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Top 2nd-Quarter Trades of Frank Sands' Firm

Sands Capital Management picks up Carvana, lets down Match Group

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Margaret Moran
Aug 26, 2021

Summary

  • The firm's most significant buys for the quarter were Carvana and DoorDash.
  • Its biggest sells were Illumina and Match Group.
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Sands Capital Management recently disclosed its 13F portfolio updates for the second quarter of 2021, which ended on June 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 latest 13F filing, its most significant buys for the quarter were Carvana Co. (

CVNA, Financial) and DoorDash Inc. (DASH, Financial), while its biggest sells were Illumina Inc. (ILMN, Financial) and Match Group Inc. (MTCH, Financial).

Carvana

The firm established a new stake worth 1,250,492 shares in Carvana (

CVNA, Financial), giving the holding a 0.64% weight in the equity portfolio. During the quarter, shares traded for an average price of $271.66.

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Carvana is an e-commerce company that sells used cars through its unique technology platform, which aims to make the used car buying process easier and faster. Founded in 2012, the Tempe, Arizona-based company is a relatively new market player that has been rapidly growing its top line.

On Aug. 26, shares of Carvana traded around $352.43 for a market cap of $60.82 billion. According to the GuruFocus Value chart, the stock is significantly overvalued.

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The company has a financial strength rating of 3 out of 10 and a profitability rating of 2 out of 10. The cash-debt ratio of 0.03 is lower than 91% of competitors, while the Piotroski F-Score of 3 out of 9 implies poor business operation. The operating margin and net margin have both reached the positive range as of the most recent quarter, indicating the company is making progress toward becoming profitable.

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DoorDash

The firm added 2,116,415 shares, or 47.84%, to its investment in DoorDash (

DASH, Financial) for a total of 6,540,407 shares. The trade had a 0.64% impact on the equity portfolio. Shares traded for an average price of $146.25 during the quarter.

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DoorDash is a food delivery service that connects customers with local restaurants. Launched in Palo Alto, California in 2012, the company has since grown to have the largest share of the third-party food delivery market in the U.S.

On Aug. 26, shares of DoorDash traded around $191.26 for a market cap of $65 billion. Since going public at the end of 2020, the stock is mostly flat, having gained about 0.88%.

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The company has a financial strength rating of 6 out of 10. The cash-debt ratio of 14.54 and Altman Z-Score of 25.16 indicate the company has a strong balance sheet. In terms of profitability, the company’s net income remains in the negatives, meaning it is losing money. However, the top line has shown strong growth over the past couple of years.

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Illumina

The firm reduced its stake in Illumina Inc. (

ILMN, Financial) by 1,195,216 shares, or 41.63%, leaving a remaining investment of 1,675,883 shares. The trade had a -0.89% impact on the equity portfolio. During the quarter, shares traded for an average price of $413.01.

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Illumina is a San Diego-based biotechnology company that develops, manufactures and markets integrated systems for the sequencing and analysis of genetic variation and biological function. Its products enable researchers to explore DNA at an unprecedented scale.

On Aug. 26, shares of Illumina traded around $469.89 for a market cap of $73.66 billion. According to the GF Value chart, the stock is modestly overvalued.

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The company has a financial strength rating of 6 out of 10 and a profitability rating of 9 out of 10. The Piotroski F-Score of 7 out of 9 and Altman Z-Score of 15.35 show a fortress-like balance sheet. The return on invested capital is typically higher than the weighted average cost of capital, indicating the company is creating value as it grows.

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Match Group

The firm also slimmed its Match Group (

MTCH, Financial) investment by 1,797,461 shares, or 21.75%, leaving a remaining stake of 6,466,930 shares. The trade had a -0.48% impact on the equity portfolio. Shares traded for an average price of $146.27 during the quarter.

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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 Aug. 26, shares of Match Group traded around $137.05 for a market cap of $38 billion. According to the GF Value chart, the stock is significantly overvalued.

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The company has a financial strength rating of 3 out of 10 and a profitability rating of 6 out of 10. The cash-debt ratio of 0.07 is lower than 97% of industry peers, though the Altman Z-Score of 3.63 suggests the company is not in danger of bankruptcy over the next two years. The operating margin of 29.66% and net margin of 19.91% are both outperforming 80% of industry peers.

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Portfolio overview

As of the quarter’s end, the firm held shares in 77 stocks valued at a total of $58.98 billion. The top holdings were Sea Ltd. (

SE, Financial) with 10.75% of the equity portfolio, Visa Inc. (V, Financial) with 5.41% and Netflix Inc. (NFLX, Financial) with 4.70%.

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In terms of sector weighting, the firm was most invested in communication services, technology and consumer cyclical.

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Disclosures

I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
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 SEC filings for the quarter in question and may not include non-U.S.-listed international stocks or changes made after the quarter ended.
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