In this article, we will discuss the top 10 stock picks of Julian Robertson’s Tiger Management.
Julian Robertson was a pioneer in the hedge fund industry as he co-founded one of the earliest hedge funds, Tiger Management, in 1980. The billionaire hedge fund owner and philanthropist passed away at the age of 90 due to cardiac complications on August 23.
Born in Salisbury, North Carolina, Robertson had a knack for stock picking from a young age and developed astute investment strategies. He served for two years in the Navy following his graduation from the University of North Carolina in Chapel Hill. Robertson entered the world of finance in 1957 after joining the securities firm Kinder Peabody. He rose through the ranks and became the CEO of Webster Management, the investment advisory arm of Kinder Peabody, in 1978. After serving as the CEO for a year only, he took a break from the world of investing and traveled to New Zealand to write a novel. Robertson came back with a renewed focus and started his hedge fund in 1980.
Building a Legacy
Tiger Management held assets of more than $22 billion in the late 1990s and gave an average annual return of 32% to its investors. Robertson brought in analysts and trained them in picking the right stocks for his hedge fund. Several of them went on to start their hedge funds and became part of one of the biggest alumni groups in the hedge fund industry. Andreas Halvorsen, Stephen Mandel, Lee Ainslie, and Chase Coleman are currently some of the leading billionaire hedge fund managers in the industry who started their careers with Robertson. The extensiveness of the alumni network can be gauged by the fact that by 2008, around 36 former employees of Tiger Management had founded their hedge funds and were managing more than $100 billion in assets together, according to Sebastian Mallaby’s book “More Money Than God.” Robertson gave seed money to several of these funds.
Robertson had a peculiar way of running his hedge fund. He preferred analysts with top mental and physical abilities as he picked out competitive college athletes and arranged hikes for them as a team-building activity. Furthermore, a trainer was present on the office premises to motivate the staff towards exercise. Another of Robertson’s qualities was to know when to step away from an investment or accept responsibility for miscalculated bets. This trait was seen in 2000 when he decided to close six of his Tiger funds after recording heavy losses in 1999 and 2000 due to an incorrect bet on the yen. In a letter to investors, Robertson said:
“There is no point in subjecting our investors to risk in a market which I frankly do not understand.”
Philanthropic Pursuits
Robertson was not only known for training a generation of hedge fund managers known as “Tiger Cubs” but also for his charitable pursuits. He donated around $2 billion towards educational and medical causes during his lifetime. Robertson was also a member of the Giving Pledge initiative, which comprises the richest individuals in the world like Bill Gates and Warren Buffett. According to his spokesperson, Fraser Seitel, the billionaire shared that he would be happy to be remembered for charitable causes. When Robertson stepped back from actively managing his hedge fund, he famously said in 2013, “I didn’t want my obituary to read, ‘He died getting a quote on the yen at 2 a.m.'”
According to Forbes, Robertson’s net worth stood at $4.8 billion in 2022 as compared to $4.5 billion last year. The rise in his wealth can be attributed to allocating 40% of his portfolio towards buying put options on the Invesco QQQ Trust (NASDAQGM:QQQ). The index fund tracks the performance of the NASDAQ Composite Index, which has observed a decline of over 21% since the start of the year. The decline would have certainly booked healthy returns on the holdings of the billionaire’s put options. Furthermore, Robertson’s Tiger Management also held a stake in popular companies like Alphabet Inc. (NASDAQ:GOOG), Microsoft Corporation (NASDAQ:MSFT), and Blackstone Inc. (NYSE:BX) as of the second quarter of 2022.
Our Methodology
These stocks have been picked from the second quarter portfolio of Julian Roberson’s Tiger Management. We have ranked these companies according to the stake held in them by the hedge fund as of Q2 2022.
10. Nemaura Medical Inc. (NASDAQ:NMRD)
Number of Hedge Fund Holders: 1
Julian Robertson’s Tiger Management’s Holdings: $964,000
Percentage of Julian Robertson’s Tiger Management’s Portfolio: 0.42%
Nemaura Medical Inc. (NASDAQ:NMRD) is a New York-based organization founded in 2011. The company is working on developing a single medical platform technology that employs non-invasive systems to measure different blood markers from the skin’s surface.
In a research note issued to investors on August 19, Yi Chen at H.C Wainwright gave Nemaura Medical Inc. stock a target price of $8 and maintained a Buy rating on the stock. The target price provides a potential upside of over 272% from the closing price as of August 24.
Nemaura Medical Inc. posted its Q1 FY23 results on August 15. The company did not report any revenue as opposed to H.C. Wainwright’s forecast of $500,000. Meanwhile, the adjusted loss per share of 17 cents was in line with the consensus forecast.
