In this article, we will take a look at Gabriel Plotkin’s Melvin Capital portfolio: Top 5 stock picks. If you want greater depth about him and his investment firm, then head over to Gabriel Plotkin’s Melvin Capital Portfolio: Top 10 Picks.
5. Fair Isaac Corporation (NYSE:FICO)
Mr. Plotkin’s Stake Value: $495.1 million
Percentage of Mr. Plotkin’s 13F Portfolio: 2.84%
Number of Hedge Fund Holders: 28
Fair Isaac Corporation (NYSE:FICO) is an American company that provides software and automation management solutions for companies. It operates globally by allowing its customers interconnectivity across North America, the Middle East, Asia, Europe and Latin America.
By the end of the second quarter, Mr. Plotkin held 985,000 shares of Fair Isaac Corporation (NYSE:FICO) in a stake that is worth $495 million and represents 2.84% of its portfolio. The company earned $338 million in revenue and $3.38 in non-GAAP EPS in its third quarter, beating analyst estimates on both counts.
In an October 2021 investment note, RBC Capital lowered Fair Isaac Corporation’s (NYSE:FICO) price target to $463 citing several concerns such as conservative guidance. Insider Monkey’s second quarter survey of 873 hedge funds revealed that 28 held a stake in Fair Isaac Corporation (NYSE:FICO).
The company’s largest stakeholder after Melvin Capital is Dev Kantesaria’s Valley Forge Capital who owns 671,509 shares worth 337 million.
In its third-quarter 2021 letter, Richie Capital Group, an investment management firm mentioned the company and stated:
“Fair Isaac Corp (FICO – down 18.84%) – The stock price for the predictive analytics software firm has declined off of very little news outside of an article in the Wall Street Journal highlighting the increasing competitive threats. We view much of this as known. Anytime a company dominates a market in a monopoly-like manner, it will naturally attract competitors as well as customers who will attempt to push back on pricing. However, their solutions are highly predictive within the subprime market and the company continues to identify new opportunities for their software solutions. FICO reported a solid Q3 in August beating earnings and revenue estimates. The report seemed to imply slowing revenue growth, specifically in their DMS and Applications revenue. We believe the market is missing the bigger picture. FICO is transitioning from a licensing model to a subscription model. These transitions typically lead to near term growth headwinds but longerterm profitability improvement and stickier customers. FICO’s scores revenue continues to grow at a double-digit annual rate, and margins (Gross, Operating, and Net Income) are expanding which supports the premise that the company is maintaining their pricing power. We view this decline as a buying opportunity. Management seems to agree with our thinking as they announced a $500M stock repurchase program on August 18th.”
4. Laboratory Corporation of America Holdings (NYSE:LH)
Mr. Plotkin’s Stake Value: $537 million
Percentage of Mr. Plotkin’s 13F Portfolio: 3.09%
Number of Hedge Fund Holders: 53
By the end of the second quarter of this year, Mr. Plotkin’s investment firm held 1.9 million shares of Laboratory Corporation of America Holdings (NYSE:LH) that were worth $537 million and which represented 3.09% of the fund’s portfolio. At the same time, 53 of the 873 hedge funds polled by Insider Monkey held a stake in the company.
The company’s largest shareholder after Melvin Capital is Andreas Halvorsen’s Viking Global who owns 1.3 million shares worth $378 million.
In its second-quarter 2021 investor letter, Broyhill Asset Management mentioned Laboratory Corporation of America Holdings (NYSE:LH). Here is what the fund said:
“Analysts continued ratcheting up full-year earnings estimates for Lab Corp (LH) driving the stock steadily higher. Despite strong year-to-date gains, shares of the company are trading at lower valuations today than before the pandemic as earnings estimates have outpaced their rising stock prices. Notably, consensus estimates for Lab Corp have nearly doubled over the past year as analysts have been slow to recognize the impact of increased testing volumes on fundamentals.”
3. Visa Inc. (NYSE:V)
Mr. Plotkin’s Stake Value: $701 million
Percentage of Mr. Plotkin’s 13F Portfolio: 4.03%
Number of Hedge Fund Holders: 162
Visa Inc. (NYSE:V) is a financial services provider that enables digital payments for a large variety of customers, both corporate and individual. It is also one of the most well known payments firms in the world due to its established brand name. Visa Inc. (NYSE:V) is headquartered in San Francisco, California.
Visa Inc. (NYSE:V)’s biggest hedge fund holder is Alexander Becker’s Codex Capital, which holds 30,500 shares that are roughly worth $7.1billion.
By the end of the second quarter of this year, Mr. Plotkin’s Melvin Capital held 3 million shares of Visa Inc. (NYSE:V) with the stake equaling $701 million and representing 4.03% of the investment firm’s portfolio. At the same time, 162 of 873 hedge funds polled by Insider Monkey held shares of Visa Inc. (NYSE:V).
The company reported $6 billion in revenue for its third quarter, alongside non-GAAP EPS of $1.49 as it beat analyst estimates on both counts. In a September 2021 analyst note, investment bank Morgan Stanley kept a $282 price target and an Overweight rating for Visa Inc. (NYSE:V) shares, expecting its conflicts to resolve.
