First Pacific Advisors' Top 5 Trades in the 3rd Quarter

Firm boosts stake in Activision Blizzard, exits Alibaba and Baidu stakes

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Nov 03, 2021
Summary
  • Firm expanded its position in Activision Blizzard.
  • Firm exited its stakes in Alibaba and Baidu.
  • Firm also trimmed is holdings in Booking and Netflix.
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First Pacific Advisors (Trades, Portfolio), a Los Angeles-based investment management firm, disclosed in a regulatory portfolio filing that its top five trades during the third quarter included a boost to its holding in Activision Blizzard Inc. (ATVI, Financial), the closure of its stakes in Alibaba Group Holding Ltd. (BABA, Financial) and Baidu Inc. (BIDU, Financial), and the trimming of its holdings in Booking Holdings Inc. (BKNG, Financial) and Netflix Inc. (NFLX, Financial).

The firm follows a value-oriented, research-intensive process to investing. FPA focuses on ideas from its portfolio managers with an emphasis on intellectual independence that does not seek validation from the broader investment community. The firm’s funds focus primarily on small-cap and mid-cap stocks.

As of Sept. 30, the firm’s $7.70 billion equity portfolio contains 211 stocks, with 35 new positions and a turnover ratio of 4%. The top three sectors in terms of weight are communication services, financial services and technology, represnting 32.01%, 29.98% and 20.04% of the equity portfolio.

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Activision Blizzard

FPA invested in 2,214,799 shares of Activision Blizzard (

ATVI, Financial), giving the shares 2.22% weight in the equity portfolio.

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Shares of Activision Blizzard traded around $83.70 during the third quarter; the stock is modestly undervalued based on Wednesday’s price-to-GF Value ratio of 0.79.

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GuruFocus ranks the Santa Monica, California-based video game company’s profitability 8 out of 10 on several positive investing signs, which include a 3.5-star business predictability rank and an operating margin that has increased approximately 6.10% per year on average over the past five years and outperforms more than 90% of global competitors.

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Other gurus with holdings in Activision Blizzard include

PRIMECAP Management (Trades, Portfolio), Pioneer Investments, Jim Simons (Trades, Portfolio)’ Renaissance Technologies and George Soros (Trades, Portfolio)’ Soros Fund Management.

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Alibaba

The firm exited its 957,979-share stake in Alibaba (

BABA, Financial), trimming 2.73% of its equity portfolio.

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Shares averaged $182.30 during the third quarter; the stock is significantly undervalued based on Wednesday’s price-to-GF Value ratio of 0.43.

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GuruFocus ranks the Chinese e-commerce giant’s profitability 8 out of 10 on several positive investing signs, which include a three-star business predictability rank and profit margins and returns that outperform more than 78% of global competitors.

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Steven Romick (Trades, Portfolio)’s FPA Crescent Fund disclosed it invested in 5,586,312 Hong Kong-listed shares of Alibaba (HKSE:09988, Financial) during the third quarter.

Baidu

The firm sold its 604,289 shares of Baidu (

BIDU, Financial), impacting the portfolio by -1.55%.

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Shares of Baidu averaged $164.72 during the third quarter; the stock is fairly valued based on Wednesday’s price-to-GF Value ratio of 0.95.

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GuruFocus ranks the Chinese online search giant’s profitability 8 out of 10 on the back of profit margins and returns outperforming more than 80% of global competitors.

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FPA Crescent disclosed that it purchased 3,868,925 Hong Kong-based shares of Baidu (

HKSE:09888, Financial) during the third quarter.

Booking Holdings

The firm sold 34,161 shares of Booking Holdings (

BKNG, Financial), curbing 64.34% of the position and 0.94% of its equity portfolio.

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Shares of Booking averaged $2,243.82 during the third quarter; the stock is significantly overvalued based on Wednesday’s price-to-GF Value ratio of 1.76.

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GuruFocus ranks the Norwalk, Connecticut-based reservation giant’s profitability 7 out of 10 on the back of profit margins and returns outperforming more than 66% of global competitors despite three-year earnings growth rates underperforming over 70% of global travel and leisure companies.

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Netflix

The firm sold 100,508 shares of Netflix (

NFLX, Financial), chopping 94.78% of the position and 0.66% of its equity portfolio.

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Shares of Netflix averaged $550.68 during the third quarter; the stock is modestly overvalued based on Wednesday’s price-to-GF Value ratio of 1.15.

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GuruFocus ranks the Los Gatos, California-based streaming giant’s profitability 8 out of 10 on several positive investing signs, which include a five-star business predictability rank and profit margins and returns that outperform more than 88% of global competitors.

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