8 Stocks to Buy According to Alexander Captain’s Cat Rock Capital

Published on October 31, 2022 at 9:26 am by Ruchi Gupta in Hedge Funds, News

In this article, we discuss 8 stocks to buy according to Alexander Captain’s Cat Rock Capital. If you want to skip our detailed analysis of Captain’s investment philosophy and performance, go directly to 4 Stocks to Buy According to Alexander Captain’s Cat Rock Capital.

In the first quarter of 2015, Alexander Captain established the Connecticut-based hedge fund Cat Rock Capital. Captain has a Master of Arts in Statistics from the Harvard Graduate School of Arts and Sciences and a Bachelor of Arts in Economics from Harvard College. He worked at Chase Coleman’s Tiger Global and Blackstone before launching Cat Rock Capital. He is the founder and managing partner at the Cat Rock Capital.

Cat Rock Capital uses in-depth fundamental analysis and targeted value investing in providing returns for investors over the long term in high-quality, publicly traded firms. It often keeps investments for several years, borrows little to nothing, and has 10 to 15 core holdings. Cat Rock Capital’s investment strategy emphasizes on reliability, firm, people, and pricing.

The fund’s Q2 2022 portfolio was worth $469.92 million, and some renowned names in Cat Rock Capital’s include TransDigm Group Incorporated (NYSE:TDG), Microsoft Corporation (NASDAQ:MSFT), and Meta Platforms, Inc. (NASDAQ:META). The hedge fund primarily invests in the information technology, industrials, and communication sectors, focusing on small and big companies with solid fundamentals and potential for future growth.

Our Methodology

Let’s start our list of 8 stocks to buy according to Alexander Captain’s Cat Rock Capital. These equities were chosen from Cat Rock Capital’s Q2 portfolio. The Q2 2022 database of Insider Monkey, which contains data on approximately 900 hedge funds, was utilised to ascertain the sentiment of the hedge funds towards these equities.

Stocks to Buy According to Alexander Captain’s Cat Rock Capital

8. DocuSign, Inc. (NASDAQ:DOCU)

Cat Rock Capital’s Stake Value: $16,411,000

Percentage of Cat Rock Capital’s 13F Portfolio: 3.49%

Number of Hedge Fund Holders: 37

DocuSign, Inc. (NASDAQ:DOCU) provides cloud-based electronic signing solutions. DocuSign, Inc. (NASDAQ:DOCU) was upgraded by Wedbush analyst Daniel Ives on October 12 from ‘Underperform’ to ‘Neutral’ with a $55 price target. According to the analyst, CLM deal execution has generally steadied, with numbers currently within reach for 2023–2024. DocuSign, Inc. (NASDAQ:DOCU) launched CLM Essentials in April to streamline contracts for expanding businesses.

At the end of Q2 2022, 37 hedge funds tracked by Insider Monkey owned stakes in DocuSign, Inc. (NASDAQ:DOCU), down from 45 a quarter earlier. The collective value of these stakes is over $1.01 billion. With nearly 5.22 million shares, Fisher Asset Management is DocuSign, Inc. (NASDAQ:DOCU)’s leading stakeholder as of Q2 2022.

Cat Rock Capital increased its stake in DocuSign, Inc. (NASDAQ:DOCU) during the second quarter of 2022 by around 30%. The fund now owns over 286,000 shares of DocuSign, Inc. (NASDAQ:DOCU), worth close to $16.41 million, representing 3.49% of the portfolio.

In addition to TransDigm Group Incorporated (NYSE:TDG), Microsoft Corporation (NASDAQ:MSFT), and Meta Platforms, Inc. (NASDAQ:META), Alexander Captain’s Cat Rock Capital is bullish on DocuSign, Inc. (NASDAQ:DOCU).

Rowan Street Capital, an investment management company, mentioned DocuSign, Inc. (NASDAQ:DOCU) in its Q3 2022 investor letter. Here is what the fund said:

“In the case of DocuSign, Inc. (NASDAQ:DOCU), the “Management” part no longer satisfies our requirements in order to remain in our investment portfolio. In the past 6-9 months, the company has had a huge turnover in both employees and upper management. In June of 2021, the board decided to get rid of Dan Springer, who had been a CEO of DocuSign since 2017 and took the company public in 2018. We found this decision strange as we thought that he actually did a great job growing the company over the past 5 years (revenues grew almost 5x from $519 million in 2017 to an estimated $2.4 billion this year).…” (Click here to read the full text)

7. eXp World Holdings, Inc. (NASDAQ:EXPI)

Cat Rock Capital’s Stake Value: $32,462,000

Percentage of Cat Rock Capital’s 13F Portfolio: 6.9%

Number of Hedge Fund Holders: 19

eXp World Holdings, Inc. (NASDAQ:EXPI) owns and runs a technology platform that enables businesses to run remotely, as well as a cloud-based real estate brokerage. eXp Realty has more than 85,000 agents globally, a 30% increase from the 65,286 agents it had at the start of October 2021. eXp World Holdings, Inc. (NASDAQ:EXPI) is the parent company of eXp Realty.

In light of eXp World Holdings, Inc. (NASDAQ:EXPI)’s Q2 earnings deficit, DA Davidson analyst Tom White on August 4 maintained a ‘Buy’ rating on shares of eXp World Holdings while decreasing his price objective from $28 to $22. In addition, according to Insider Monkey’s data, 19 hedge funds were bullish on eXp World Holdings, Inc. (NASDAQ:EXPI) at the end of Q2 2022, compared to 18 funds in the prior quarter.