Qualified Investment Partners, in its first-quarter 2021 investor letter, highlighted that:
“What Attracts Us
Superior Business:
• Wide moat business with high barriers to entry:
− Duopoly with top 2 players (Mastercard/VISA) owning 68% share of credit and 94% of debit transactions
− A double sided financial transaction network with scale on each end
• High returns on equity (21.8%) and low levels of capital expenditure compared to sales (3.4%)
• Recurring revenue stream:
⎼ Toll booth based on transaction volumes
• Top security platform versus cyber fraudSuperior Reinvestment Opportunities:
• Long Runway: Secular cash to electronic payment trends supporting double digit growth in demand for the foreseeable futureSuperior Management / Capital Allocation:
• Consistent deployment of excess cash flow towards value accretive acquisitions (V Europe), dividends and opportunistic share repos…”
2. Amazon.com, Inc. (NASDAQ:AMZN)
Mr. Plotkin’s’Stake Value: $739 million
Percentage of Mr. Plotkin’s 13F Portfolio: 4.24%
Number of Hedge Fund Holders: 271
Amazon.com, Inc. (NASDAQ:AMZN) is one of the world’s largest online retailers. Its other business lines now target established and emerging market segments such as cloud computing and home entertainment. Amazon.com, Inc. (NASDAQ:AMZN) is based out of the United States and it is known for its founder Mr. Jeffery P. Bezos, who is also one of the world’s richest men.
Mr. Plotkin’s holdings in the company involve 215,000 shares that are worth $739 million. They represent 4.24% of his portfolio. 271 out of the 873 hedge funds polled by Insider Monkey at the end of the second quarter of this year held a stake in the company whose price target was lowered to $4,200 by Credit Suisse in October 2021 due to an expected increase in expenses.
Amazon.com, Inc. (NASDAQ:AMZN) largest shareholder is Alexander Becker’s Codex Capital who owns 2,850 shares worth $9.8 billion.
In its third-quarter 2021 investor letter, Madison Funds had the following to say about Amazon.com, Inc. (NASDAQ:AMZN):
“We did add a modest new position weight to the portfolio in the quarter in Amazon.com, Inc. stock (AMZN). We acknowledge that many aspects of Amazon’s merit as an investment are well appreciated. However, our work leads us to conclude that shares are attractive. Leadership positions in both e-commerce and cloud computing provide the company with significant durable competitive advantages in industries that we think can produce above average growth over the next decade. Over the past year, AMZN shares have trailed the market as investors debate near-term growth prospects following the pandemic-induced e-commerce demand. Additionally, margins have been depressed due to Amazon’s unprecedented increases in spending to build out fulfillment and in-house logistics capabilities – Amazon will build out more square footage this year and last than it did cumulatively over the previous 10 years, more than doubling its in-house delivery capacity. We like the investments Amazon is making and believe they will further advantage the company relative to other retailers, making it nearly impossible for competitors to match the same level of delivery speed and convenience. With its large and frequently engaged customer base, Amazon has multiple mechanisms to make money, including selling advertising and enhanced subscription services. Within the cloud business, we forecast Amazon Web Services (AWS) leveraging its strengths in Infrastructure-as-a-service (IaaS) to move into higher value segments of cloud computing (such as platform-as-a-service: PaaS), allowing the company to continue outgrowing the overall IT sector with strong profitability. While Amazon shares have performed extremely well over the long-term, we think near-term concerns about whether Amazon will earn a return on its accelerated investments provide an opportunity now for investors willing to look through the investment period. Our view is that the investments likely earn strong returns and extend Amazon’s competitive advantages and above average growth.”
1. Expedia Group, Inc. (NASDAQ:EXPE)
Mr. Plotkin’s Stake Value: $1 billion
Percentage of Mr. Plotkin’s 13F Portfolio: 5.85%
Number of Hedge Fund Holders: 87
Expedia Group, Inc. (NASDAQ:EXPE) is an online travel services provider that enables travelers to make sound decisions about their plans. Its services involve travel bookings, rental car services, accommodation marketing and booking provisions.
During the second quarter, Mr. Plotkin held 6.2 million Expedia Group, Inc. (NASDAQ:EXPE) shares. These were worth $1 billion and represented 5.85% of his overall portfolio. At the same time, 87 out of the 873 hedge funds polled by Insider Monkey had held a stake in the company.
Expedia Group, Inc. (NASDAQ:EXPE)’s largest investor by the second quarter was Daniel Sundheim’s D1 Capital Partners who owned 7.5 million shares worth $1.2 billion.
In its first-quarter 2021 investor letter, ClearBridge Investments had the following to say about the company:
“Several of our better performers in the first quarter were purchased while their business models were under stress from COVID restrictions or the macro environment the pandemic created. What gave us confidence in purchasing Expedia were the actions the company took to extend out their balance sheets until travel resumed. It should benefit as a broader vaccination rollout prompts cruise lines to resume operations and consumers to start traveling again and are positioned to deliver better margins and gain pricing power as the economy normalizes due to the cost controls implemented during the downturn.”
