In this article, we discuss the 10 best stocks to buy according to Anand Desai’s Darsana Capital. If you want to skip our detailed summary of Desai’s history, investment philosophy, and hedge fund performance, go directly to the 5 Best Stocks to Buy for 2022.
In 1995, Anand Desai received a BS in Economics from the Wharton School and a BA in Mathematics from the University of Pennsylvania’s College of Arts and Sciences. He started his career as a financial analyst, first with Donaldson, Lufkin, and Jenrette’s investment banking division, where he focused on capital raising and commercial banking, and then with Siegler, Collery & Co., where Anand Desai performed primary business, industry, and economic research. Later, he served as a Partner at SAB Capital Management and as a Senior Managing Director and Founding Partner at Eton Park Capital Management. Eton Park Capital is closed now, but Darsana is open.
Darsana Capital Partners is a hedge fund established in New York. Mr. Desai launched the hedge fund in 2014 with $1 billion in funding. The hedge fund takes a bottom-up approach, focusing its investments on a small number of individual stocks worldwide. The hedge fund searches for companies and industries that are going through significant secular shifts and for which it has an entirely different view on future outcomes. To generate high returns, the company also undertakes short-term bets. In 2015 and 2016, Anand Desai’s fund was relatively unchanged before returning 20.5% in 2017. As of the third quarter of 2021, the fund has 15 reported holdings, according to SEC 13F filings. The hedge fund valued its 13F public stock portfolio at $3.04 billion and a top 10 holdings concentration of 85.77%.
Some of the top stocks in Anand Desai’s Darsana Capital include Amazon.com, Inc. (NASDAQ:AMZN), Meta Platforms, Inc. (NASDAQ:FB), and Shopify Inc. (NYSE:SHOP), among others discussed in detail below.
The hedge fund managed by Anand Desai owns 30,000 shares in the multinational technology company, Amazon.com, Inc. (NASDAQ:AMZN), worth over $98.55 million, representing close to 3.24% of their portfolio. In December, Cowen analyst John Blackledge increased his price target on Amazon.com, Inc. (NASDAQ:AMZN) to $4,500 from $4,300 and maintained an “Outperform” rating on the shares.
Darsana Capital also holds 800,000 shares in Meta Platforms, Inc. (NASDAQ:FB) worth over $271.51 million, representing 8.94% of their investment portfolio. On January 23, shares of Meta Platforms, Inc. (NASDAQ:FB) is up over 9.05% over the last 12 months.
Darsana Capital also owns 225,000 shares of Shopify Inc. (NYSE:SHOP). In January, Roth Capital analyst Darren Aftahi lowered his price target on Shopify Inc. (NYSE:SHOP) to $1,400 from $1,650 and kept a “Buy” rating on the shares. The analyst forecasts a 30% growth in gross merchandise volume over the previous year.
Keeping all these points in mind, let’s start our list of the 10 stocks to buy according to Anand Desai’s Darsana Capital. We picked these stocks from the Q3 portfolio of Desai’s hedge fund.
Stocks to Buy According to Anand Desai’s Darsana Capital
10. Peloton Interactive, Inc. (NASDAQ:PTON)
Darsana Capital Stake Value: $156,690,000
Percentage of Darsana Capital’s 13F Portfolio: 5.16%
Number of Hedge Fund Holders: 62
Peloton Interactive, Inc. (NASDAQ:PTON) offers live and on-demand indoor cycling courses through an at-home exercise platform. In addition, the firm was the first to offer linked, technology-enabled exercise to its members and the streaming of immersive, instructor-led boutique courses. Peloton Interactive, Inc. (NASDAQ:PTON) accounts for about 5.16% of Darsana Capital’s portfolio, as the hedge fund owns a $156.69 million stake in the company.
Needham analyst Bernie McTernan reduced his price objective on Peloton Interactive, Inc. (NASDAQ:PTON) to $50 from $105 on January 21, but maintained a “Buy” rating on the stock following CNBC speculation about production reduction and management’s subsequent Q2 sales statement.
By the end of the third quarter of 2021, 62 hedge funds out of the 867 tracked by Insider Monkey held stakes in Peloton Interactive, Inc. (NASDAQ:PTON), worth roughly $4.63 billion. This is compared to 67 hedge funds in the previous quarter, with a total stake value of approximately $6.12 billion.
Just like Amazon.com, Inc. (NASDAQ:AMZN), Meta Platforms, Inc. (NASDAQ:FB), and Shopify Inc. (NYSE:SHOP), Peloton Interactive, Inc. (NASDAQ:PTON) is one of the best stocks to buy, according to Anand Desai’s Darsana Capital. Unfortunately, PTON shares performed horribly this year losing around 30% of its value.