9. Uber Technologies, Inc. (NYSE:UBER)
Number of Hedge Fund Holders: 144
Julian Robertson’s Tiger Management’s Holdings: $1,227,000
Percentage of Julian Robertson’s Tiger Management’s Portfolio: 0.54%
Uber Technologies, Inc. (NYSE:UBER) is a San Francisco, California-based ride-hailing company that has also ventured into the delivery of food and other items. The company intends to operate a fully-electric and zero-emission platform by 2040. Julian Robertson’s Tiger Management initiated a stake in Uber Technologies, Inc. in Q2 2020 with 34,600 shares. The hedge fund has since increased its holding in the company to 59,976 shares as of Q2 2022.
Deepak Mathivanan at Wolfe Research termed Uber Technologies, Inc. stock as a top idea in the mobility segment for the second half of 2022. The analyst gave the stock an Outperform rating with a target price of $37 in a note issued to investors on August 23.
Analysts think that Uber Technologies, Inc. has a “significant runway” to report growth in profitability and free cash flows during the second half of this year and 2023. The company is also working on margin expansion through cost savings.
Here’s what ClearBridge Investments said about Uber Technologies, Inc. in its Q3 2021 investor letter:
“We have also been looking for multiyear secular trends outside of the IT and Internet sectors to help us maintain a portfolio that can perform well in markets with varied sector or factor leadership. In particular, electrification of the global economy and the transition to electric vehicles (EVs) are areas where we continue to add exposure. We are investing in the brains behind EVs through NXP in the control center and Aptiv for safety features. Global rideshare leader Uber will also be a key player in the transition from internal combustion engines to EVs.”
8. European Wax Center, Inc. (NASDAQ:EWCZ)
Number of Hedge Fund Holders: 17
Julian Robertson’s Tiger Management’s Holdings: $6,440,000
Percentage of Julian Robertson’s Tiger Management’s Portfolio: 2.83%
European Wax Center, Inc. (NASDAQ:EWCZ) is a Plano, Texas-based operator of a waxing services chain that became public in August 2021. The company has over 900 locations and is working on consolidating a fragmented industry.
Analysts think there was very little focus on the personal care industry in the public market before the IPO of European Wax Center, Inc.. The stock offers an attractive entry point to investors looking for a simple business model that can yield substantial returns.
European Wax Center, Inc. reported strong Q2 2022 results. The company’s total revenue observed an increase of 11% YoY while the systemwide sales grew by 6%. Furthermore, European Wax Center, Inc. opened 19 new centers during Q2, bringing the total number of centers to 893 at the end of the second quarter.
European Wax Center, Inc. is also working on boosting its franchising business. Nearly 30% of the company’s locations are franchised, but European Wax Center, Inc. intends to have a more balanced mix down the line.
7. Flywire Corporation (NASDAQ:FLYW)
Number of Hedge Fund Holders: 24
Julian Robertson’s Tiger Management’s Holdings: $6,787,000
Percentage of Julian Robertson’s Tiger Management’s Portfolio: 2.99%
Flywire Corporation (NASDAQ:FLYW) is a Boston, Massachusetts-based global payments enablement and software corporation.
On July 14, Will Nance at Goldman Sachs upgraded Flywire Corporation stock from a Neutral to a Buy rating and increased the target price from $26 to $30. The analyst believes that Flywire Corporation offers “defensive vertical exposure” because of the company’s operations in the secondary and post-secondary education segment through its receivables solutions for the industry.
Furthermore, the acquisition of UK-based education software provider WPM will give Flywire Corporation a platform to cross-sell its offerings. Flywire Corporation also offers significant upside in terms of growth in organic sales through pricing and volume.
During Q2 2022, Adage Capital Management increased its stake in Flywire Corporation by 80%.
6. Archaea Energy Inc. (NYSE:LFG)
Number of Hedge Fund Holders: 32
Julian Robertson’s Tiger Management’s Holdings: $6,942,000
Percentage of Julian Robertson’s Tiger Management’s Portfolio: 3.05%
Archaea Energy Inc. (NYSE:LFG) is a Houston, Texas-based renewable natural gas (RNG) producer.
The recent development between Russia and Ukraine, causing a natural gas shortage and rocketing prices across Europe, has given a strong narrative on the outlook of the commodity, which plays in favor of Archaea Energy Inc.. The company has a backlog of 88 high-quality RNG development projects in the pipeline.
Theresa Chan at Barclays initiated coverage on Archaea Energy Inc. stock with an Overweight rating and a target price of $26 in a research note issued on June 17. The analyst believes that Archaea Energy Inc. stock offers a vast growth opportunity in the waste-to-energy space due to long-term contracts with reliable counterparties.
