In this article, we examined Billionaire Masayoshi Son’s investment strategy that helped him in generating billions of dollars in profits last year. We also discussed billionaire Masayoshi Son’s top 10 stock picks to see whether the Japanese billionaire is in a position to extend his robust performances into 2021.
The Japanese billionaire and SoftBank founder Masayoshi Son’s bullish bets on tech stocks helped him make $12 billion in profits for the June quarter while his technology investment firm racked up another $6 billion in profits during the September quarter last year. SoftBank’s stock price rallied 180% in the last twelve months, driven by the strong performance from portfolio companies. Headquartered in Tokyo, SoftBank Group is a Japanese multinational conglomerate that owns stakes in many technology, energy, and financial companies. SoftBank’s Vision Fund is the world’s largest technology fund with assets over $100 billion. In the past couple of quarters, Masayoshi Son established several other investment arms including SB Management and SB Northstar to capitalize on tech and biotechnology opportunities.
SoftBank has been using proceeds from its assets sales for investment in technology stocks. Last year, SoftBank announced to sell $41 billion of its assets amid rising debt and plunging stock price. The company ended the September quarter with $80 billion of cash in hand to prepare for a worst-case scenario.
Masayoshi Son of SB Management
During a DealBook Summit last year, Son said:
“Anything can happen in this kind of situation. I think it’s getting better with this news of the vaccines’ success. But I still want to be prepared for the worst-case scenario, so that’s why today we have almost $80 billion cash in hand ourselves.”
Son went on to say that SoftBank has “enough funding,” but that “I thought cash is very important in this kind of crisis.”
The asset sales were initially deemed to be used for SoftBank’s stock buybacks and debt reduction. However, the Japanese billionaire now plans to use these funds for building more stakes in portfolio companies.
“If we can invest in these front-end companies, if we can invest more into those opportunities, I will be aggressive,” Son said.
The asset management firm SB Management, a subsidiary of SoftBank, ended the December quarter with a 13F portfolio market value of $17.6 billion. Masayoshi Son’s SB Management unit has spread investments across high-growth sectors including communications, information technology, and consumer discretionary.
Interestingly, the Japanese billionaire investor has also started moving investments towards biotechnology stocks over the past couple of quarters. The healthcare sector accounted for more than 3% of Masayoshi Son’s SB Management portfolio at the end of the latest quarter. SB Management added three stocks from the healthcare sector in Q4. Moreover, the Japanese billionaire plans to invest billions of dollars in biotech and healthcare stocks in the days ahead.
SB Management is working on a strategy of managing a concentrated portfolio. The firm has spread $17 billion across its 12 positions while the top 5 positions represent more than 80% of the overall 13F stock portfolio. Excluding Apple, Son’s SB Management portfolio is holding a big stake in the rest of the FAANG members. These stocks, however, underperformed since the beginning of this year due to the market’s broader move towards value stocks that are benefiting from easing social distancing policies. Amazon (NASDAQ: AMZN) and Facebook (NASDAQ: FB), which account for almost 60% of the SB Management’s portfolio, are still struggling to trade in the green. Netflix (NASDAQ: NFLX) is among billionaire Masayoshi Son’s top 10 stock picks for 2021. The streaming giant has also been struggling to generate positive share price gains this year.
Tupungato/Shutterstock.com
While Masayoshi Son’s reputation remains intact, the same can’t be said of the hedge fund industry as a whole, as its reputation has been tarnished in the last decade, during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017. Between March 2017 and February 26th 2021 our monthly newsletter’s stock picks returned 197.2%, vs. 72.4% for the SPY. Our stock picks outperformed the market by more than 124 percentage points (see the details here). We were also able to identify in advance a select group of hedge fund holdings that significantly underperformed the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 16th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
Let’s start reviewing Masayoshi Son’s top 10 stock picks to see whether the Japanese billionaire is in a position to extend his stunning performance into 2021.
10. Pacific Biosciences of California, Inc. (NASDAQ: PACB)
The biotechnology company Pacific Biosciences of California, Inc. (NASDAQ: PACB) is the new stock pick of SB Management. The firm purchased 9.1 million shares of Pacific Biosciences in Q4. The investment is valued at $238 million and represents 1.35% of the 13F portfolio, according to the latest filings.
Baron Discovery Fund, which returned 25.5% for the fourth quarter, highlighted a few stocks including Pacific Biosciences of California in the Q4 investor letter. Here is what Baron Discovery Fund stated:
“Pacific Biosciences of California, Inc. offers a differentiated long-read DNA sequencing platform for genetic analysis. Shares performed exceedingly well in the quarter, up about 162%. We believe there is increasing excitement about the potential for its platform as it lowers sequencing costs and has the potential to move beyond its current commercial niche. The recently appointed CEO, Christian Henry, had previously served as CFO and Chief Commercial Officer at Illumina, and we think he is well qualified to commercially execute on Pacific Biosciences’ differentiated long-read platform.”