In its second-quarter 2021 investor letter, Carillon Tower Advisers mentioned Peloton Interactive, Inc. (NASDAQ:PTON). Here is what the fund said:
“Peloton Interactive operates a connected fitness platform offering live and on-demand classes allowing users to exercise at home. The firm’s shares were pressured in the quarter after Peloton announced a voluntary recall for both its legacy treadmill (Peloton Tread+) and its newly-launched base model treadmill (Peloton Tread). The issue surrounding the latter is somewhat troubling, as it appears it may be the result of an engineering flaw. This new treadmill offering was expected to be a key growth driver in the second half of 2021, and this development reduces our confidence in Peloton’s product pipeline. Therefore, we sold the stock.”
9. Warner Music Group Corp. (NASDAQ:WMG)
Darsana Capital Stake Value: $179,767,000
Percentage of Darsana Capital’s 13F Portfolio: 5.92%
Number of Hedge Fund Holders: 28
Warner Music Group Corp. (NASDAQ:WMG) is a music publishing and recording company. It is divided into two segments: recorded music and music publishing. In January, Jefferies analyst Andrew Uerkwitz upgraded Warner Music Group Corp. (NASDAQ:WMG) to “Buy” from “Hold” with a price target of $50, up from $41.
Darsana Capital began investing in Warner Music Group Corp. (NASDAQ:WMG) in the second quarter of 2020 and currently holds over 4.21 million shares in the company, valued at $179.77 million. The company represents 5.92% of the hedge fund’s 13F portfolio.
Warner Music Group Corp. (NASDAQ:WMG) recently saw a decrease in hedge fund sentiment. The number of long hedge fund positions declined to 28 at the end of the third quarter compared to 29 positions in the previous quarter.
In its fourth-quarter 2021 investor letter, Cooper Investors mentioned Warner Music Group Corp. (NASDAQ:WMG). Here is what the fund said:
“In recent years we have observed a growing market for music rights which represent another way for owners of record labels and music libraries like portfolio holdings Warner Music Group and Sony (via its subsidiary Sony Music, ~25% of our estimated enterprise value) to deploy capital, grow their businesses and create value for shareholders.
In the first few days of 2022 Warner closed a deal to acquire David Bowie’s back catalogue for about US$250m which follows on from Bruce Springsteen’s catalogue sale to Sony for upwards of US$500m and Bob Dylan’s sale to Universal Music for a similar amount.
The trend in demand for music copyrights is clearly strengthening, with competition for these assets coming from traditional music companies (Warner, Sony) as well as specialist investors and private equity…” (Click here to see the full text)
8. Comcast Corporation (NASDAQ:CMCSA)
Darsana Capital Stake Value: $195,755,000
Percentage of Darsana Capital’s 13F Portfolio: 6.44%
Number of Hedge Fund Holders: 75
Comcast Corporation (NASDAQ:CMCSA) is a Philadelphia-based media, entertainment, and communications conglomerate. In the third quarter of 2021, First Eagle Investment Management, with approximately 29.45 million shares worth $1.65 billion, is the largest shareholder in Comcast Corporation (NASDAQ:CMCSA).
Goldman Sachs analyst Brett Feldman’s number one cable option is Comcast Corporation (NASDAQ:CMCSA). Therefore, in January, he initiated coverage of Comcast Corporation (NASDAQ:CMCSA), rating the stock as “Buy,” and gave a 12-month price target of $62.
As of the end of the third quarter, 75 hedge funds in Insider Monkey’s database of 867 funds held stakes in Comcast Corporation (NASDAQ:CMCSA) compared to 84 funds in the preceding quarter.
ClearBridge Investments, in its “second-quarter 2021 investor letter mentioned Comcast Corporation (NASDAQ:CMCSA). Here is what the fund said:
“We funded the shift primarily with trims in Comcast following big gains in this name. Comcast is a long-term holding that have been and remain core holdings. During the quarter, however, we took gains and resized the positions to reflect their current risk-reward post strong increases in the stocks.
Comcast, like Blackstone, has been a meaningful long-term holding whose stock performance has at times lagged its robust fundamental performance. Over the last nine months the stock price caught up some with the fundamentals and looked like it had more room to run. Our thesis on the name evolved, however, following the May 17 announcement that competitor Discovery was merging its operations with Time Warner. This deal positions the new company as a credible competitor to Netflix, Amazon Prime, Hulu and Disney, and results in Comcast being left without the proverbial dance partner in the evolving pay TV/DTC landscape. While we continue to believe Comcast’s cable systems business is well-positioned and that NBCUniversal remains valuable, the competitive dynamic for NBCUniversal has stiffened. Our reduced position size reflects both our continued enthusiasm for many parts of the franchise and emerging concerns given the evolving pay TV/DTC landscape.”
CMCSA shares outperformed the market so far in 2022.
