In this article, we discuss the top 10 picks of the Harvard University stock portfolio.
Harvard Management Company was established in 1974 and manages Harvard University’s endowment and financial assets. Over the years, the market-beating performance of Harvard Management Company has contributed billions of dollars to Harvard University. The value of Harvard University’s endowment declined by $2.3 billion in 2022, after Harvard Management Company posted a 1.8% loss on its investments. This marks the first year of negative returns since 2016. This is a distinct contrast to the record-high 33.6% returns that Harvard Management Company reported last year.
Harvard Management Company’s loss is primarily attributed to skyrocketing inflation and high interest rates, which have created havoc in the global financial markets. The endowment underperformed due to “the poor performance of global equity markets”, noted HMC CEO N.P. Narvekar. Overall, the performance of the Harvard University stock portfolio was satisfying relative to the global equity markets. The portfolio was previously managed by Jane Mendillo, and she served as the president and chief executive officer of the endowment before departing from her position in 2014, after 21 years with HMC. She is an American investor, endowment fund manager, and philanthropist.
The endowment contributed $2.1 billion towards the university’s operational budget for the fiscal year 2022, accounting for 36% of the annual revenue. Harvard concluded the fiscal year with a budget surplus of $406 million. Harvard Management Company has delivered upbeat returns historically, which makes it a good idea to follow its investment strategy. Some of the best stocks in the Harvard University stock portfolio include Meta Platforms, Inc. (NASDAQ:META), Alphabet Inc. (NASDAQ:GOOG), and Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM).
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Our Methodology
We used Harvard Management Company’s stock portfolio for the second quarter of 2022 for this analysis. The following stocks are listed according to the firm’s stake value in each holding. We have assessed the hedge fund sentiment from Insider Monkey’s database of 895 elite hedge funds tracked as of the end of the second quarter of 2022.
Harvard University Stock Portfolio: Top Picks
10. NVIDIA Corporation (NASDAQ:NVDA)
Harvard Management Company’s Stake Value: $10,061,000
Number of Hedge Fund Holders: 84
NVIDIA Corporation (NASDAQ:NVDA) is a California-based provider of graphics, computing, semiconductors, and networking solutions in the United States, Taiwan, China, and internationally. Harvard Management Company initially invested in NVIDIA Corporation during the fourth quarter of 2021. In Q2 2022, the hedge fund increased its stake in the firm by 153%, holding 66,368 shares worth over $10 million.
Needham analyst Rajvindra Gill on October 25 maintained a Buy recommendation on NVIDIA Corporation but lowered the price target on the stock to $155 from $170 as part of a broader research note on Semiconductors and Semiconductor Equipment. Semiconductor stocks will not reach a bottom until Wall Street indicates negative revenue and EPS growth year-over-year in 2023, similar to earlier cycles, the analyst told investors. He noted that market estimates are still reflecting a positive growth rate.
In Q2 2022, NVIDIA Corporation lost favor with hedge funds. According to Insider Monkey’s data, 84 funds reported owning stakes worth $3.3 billion in NVIDIA Corporation at the end of June 2022, compared to 102 funds in the prior quarter worth $6.3 billion. Ken Fisher’s Fisher Asset Management held a prominent stake in the company at the end of Q2, comprising 7.6 million shares worth $1.15 billion.
In addition to Meta Platforms, Inc., Alphabet Inc., and Taiwan Semiconductor Manufacturing Company Limited, NVIDIA Corporation is one of the top stock picks of the Harvard University stock portfolio.
Here is what Baron Fifth Avenue Growth Fund has to say about NVIDIA Corporation in its Q2 2022 investor letter:
“At the company-specific level, there was a broad correction across the entire portfolio. While four of our holdings contributed to performance, the contribution to absolute returns was less than 100 bps combined, as unfortunately none of them were large enough to move the needle. We had 16 investments detracting over 100 bps each with NVIDIA, our second largest detractor, costing the Fund 254 bps.
NVIDIA’s stock was hit even harder, down 44.4%, impacted by concerns over the health of the consumer, dramatic declines in crypto, and COVID-related lockdowns in China. Despite the sell-off and the increased near-term volatility in its gaming business, NVIDIA’s revenues grew 46% year-over-year with 48% operating margins, driven by continued strength in its data center business as companies across industries adopt AI and ML…” (Click here to see the full text)
9. Recursion Pharmaceuticals, Inc. (NASDAQ:RXRX)
Harvard Management Company’s Stake Value: $12,285,000
Number of Hedge Fund Holders: 17
Recursion Pharmaceuticals, Inc. (NASDAQ:RXRX) was incorporated in 2013 and is headquartered in Salt Lake City, Utah. It operates as a clinical-stage biotechnology company, utilizing biology, chemistry, automation, data science, and engineering to commercialize drug discovery. Recursion Pharmaceuticals, Inc. has been part of the Harvard University stock portfolio since Q2 2021. In the second quarter of 2022, the fund owned 1.50 million Recursion Pharmaceuticals, Inc. shares worth $12.2 million, representing 1.42% of the total 13F securities.