9. AbCellera Biologics Inc. (NASDAQ: ABCL)
The biotechnology company AbCellera Biologics Inc. (NASDAQ: ABCL) is ranked 9th on the list of billionaire Masayoshi Son’s top 10 stock picks. Son’s SB Management initiated a position in ABCL during the fourth quarter by purchasing 6.7 million shares valued at $272 million. Shares of AbCellera Biologics underperformed this year compared to the broader market index. AbCellera Biologics develops an antibody discovery platform. Its full-stack, AI-powered drug discovery platform searches and analyzes the database of natural immune systems to find antibodies that can be developed as drugs.
8. Netflix Inc (NASDAQ: NFLX)
Masayoshi Son slashed his stake in the world’s largest streaming giant Netflix Inc almost by half during the fourth quarter after initiating a position in the September quarter. Netflix is ranked 7th in the list of billionaire Masayoshi Son’s top 10 stock picks. Shares of Netflix are down more than 4% since the beginning of this year. SB Management held close to 1 million shares of the streaming giant at the end of Q4, accounting for 3.29% of the overall portfolio.
Miller Value Partners, which returned 35.4% for the fourth quarter, highlighted a few stocks including Netflix in the Q4 investor letter. Here is what Miller Value Partners stated:
“Lastly, we added a small position to Netflix after the disappointment following 3Q results. Overall, it’s getting more difficult to find investment opportunities in the very high growth areas that meet our standards for attractive value. On the other hand, we continue to find opportunities in more value-oriented areas of the market. We would expect the portfolio to migrate in this direction.”
7. Salesforce.Com Inc. (NASDAQ: CRM)
Masayoshi Son’s SB Management significantly raised its bet on Salesforce (NASDAQ: CRM) by 1000% to 3.83% of the overall portfolio. Salesforce stock price plunged nearly 4.5% so far in 2021. The future fundamentals still look strong as the company expects first-quarter revenue in the range of $5.875-5.885 billion compared to the consensus estimate for $5.72 billion.
Polen Capital Management, which returned 10.15% for the fourth quarter, presented an optimistic outlook for Salesforce in the Q4 investor letter. Here’s what Polen Capital Management stated:
“We discussed Salesforce.com in the third quarter, but the former went from our top contributor last quarter to the largest detractor this quarter. The double-digit share price decline in the quarter seemed mostly driven by investor reaction after Salesforce announced it would acquire Slack, a collaboration software company, for approximately $28 billion, a high purchase price. While the purchase price is higher than we expected, we believe Slack and its functionality fit well strategically with Salesforce’s suite of enterprise software offerings. At a high-level, Slack offers the ability to make both Salesforce’s and other third-party applications work better for their respective customers. In addition, Salesforce’s world-class selling organization and already large customer base should be beneficial for Slack’s subscription revenue growth, which has been more customer-referral based up to this point. It is too early to know if this acquisition will prove to be a smart allocation of investor capital. That said, Slack has a unique value proposition and was growing nicely on a standalone basis. We believe the Salesforce-Slack strategic vision is on point; and although the purchase price is high in absolute dollars, it represents less than 15% of Salesforce’s market capitalization.”
6. Microsoft Corporation (NASDAQ: MSFT)
The technology giant Microsoft Corporation (NASDAQ: MSFT) is the sixth-largest stock holding of Masayoshi Son’s portfolio, according to the latest filings. SB Management held 4.9 million shares of MSFT at the end of the latest quarter, up 189% from the September quarter. Microsoft stock price soared 6% year to date, extending the twelve-month gains to 69.5%.
Bretton Fund, which returned 11.52% for the fourth quarter, highlighted a few stocks including Microsoft in the Q4 investor letter. Here is what Bretton Fund stated:
“Microsoft’s stock also had a great year, returning 42.4% on increased earnings per share of 30%. The main driver of their growth in recent years is their cloud computing business, and while it did see a bump in demand as office workers went remote, most of the growth is from the continued shift of corporate computing systems to “the cloud.” We think this shift is still in its early stages.”
5. Taiwan Semiconductor Mfg Co Ltd (NYSE: TSM)
Shares of Taiwan Semiconductor (NYSE: TSM) accelerated the upside momentum into 2021 on the back of strong demand for its products. TSM stock price is up 8% this year, extending twelve-months gain to 143%. SB Management held 11.9 million shares of Taiwan Semiconductor at the end of the latest quarter, up 278% compared to the previous quarter.
Bonsai Partners, which posted a return of 247% for the fourth quarter, highlighted the strong growth prospects for Taiwan Semiconductor in the Q4 investor letter. Here is what Bonsai Partners stated:
“Taiwan Semiconductor is the world’s largest outsourced foundry of logic semiconductor chips. TSMC’s shares appreciated 34.5% during the quarter. Taiwan Semiconductor continues to see unprecedented demand, albeit at a slightly less rapid growth rate than earlier in 2020. At the time of writing, TSMC announced strong fourth-quarter results and staggering growth in their expected capital expenditures for 2021 – growing from $17B in 2020 to $25B to $28B in 2021. Forward-looking capital expenditures are the key leading indicator of their medium-term growth rate expectations, and I expect TSMC management will continue to earn excellent returns on these colossal investments.