7. Hilton Worldwide Holdings Inc. (NYSE:HLT)
Darsana Capital Stake Value: $198,165,000
Percentage of Darsana Capital’s 13F Portfolio: 6.52%
Number of Hedge Fund Holders: 44
Hilton Worldwide Holdings Inc. (NYSE:HLT), originally Hilton Hotels Corporation, is a worldwide hospitality corporation based in the United States that operates and franchises a diverse range of hotels and resorts. In 104 countries and territories, Hilton has over 4,900 hotels. In the third quarter of 2021, Hilton Worldwide Holdings Inc.’s (NYSE:HLT) revenue came in at $1.75 billion, up 87.6% YoY, beating the estimates by $50 million.
In January, Bernstein analyst Richard Clarke downgraded Hilton Worldwide Holdings Inc. (NYSE:HLT) to “Market Perform” from “Outperform” and gave price objective of $161. Due to its fair market value, unpredictability, and a lack of favorable factors in the coming years, Hilton was downgraded by the analyst.
In the third quarter, hedge fund sentiment decreased for Hilton Worldwide Holdings Inc. (NYSE:HLT). Insider Monkey’s data shows that 44 elite hedge funds held stakes in the company at the end of the third quarter, down from 45 funds a quarter earlier.
Pershing Square Holdings, Ltd., in its second-quarter 2021 investor letter mentioned Hilton Worldwide Holdings Inc. (NYSE:HLT). Here is what the fund said:
“While the hotel industry has been extremely negatively impacted by the COVID-19 pandemic, Hilton has done an excellent job navigating industry volatility, a testament to the company’s high-quality, asset light, high-margin business model and superb management team. From the moment the pandemic began, Hilton’s management team took decisive actions to ensure the company not only managed through what it knew would be a challenging period, but also positioned the company to generate improved margins, cash fl ows and investment returns once the business recovers to pre-COVID-19 demand levels.
Industry RevPAR (the industry metric for same-store sales at a given hotel) bottomed in April 2020 and has shown sequential improvement every quarter as travel and mobility have recovered along with COVID-19 vaccine rollouts and a resumption in travel. In recent months, there is increasing evidence that a robust recovery scenario is underway, led by domestic leisure travel occasions which is currently trending above 2019 demand levels. For the fi rst three weeks of July, the most recent data the company provided, RevPAR has already recovered to 85% of 2019 levels – a significant improvement over prior months driven by increased hotel occupancy and a rapid recovery in rate.…” (Click here to see the full text)
6. RH (NYSE:RH)
Darsana Capital Stake Value: $266,764,000
Percentage of Darsana Capital’s 13F Portfolio: 8.78%
Number of Hedge Fund Holders: 57
RH (NYSE:RH) and its subsidiaries are a premium home goods shop that sells furniture, lighting, textiles, bath-ware, décor, outdoor and garden dinnerware, and children’s furniture, among other things. In Q3 2021, RH (NYSE:RH) posted an EPS of $7.03, beating the consensus by $0.44.
In January, Citi analyst Steven Zaccone lowered his price target on RH (NYSE:RH) from $766 to $668 but kept a “Buy” recommendation on the company. He feels that the current market slump in growth stocks and the uncertainty surrounding 2022 create intriguing risk/reward possibilities for long-term investors.
Overall, hedge funds are loading up on RH (NYSE:RH), as 57 out of the 867 funds tracked by Insider Monkey held stakes in the company, compared to 54 funds a quarter earlier.
Alongside Amazon.com, Inc. (NASDAQ:AMZN), Meta Platforms, Inc. (NASDAQ:FB), and Shopify Inc. (NYSE:SHOP), RH (NYSE:RH) is one of the stocks attracting the attention of Anand Desai’s Darsana Capital. Unfortunately RH shares lost more than 30% so far in 2022.
In its first-quarter 2021 investor letter, Polen Capital mentioned RH (NYSE:RH). Here is what Polen Capital has to say about RH in its letter:
“RH was also a top contributor during the quarter. RH is a leading luxury retailer in home furnishings, including high-end luxury furniture, home décor, lighting, textiles, etc. The company has experienced high demand for its products over the past year, despite many of its galleries and integrated restaurants being closed, at least temporarily, in 2020. We think the management team has continued to make thoughtful investments in the core business as well as other adjacencies to further meet customer needs. We believe RH has a long runway to further expand into other home furnishings categories, expand its footprint both domestically and internationally, and launch other luxury adjacent categories.”
Click to continue reading and see 5 Best Stocks to Buy for 2022.
- 10 Best Dividend Stocks to Buy According to Cliff Asness’ AQR Capital Management
- 10 Jim Cramer Stocks to Buy in January
- 10 Best Fertilizer Stocks To Buy Now
Disclosure: None. 10 Stocks to Buy According to This Hedge Fund Manager is originally published on Insider Monkey.