Of the 895 hedge funds in Insider Monkey’s database as of Q2 2022, 32 funds held a stake in Archaea Energy Inc..
In addition to Archaea Energy Inc., companies like Alphabet Inc., Microsoft Corporation, and Blackstone Inc. are also amongst the top 10 stock picks of Julian Robertson’s Tiger Management.
5. QUALCOMM Incorporated (NASDAQ:QCOM)
Number of Hedge Fund Holders: 73
Julian Robertson’s Tiger Management’s Holdings: $11,816,000
Percentage of Julian Robertson’s Tiger Management’s Portfolio: 5.2%
QUALCOMM Incorporated (NASDAQ:QCOM) is a California-based semiconductor company.
On July 28, T. Michael Walkley at Canaccord gave QUALCOMM Incorporated stock a Buy rating with a target price of $225. The analyst highlighted that the company is amongst the market leaders in the rollout of 5G technology, and it will experience a significant gain of market share with leading smartphone original equipment manufacturers (OEMs).
QUALCOMM Incorporated offers long-term growth through its exposure to the Internet of Things (IoT) theme and the automotive industry. However, the stock is undergoing multiple compression due to fears of an upcoming recession.
ClearBridge Investments discussed its outlook on QUALCOMM Incorporated in its Q4 2021 investor letter. Here’s what the firm said:
“Market strength continued in the fourth quarter, with only the communication services sector down in the Russell 1000 Value Index. Portfolio returns benefited from the strong performance of semiconductor maker Qualcomm, which has executed exceptionally well in pursuing the transition to 5G, growing both content and share due to its leadership position in cellular technology. The chipmaker recently outlined a number of peripheral growth opportunities outside of mobile markets, including automotive (where it hopes to leverage its strong presence in the automotive infotainment space into advanced driver assistance systems), Internet of Things (including opportunities in the PC market, VR/AR market, and factory automation) and radio frequency (where mmWave adoption globally, including China, would drive substantial upside).”
4. AutoZone, Inc. (NYSE:AZO)
Number of Hedge Fund Holders: 38
Julian Robertson’s Tiger Management’s Holdings: $12,895,000
Percentage of Julian Robertson’s Tiger Management’s Portfolio: 5.68%
AutoZone, Inc. (NYSE:AZO) is a Tennessee-based retailer of automotive parts and accessories.
Julian Robertson’s Tiger Management initiated a position in AutoZone, Inc. during Q2 2022. The hedge fund bought 6,000 shares at an average quarterly share price of $2056.6.
Experts believe that under the current economic uncertainty, AutoZone, Inc. stock provides a defensive position to investors due to the nature of its business. The sale of auto parts is non-discretionary, and its demand is relatively inelastic. This would aid AutoZone, Inc. in passing on the burden of higher costs to the end customer. Furthermore, AutoZone, Inc. will continue to gain market share from its highly fragmented do-it-for-me (DIFM) competitors.
Here’s what Weitz Investment Management said about AutoZone, Inc. in its Q2 2022 investor letter:
“Given a nearly fully invested portfolio, we elected to trim or sell some holdings in favor of increasing our stakes in several more compelling opportunities. We continued trimming Markel on strength and sold our remaining AutoZone (NYSE:AZO) shares during the quarter. Over our roughly 18 months of ownership, AutoZone was a strong contributor to results, and we would gladly own this business again. At current prices, however, we believe its defensive characteristics are well-appreciated.”
3. Blackstone Inc. (NYSE:BX)
Number of Hedge Fund Holders: 61
Julian Robertson’s Tiger Management’s Holdings: $26,137,000
Percentage of Julian Robertson’s Tiger Management’s Portfolio: 11.51%
Blackstone Inc. is a New York-based investment management company with an asset under management (AUM) of over $940 billion as of Q2 2022.
On August 12, Brian Bedell at Deutsche Bank increased the target price for Blackstone Inc. from $147 to $153 and reiterated a Buy rating on the stock following changes in EPS estimates. The analyst revised his financial model to incorporate the impact of changes in macroeconomic assumptions and the recovery in the equity markets since the lows of mid-June 2022. Blackstone Inc. is expected to be a beneficiary of the strong rebound in the stocks, given its diverse portfolio.
Aristotle Capital Management shared its stance on Blackstone Inc. in its Q1 2022 investor letter. Here’s what it said:
“Founded by its current CEO Stephen Schwarzman and Pete Peterson in 1985, Blackstone is one of the largest alternative asset managers in the world, with more than $880 billion of assets under management (AUM). The firm creates and manages investment vehicles that span asset classes globally and serve both institutional clients as well as high-net-worth individuals. Its core business segments include Real Estate (34% of fee-earning AUM), Credit and Insurance (31%), Private Equity (24%), and Hedge Fund Solutions (11%).
