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Yamil Berard
Yamil Berard
Articles (192) 

Chase Coleman's Risky High-Conviction Picks

The stock picker is piling on risk with a bet on the company famous for AutoCAD years ago. Facebook is still one of his favorites

July 31, 2018 | About:

Three stocks in a total of 54 equities that sat in Chase Coleman (Trades, Portfolio)’s $15 billion portfolio are high-conviction equities the guru, for the most part, has long been fond of.

Based on filings this month, at least one of those investments, Facebook Inc. (NASDAQ:FB), has been no secret. Coleman is known for his preference for social media and internet companies, including LinkedIn, one of the first of its kind to go public in 2011. The company is now owned by Microsoft Corp. (NASDAQ:MSFT), but Coleman reportedly pocketed an estimated 400% return on the LinkedIn investment in 2012.

Coleman’s hedge fund was also among the earliest investors in Facebook. The fund holds a high-conviction stake in the California-based social media giant. A total of more than 4.968 million shares of Facebook sat in the equity portfolio, filling 5.28% of portfolio space. The investment is worth about $793 million, based on filings this month.

Facebook’s current price in Tuesday late afternoon trading was $172.67 a share. The guru first bought shares when the company’s stock was valued at under $30 a share. But he sold out several months later when the stock had fallen to $23 a share. He purchased shares again in the fourth quarter of 2016, expanding the position since then.

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Lesser-known conviction buys

The guru’s other high-conviction stakes haven’t attracted the spotlight, though.

Tiger Global Management has a major stake in a provider of computer-aided design software. California-based Autodesk Inc. (NASDAQ:ADSK) was founded on the AutoCAD in December 1982, which was used to create multi-dimensional architectural designs on personal computers.

The company has built a broad product portfolio that serves multiple industries, including architecture, engineering, construction manufacturing and media.

Chase’s investment in Autodesk was worth $283 million, GuruFocus showed.

The third high-conviction pick was a position in New York-based Apollo Global Management Inc. (NYSE:APO). One of the world’s largest alternative asset management companies manages funds on behalf of pension funds, endowment and sovereign wealth funds and institutional and individuals investors. Robertson also owns a stake in the asset management company. Coleman’s Apollo stake is valued at more than $1 billion. The asset-manager provides a dividend of more than 5.49%, which is among the top 76% of peers in the industry.

Coleman, who was mentored by hedge fund inventor Julian Robertson (Trades, Portfolio), likes to invest in small-caps and technology companies, both of which have flourished on Wall Street in recent years.

Let’s take a closer look at the guru’s lesser-known, high-conviction picks

Autodesk

The multinational company reported 7.5% in revenue growth over the last 12 months, but it has not reported a profit in the last five years as it shifts to a subscription-based revenue model. It stock was up 1.35% in afternoon trading. It sold for $128.71 a share. The price is well above the historical value on the median price-sales chart, GuruFocus showed.

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In the last two years, the company’s stock price has been affected by company-wide layoffs of more than 1,000 workers. It also saw stock gains last year after it reported its subscription rates were jumping. Analysts forecast revenue of $3 billion in January 2020, compared to revenue of $2.4 billion in 2019. In the last 12 months, the company has posted earnings of $-2.38 per share on revenue of $2.1 billion. Net income has been a struggle in recent years.

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Gurus who owned shares of the company in the early months of the year included Joel Greenblatt (Trades, Portfolio), Mario Gabelli (Trades, Portfolio), Caxton Associates (Trades, Portfolio) and Jana Partners (Trades, Portfolio). All four gurus purchased shares for the first time in the first quarter of the year. Others who held shares were Steven Cohen (Trades, Portfolio), Ken Fisher (Trades, Portfolio) and Leon Cooperman (Trades, Portfolio).

Coleman increased his holding of Autodesk in the first quarter. The guru bought a total of 1.22 million shares for the first time in the third quarter of 2017. He now holds 2.255 million shares. His average purchase price was $114.28 a share and the investment has produced an estimated 14%. Shares sit in about 1.88% of the portfolio.

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The company pays no dividend. It has a market cap of $28 billion. GuruFocus ranks it 4 out of 10 in financial strength and profitability and growth.

Apollo Global Management

Apollo stood at $35.49 a share, up 1.68%. The GuruFocus median price-sales chart indicated that its shares traded above historical value.

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Coleman has more than 34 million shares of the asset management company’s stock in his portfolio. The first buy was conducted for $22.30 a share in the first quarter of last year. He bought a total of 23 million shares. The investment is worth over $1 billion.

The investment made a gain of 49% in value as the stock has risen to a market value of more than $35 a share.

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It is trading at a price-book ratio of 14.43 and a price-sales ratio of 3.26. The price-sales ratio is higher than 72% of its peers in the global asset management industry.

Analysts forecast revenue will reach $2.7 billion in December 2020. Profits exceeded $629 million while revenue jumped to $2.6 billion in 2018. GuruFocus ranks the company 5 out of 10 in financial strength and profitability and growth. It has a market cap of $14 billion.

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