Alexander Captain’s Cat Rock Capital is the leading position holder in eXp World Holdings, Inc. (NASDAQ:EXPI). The hedge fund first bought a stake in eXp World Holdings, Inc. (NASDAQ:EXPI) in the fourth quarter of 2021. In Q2 2022, the hedge fund increased its position in eXp World Holdings, Inc. (NASDAQ:EXPI) by 8% to 2.76 million shares, accounting for 6.9% of the overall portfolio.

Here is what East 72 has to say about eXp World Holdings, Inc. (NASDAQ:EXPI) in its Q1 2022 investor letter:

“Investors don’t like listed real estate brokers – at all. There are three significant US listed residential real estate brokers or franchisors (which includes) eXp World Holdings (EXPI: market capitalisation US$3.03billion less $108m in cash) with 72,000 agents connected via the eXp World and Virbela platforms; EXPI earned ~$41million in operating profit in 2021, after $144million in stock based compensation!”

6. Liberty Broadband Corporation (NASDAQ:LBRDA-C)

Cat Rock Capital’s Stake Value: $36,753,000

Percentage of Cat Rock Capital’s 13F Portfolio: 7.82%

Number of Hedge Fund Holders: 27

Liberty Broadband Corporation (NASDAQ:LBRDA-C) provides telecommunications services in the United States. Both household users and small to medium-sized businesses can access cable services using the company’s infrastructure of fibre, hybrid fibre, and coaxial connections.

In Q2 2022, Cat Rock Capital decreased its position in Liberty Broadband Corporation (NASDAQ:LBRDA-C) by 70%, holding a total of 317,820 shares worth over $36.75 million. The company represented 7.82% of the fund’s total 13F portfolio. Eagle Capital Management is the leading Liberty Broadband Corporation (NASDAQ:LBRDA-C) stakeholder, with a $960.27 million stake in the company.

According to Insider Monkey’s data, 27 hedge funds held stakes worth $543.50 million in Liberty Broadband Corporation (NASDAQ:LBRDA-C) at the end of June 2022, compared to 26 funds in the prior quarter worth $606.16 million.

Here is what Longleaf Partners Fund had to say about Liberty Broadband Corporation (NASDAQ:LBRDA) in its Q1 2022 investor letter:

“Liberty Broadband – A new position in 4Q 2021, holding company Liberty Broadband also suffered from a widening of a market-imposed holdco discount in an uncertain quarter. Liberty’s stakes in Charter and Alaskan cable company GCI also faced near-term concerns over slowing industry broadband additions, but these businesses have over a decade of pricing power history and are well positioned to weather an inflationary environment. We have a high degree of respect for our partners in John Malone and Greg Maffei, who are focused on growing value per share and are actively repurchasing discounted shares to help close the price-to-value gap.”

5. TransDigm Group Incorporated (NYSE:TDG)

Cat Rock Capital’s Stake Value: $43,644,000

Percentage of Cat Rock Capital’s 13F Portfolio: 9.28%

Number of Hedge Fund Holders: 66

TransDigm Group Incorporated (NYSE:TDG) is a designer, producer, and supplier of engineered aviation components for use in operational, commercial, and military aircraft. Sharlyn C. Heslam’s Stockbridge Partners is the leading position holder in TransDigm Group Incorporated (NYSE:TDG), with 1.60 million shares worth $859.93 million.

On October 11, Credit Suisse analyst Scott Deuschle initiated coverage of TransDigm Group Incorporated (NYSE:TDG), assigning an ‘Outperform’ rating and a $661 price target. The expert asserted that TransDigm Group Incorporated (NYSE:TDG)’s over-earning is not an issue and that there is still time for the commercial aerospace revival.

TransDigm Group Incorporated (NYSE:TDG) is a notable position in Alexander Captain’s Cat Rock Capital portfolio, alongside Microsoft Corporation (NASDAQ:MSFT), and Meta Platforms, Inc. (NASDAQ:META). Shares of TransDigm Group Incorporated (NYSE:TDG) rallied 7.11% last month, resulting in a $30.96 billion market capitalization. According to Insider Monkey’s data, 66 hedge funds were bullish on TransDigm Group Incorporated (NYSE:TDG) at the end of Q2 2022, compared to 64 funds in the preceding quarter.

The hedge fund of Alexander Captain entered the second quarter of 2022 with 81,323 shares of TransDigm Group Incorporated (NYSE:TDG) in its portfolio worth around $43.64 million. The company has featured on Captain’s portfolio since the fourth quarter of 2015.

In its Q2 2022 investor letter, Vulcan Value Partners mentioned TransDigm Group Incorporated (NYSE:TDG) and explained its insights for the company. Here is what the fund said:

“TransDigm Group Inc. is an aerospace manufacturing firm that provides highly engineered, niche components for use on commercial and military aircraft. The vast majority of the company’s profits come from aftermarket sales of sole-sourced products. The company produces high levels of free cash flow and has an effective, shareholder-oriented management team who are good capital allocators. Despite the company’s strong results during the quarter and solid outlook, its stock price declined.”

Click to continue reading and see 4 Stocks to Buy According to Alexander Captain’s Cat Rock Capital.

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