 257,495 shares. The shares traded at an average price of $320.19 during the quarter, landing the position at a total estimated gain of 19.36%. The sale had an -6.88% on the equity portfolio overall.
Facebook is the world's largest online social network, with 2.5 billion monthly active users. On the video side, the firm is in the process of building a library of premium content and monetizing it via ads or subscription revenue. Facebook refers to this as Facebook Watch. The firm's ecosystem consists mainly of the Facebook app, Instagram, Messenger, WhatsApp and many features surrounding these products. Advertising revenue represents more than 90% of the company's total revenue, with 50% coming from the U.S. and Canada and 25% from Europe.
As of Aug. 26, the stock was trading at $366.50 per share with a market cap of $1.03 trillion. The stock is trading at a fair value according to the GF Value Line.
GuruFocus gives the company a financial strength rating of 7 out of 10 and a profitability rank of 10 out of 10. There are currently two severe warning signs issued for declining gross and operating margins. Despite the warning signs, the company’s exceptional profitability rank is supported by an operating margin of 42.52% that surpasses 93.64% of competitors alongside a net margin that performs equally well.
Baillie Gifford (Trades, Portfolio), Frank Sands (Trades, Portfolio), Spiros Segalas (Trades, Portfolio), Pioneer Investments and Chase Coleman (Trades, Portfolio) also maintain positions in Facebook (FB, Financial).
Tesla
A fresh holding in Tesla (TSLA, Financial) was established during the quarter with the purchase of 82,468 shares. The shares traded at an average price of $651.28, well below the price shares were sold at during the first quarter. GuruFocus estimates the firm has gained 14.74% on the holding throughout its lifetime and the new buy had a 6.15% impact on the equity portfolio overall.
Founded in 2003 and based in Palo Alto, California, Tesla is a vertically integrated sustainable energy company that also aims to transition the world to electric mobility by making electric vehicles. The company sells solar panels and solar roofs for energy generation, plus batteries for stationary storage for residential and commercial properties including utilities. Tesla has multiple vehicles in its fleet, which include luxury and mid-size sedans and crossover SUVs. Global deliveries in 2020 were roughly 500,000 units.
The stock was trading at $704.20 per share with a market cap of $698.58 billion. The GF Value Line shows the stock trading at a significantly overvalued rating.
GuruFocus gives the company a financial strength rating of 6 out of 10 and a profitability rank of 4 out of 10. There is one severe warning sign issued for a declining gross margin. The company has continuously increased revenue over the last decade and reported positive net income for the first time in 2020.
Tesla (TSLA, Financial) is also owned by Baillie Gifford (Trades, Portfolio), Ron Baron (Trades, Portfolio), Catherine Wood (Trades, Portfolio), Primecap Management and Spiros Segalas (Trades, Portfolio).
Alphabet
The firm slashed its holding in Alphabet (GOOGL, Financial) by 66.04% with the sale of 26,583 shares. The shares traded at an average price of $2,328.99 during the quarter. Overall, the sale had a -4.97% impact on the equity portfolio and GuruFocus estimates the total gain of the holding at 13.31%.
Alphabet is a holding company, with Google, the internet media giant, as a wholly owned subsidiary. Google generates 99% of Alphabet's revenue, of which more than 85% is from online ads. Google's other revenue is from sales of apps and content on Google Play and YouTube, as well as cloud service fees and other licensing revenue. Sales of hardware such as Chromebooks, Pixel smartphones and smart homes products, which include Nest and Google Home, also contribute to other revenue. Alphabet's moonshot investments are in its other bets segment, where it bets on technology to enhance health (Verily), faster internet access to homes (Google Fiber), self-driving cars (Waymo) and more.
On Aug. 26, the stock was trading at $2,840.17 per share with a market cap of $1.90 trillion. According to the GF Value Line, the stock is trading at a significantly overvalued rating.
GuruFocus gives the company a financial strength rating of 8 out of 10, a profitability rank of 9 out of 10 and a valuation rank of 3 out of 10. There are currently two severe warning signs issued for a declining gross margin and a declining operating margin. The company’s cash-to-debt ratio of 4.86 ranks it worse than 54.84% of industry competitors, but a strong Altman Z-Score of 14.22 places the company deep into the safe zone with comfortable interest coverage into the foreseeable future.
Other top guru shareholders in Alphabet (GOOGL, Financial) include Ken Fisher (Trades, Portfolio), Primecap Management, Pioneer Investments, Spiros Segalas (Trades, Portfolio) and Frank Sands (Trades, Portfolio).
Microsoft
Rounding out the firm’s top five trades was a 56.15% reduction in its Microsoft (MSFT, Financial) position. Managers sold 206,744 shares that traded at an average price of $253.66 throughout the quarter. The firm has gained an estimated 13.70% on the position and the sale had a -4.42% impact on the equity portfolio.
Microsoft develops and licenses consumer and enterprise software. It is known for its Windows operating systems and Office productivity suite. The company is organized into three equally-sized broad segments: productivity and business processes (legacy Microsoft Office, cloud-based Office 365, Exchange, SharePoint, Skype, LinkedIn, Dynamics), intelligence cloud (infrastructure- and platform-as-a-service offerings Azure, Windows Server OS, SQL Server) and more personal computing (Windows Client, Xbox, Bing search, display advertising and Surface laptops, tablets and desktops).
As of Aug. 26, the stock was trading at $300.38 per share with a market cap of $2.26 trillion. The stock is trading at a significantly overvalued rating according to the GF Value Line.
GuruFocus gives the company a financial strength rating of 7 out of 10, a profitability rank of 9 out of 10 and a valuation rank of 1 out of 10. There is currently one severe warning sign issued for assets growing faster than revenue. The company’s cash flows and net income have grown steadily over the last five years and easily support dividend payouts.
Microsoft (MSFT, Financial) counts Ken Fisher (Trades, Portfolio), Pioneer Investments, Primecap Management, Chase Coleman (Trades, Portfolio) and Dodge & Cox as top guru shareholders.