Blackstone has leveraged its broad product portfolio and enviable investment performance to not only raise substantial amounts of capital but also maintain its reputation as a one-stop shop for investors looking to gain exposure to alternative assets. In contrast to traditional asset managers that rely on investor inaction to keep redemption rates low, the products offered by alternative asset managers typically have lockup periods that prevent redemptions for a substantial amount of time (often 10+ years).
High-Quality Business
Some of the quality characteristics we have identified for Blackstone include:
-Reputable management team that has produced an admirable track record of investment performance and demonstrated its ability to raise capital (the firm is now 9x larger since its 2007 IPO);
-Stable client base and sticky asset base with 73% of its capital locked up for over 10 years; and
-Significant scale and strong brand that provides a myriad of advantages, including for distribution and new product launches.
Attractive Valuation
Based on our estimates of normalized earnings, we believe shares of Blackstone are offered at a discount relative to our estimate of intrinsic value. It is our view that current valuation does not appropriately reflect our estimated future levels of fee-based revenue.
Compelling Catalysts
Catalysts we have identified for Blackstone, which we believe will cause its stock price to appreciate over our three- to five- year investment horizon, include:
-Increased fee-based revenue as dry powder committed capital that has yet to be invested is deployed. As of the fourth quarter of 2021, there was a total of $136 billion in dry powder across the firm;
-Given its scale and sustained investment prowess, Blackstone is uniquely positioned to benefit from the secular shift in investor allocation away from traditional managers and toward less liquid and higher expected return strategies in the alternative asset management sector; and
-Further penetration in the retail and private wealth channel, a segment of investors that has historically been excluded from participating in alternative assets. Blackstone has a first-mover advantage in providing institutional-quality products across its expanding distribution teams that focus on financial advisors.”
2. Microsoft Corporation (NASDAQ:MSFT)
Number of Hedge Fund Holders: 259
Julian Robertson’s Tiger Management’s Holdings: $26,736,000
Percentage of Julian Robertson’s Tiger Management’s Portfolio: 11.78%
Microsoft Corporation is a Washington-based diversified technology conglomerate.
Experts believe that Microsoft Corporation can grow its top line and free cash flows (FCF) by an average in the mid-teens percentage due to the upside offered by the Azure cloud services and Office 365 Commercial. The biggest publicly listed company in the world is expected to experience secular growth in the cloud computing industry as it is set to compound annually at an average rate of 14.8% from 2022 to 2030. This will be beneficial for Microsoft Corporation because 40% of the company’s revenues are generated by the Microsoft Intelligent Cloud segment.
Here’s what Baron Funds said about Microsoft Corporation in its Q1 2022 investor letter:
“Shares of mega-cap software company Microsoft Corporation (NASDAQ:MSFT) pulled back with the broader software sector. The company posted another solid quarter, highlighted by total revenues increasing 20% and Microsoft Cloud revenues, now 45% of total revenues, growing 32%. These results were driven, in large part, by strong demand for large Azure contracts. We believe Microsoft can compound revenue in the low double digits for the next three years, underpinned by its expansion in its total addressable market and market share gains.”
Microsoft Corporation was held by 259 hedge funds at the end of Q2 2022.
1. Alphabet Inc. (NASDAQ:GOOG)
Number of Hedge Fund Holders: 160
Julian Robertson’s Tiger Management’s Holdings: $34,365,000
Percentage of Julian Robertson’s Tiger Management’s Portfolio: 15.14%
Alphabet Inc. is a California-based diversified technology company and parent company of leading technology brands like Google, Waymo, and YouTube.
The stock price of the tech giant has doubled in the last two years. However, Alphabet Inc. continues to offer significant upside to investors as the business is expected to see growth in its revenue from the advertising segment. Alphabet Inc.’s advertising segment contributed $209 billion to the top line in 2021 through Search and YouTube. Experts believe Alphabet Inc. will achieve a total top line of $368 billion by 2026. This would be equivalent to 42% of the total size of the online adverting market, according to Statista.
Alphabet Inc. was mentioned in the Q2 2022 investor letter of Mayar Capital. Here’s what the firm said:
“Our technology businesses enjoyed a strong year of operating performance – from Google. Google saw revenue growth of over 40% in the year, with operating profits growing above 90%; YouTube ended the year with higher viewership than Netflix – without the content costs. With its dominant position in online advertising, we continue to monitor regulatory risks for this business.”
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