On October 25, Recursion Pharmaceuticals, Inc. announced that it has entered into a stock purchase agreement for the sale of approximately 15.3 million units of its common stock in a private placement, led by investment firm Kinnevik AB. Gross proceeds of the private placement are expected to be nearly $150 million, before accounting for agent fees and other expenses to be paid by Recursion. The net proceeds will be utilized for general corporate purposes, including investments in advancing the firm’s current clinical and preclinical programs.
KeyBanc analyst Scott Schoenhaus initiated coverage of Recursion Pharmaceuticals, Inc. on September 15 with an Overweight rating and a $20 price target. The analyst noted that Recursion Pharmaceuticals, Inc. is at the “forefront” of an emerging industry, and the company utilizes cloud computing and data science to “disrupt” traditional drug discovery. Four of the company’s drug development programs are in clinical trials, added the analyst.
According to Insider Monkey’s data, 17 hedge funds were long Recursion Pharmaceuticals, Inc. at the end of June 2022, compared to 20 funds in the last quarter. MIC Capital Partners held the biggest stake in the company, consisting of 8.45 million shares worth $68.8 million.
Here is what Lux Capital has to say about Recursion Pharmaceuticals, Inc. in its Q2 2022 investor letter:
“As we discussed before describing “Extensionalism”, one of our theses has been the growing convergence between the biological and technological, the organic and inorganic, man and machine. Lux has made investments in the digitization, technological capture and amplification of each of the human senses. Consider vision and speech: we have technology that can rapidly recognize and label objects from pixels (companies that span defense, biotechnology, manufacturing and transportation like, Recursion, and others that can rapidly generate videos, images, and even more complex language from simple inputs.”
8. Revolution Medicines, Inc. (NASDAQ:RVMD)
Harvard Management Company’s Stake Value: $13,066,000
Number of Hedge Fund Holders: 20
Revolution Medicines, Inc. (NASDAQ:RVMD) is a California-based clinical-stage precision oncology company, focused on developing therapies for RAS-addicted cancers and solid tumors. As per regulatory filings for the second quarter of 2022, the Harvard University stock portfolio featured 670,382 shares of Revolution Medicines, Inc., worth over $13 million and representing 1.51% of the total holdings. The hedge fund has held a position in the firm since Q1 2020.
On October 20, Oppenheimer analyst Jay Olson initiated coverage of Revolution Medicines, Inc. with an Outperform rating and a $30 price target. The “pioneering oncology company” has a “potentially best-in-class” KRASG12C inhibitor candidate, RMC-6291, and later-stage RMC-4630, the analyst told investors. He believes Revolution Medicines, Inc.’s approach is unique as compared to Amgen Inc. (NASDAQ:AMGN) and Mirati Therapeutics, Inc. (NASDAQ:MRTX). The analyst added that Revolution Medicines, Inc.’s inhibitors “could avoid certain limitations”.
Among the hedge funds tracked by Insider Monkey, 20 funds reported owning stakes worth $370 million in Revolution Medicines, Inc. at the end of June 2022, compared to 19 funds in the prior quarter worth $410.4 million. Oleg Nodelman’s EcoR1 Capital is the biggest position holder in the company, with 4.2 million shares valued at $83.3 million.
7. Grab Holdings Limited (NASDAQ:GRAB)
Harvard Management Company’s Stake Value: $13,586,000
Number of Hedge Fund Holders: 25
Grab Holdings Limited (NASDAQ:GRAB) is a Singapore-based company providing mobility, delivery, financial services, and enterprise offerings through its mobile application in Cambodia, Indonesia, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam. The company reported at the end of September that it expects to breakeven on its adjusted EBITDA by the second half of 2024 as it moves towards profitability.
Securities filings for Q2 2022 reveal that the Harvard University stock portfolio had 5.36 million shares of Grab Holdings Limited, worth $13.5 million and representing 1.57% of the total holdings. The hedge fund strengthened its hold on the stock by 46% in the June quarter.
Barclays analyst Jiong Shao on October 10 assumed coverage of Grab Holdings Limited with an Equal Weight rating and a $3 price target. As a market leader in food delivery and ride-hailing in Southeast Asia, Grab Holdings Limited has a “very strong competitive position,” the analyst wrote in a research note. However, the analyst remains skeptical whether these businesses “can thrive longer term in the region.”
According to Insider Monkey’s data, 25 hedge funds were long Grab Holdings Limited at the end of June 2022, compared to 27 funds in the last quarter. Brett Barakett’s Tremblant Capital is the biggest position holder in the company, with 28 million shares worth approximately $71 million.