TSMC’s capital expenditure growth is likely due to investment in their new U.S. manufacturing footprint, rapid investment in their cutting edge process technology, as well as generally high levels of customer demand. Lately, we’ve seen semiconductor shortages in some of their less advanced process technologies, emphasizing the current state of the semiconductor supply-demand imbalance.”
Masayoshi Son of SB Management
4. Alphabet (NASDAQ: GOOG)
Masayoshi Son raised his stake in Google-parent Alphabet (NASDAQ: GOOG) during the fourth quarter by 460% to 785,000 shares. It is ranked fourth-largest stock holding of SB Management portfolio, accounting for 7.77% of the overall portfolio. Shares of Alphabet have been rallying at a sharp pace since the beginning of this year amid prospects for economic reopening and expectations for higher ad revenue.
In a Q4 investors’ letter, Bretton Fund anticipates strong stock performance from Alphabet in 2021. Here is what Bretton Fund stated:
“Google (aka Alphabet) was one of our best performing stocks last year, returning 30.9%, while its earnings per share increased 19%. As lockdowns first went into place in the spring, many advertisers hit pause on their campaigns, waiting—like a lot of us—to see what the world would look like. And then—like a lot of us—advertisers adjusted. Travel companies cut back their campaigns, while ads for other goods, like athleisure wear and video games, picked up the slack. Google had a rough second quarter, but was back in the swing of things by the next quarter.”
3. PayPal Holdings, Inc. (NASDAQ: PYPL)
SB Management increased its stake in PayPal Holdings (NASDAQ: PYPL) by 386% during the fourth quarter to 6.1 million shares, making it the third-largest stock holding of the 13F portfolio. Shares of PayPal have extended the upside momentum into 2021. Its stock price is up 6% year to date, enlarging twelve months gains to 158%.
In its Q4 investor letter, Polen Capital Management forecasted double-digit growth for PayPal in the years ahead. Here is what Polen Capital Management stated:
“For the full year 2020, one of the top performers was PayPal, which we purchased in 2019, the company continues to take market share in digital payments and has seen an acceleration in user adoption and engagement, especially within their “silver tech” or older user demographic. We expect many more years of ongoing double-digit growth from their various business segments and new initiatives.”
2. Facebook Inc (NASDAQ: FB)
The shares of social media giant Facebook are struggling to trade in green this year. SB Management, however, looks optimistic about Facebook’s future fundamentals. The firm raised its position by 41% in the latest quarter to 18.13% of the overall 13F portfolio. It ranks 2nd on the list of Masayoshi Son’s top 10 stock picks for 2021.
Kinsman Oak Capital Partners Inc., an independent Toronto-based boutique investment firm, highlighted a few stocks including Facebook in the Q4 investors’ letter. Here’s what Kinsman Oak Capital Partners stated:
“Our view on Facebook (FB) may be somewhat controversial. The bear case for FB boils down to antitrust risk and valuation. Facebook, although to a lesser degree, is a relative value bargain as well. We believe the company possesses an element of platform risk that Alphabet does not but, compared to the rest of the market, the stock still seems undervalued. We compared Facebook to the Russell 2000, an index full of cyclical businesses that are considered no-brainers at the beginning of a recovery and popular re-opening stocks that are poised to go higher after the vaccine is distributed (Appendix E). Facebook is significantly cheaper, growing faster, has a larger economic moat, superior margin profile, and requires less capex.
1. Amzon.com (NASDAQ: AMZN)
Amzon.com (NASDAQ: AMZN) is the largest stock holding of Japanese billionaire Masayoshi Son’s SB Management portfolio, according to the latest filings. The firm held 2.2 million shares of Amazon at the end of the latest quarter, accounting for 41% of the 13F portfolio.
L1 Capital International Fund, which returned 5.1% for the quarter, stated in the Q4 investor letter that Amazon is likely to perform well ahead amid its strong business model. Here’s what L1 Capital International Fund stated:
“Several investments in the technology sector were trimmed on valuation grounds with the proceeds used to increase our investment in Amazon. Amazon’s successful flywheel business model and Amazon Web Services are well known. However, we believe the current share price under‑appreciates:
- The consistency and longevity of Amazon’s growth potential in its key businesses;
- The importance of additional revenue streams such as advertising which are high margin and growing rapidly; and
- The strengthening barriers to competition and competitive advantages arising from Amazon’s stepped‑up investment in logistics and other infrastructure.”
You can also take a peek at Billionaire Lee Ainslie’s Top 10 Stock Picks and Billionaire Steve Cohen’s Top 10 Stock Picks.
Follow Insider Monkey on Twitter
Suggested articles:
- Billionaire Carl Icahn’s Top 10 Picks
- Billionaire Nelson Peltz’s Top 8 Stock Picks
- Billionaire Michael Price’s Top 10 Stock Picks
This article is originally published at Insider Monkey.