6. PureCycle Technologies, Inc. (NASDAQ:PCT)
Harvard Management Company’s Stake Value: $18,536,000
Number of Hedge Fund Holders: 23
PureCycle Technologies, Inc. (NASDAQ:PCT) is a Florida-based company that produces recycled polypropylene. Its recycling process separates color, odor, and other contaminants from plastic waste feedstock and turns it into resin. Harvard Management Company owns 2.5 million shares of PureCycle Technologies, Inc. as of Q2 2022, worth $18.5 million and representing 2.14% of the total securities. The stock has been part of the Harvard University stock portfolio since Q1 2021.
On September 15, Stifel analyst Michael Hoffman initiated coverage of PureCycle Technologies, Inc. with a Buy rating and a $15 price target. The global demand for polypropylene is 178 billion pounds with a forecasted five-year CAGR of 3.8%, the analyst told investors in a research note. He added that he is optimistic about PureCycle Technologies, Inc. as an “attractive” sustainability investment which offers a first mover advantage, while also supporting global consumer packaging companies in terms of meeting high polypropylene recycled plastic content quota.
According to Insider Monkey’s records, PureCycle Technologies, Inc. was part of 23 hedge fund portfolios at the end of the second quarter of 2022, compared to 31 funds in the last quarter. Daniel Patrick Gibson’s Sylebra Capital Management is the leading position holder in the company, with more than 29 million shares worth $216.6 million.
Like Meta Platforms, Inc., Alphabet Inc., and Taiwan Semiconductor Manufacturing Company Limited, PureCycle Technologies, Inc. holds a prominent position in the Harvard University stock portfolio.
5. EQRx, Inc. (NASDAQ:EQRX)
Harvard Management Company’s Stake Value: $24,680,000
Number of Hedge Fund Holders: 26
EQRx, Inc. (NASDAQ:EQRX) is a Massachusetts-based pharmaceutical company, specializing in developing medicines for oncology and immune-inflammatory diseases in the United States. Securities filings for Q2 2022 reveal that Harvard University stock portfolio held 5.2 million shares of EQRx, Inc. worth $24.6 million.
On August 16, JPMorgan analyst Chris Schott initiated coverage of EQRx, Inc. with a Neutral rating and a $5.50 price target. EQRx, Inc. wants to deliver new medicines to patients at “radically lower prices” by targeting known mechanisms of action and collaborating with payers to increase usage, the analyst noted. While the company’s goals “clearly address a significant unmet need in the drug space,” he believes the business model is still at a relatively early stage of development and there are many unknowns that are unlikely to be addressed in the short-term, the analyst told investors.
According to Insider Monkey’s data, 26 hedge funds were long EQRx, Inc. at the end of the second quarter of 2022, compared to 38 funds in the preceding quarter.
4. AbCellera Biologics Inc. (NASDAQ:ABCL)
Harvard Management Company’s Stake Value: $43,719,000
Number of Hedge Fund Holders: 17
AbCellera Biologics Inc. (NASDAQ:ABCL) is headquartered in Vancouver, Canada, and the company operates an AI-powered antibody discovery platform. Harvard University stock portfolio features 4.10 million shares of AbCellera Biologics Inc. as of Q2 2022, worth $43.7 million and representing 5.06% of the total holdings. The stock has been part of the Harvard portfolio since Q4 2020.
On August 10, Credit Suisse analyst Tiago Fauth maintained an Outperform rating on AbCellera Biologics Inc. but lowered the price target on the shares to $34 from $40 following the Q2 results. The analyst observed that the company added six programs under contract and initiated discovery on four additional programs, bringing the cumulative program stats to 88. This represents a robust 47% year-over-year growth. However, there is some quarter-over-quarter variability across these metrics, the analyst added.
According to Insider Monkey’s data, 17 hedge funds were bullish on AbCellera Biologics Inc. at the end of June 2022, with combined stakes worth $320.5 million. Julian Baker and Felix Baker’s Baker Bros. Advisors is the largest stakeholder of the company, with 10.45 million shares valued at $111.3 million.
3. Light & Wonder, Inc. (NASDAQ:LNW)
Harvard Management Company’s Stake Value: $125,866,000
Number of Hedge Fund Holders: 27
Light & Wonder, Inc. was incorporated in 1984 and is based in Las Vegas, Nevada. The company provides technology-based products, services, and content for the gaming, lottery, social, and digital gaming industries in the United States and internationally. In Q2 2022, Harvard Management Company owned 2.6 million Light & Wonder, Inc. shares worth $125.8 million, representing 14.57% of the total holdings.
On October 6, Light & Wonder, Inc. announced that it had acquired all assets of House Advantage, a company that develops loyalty solutions for the gaming and hospitality industries, in a cash deal. The acquisition strengthens Light & Wonder, Inc.’s systems business with differentiated omni-channel player loyalty solutions.
Craig-Hallum analyst Ryan Sigdahl on August 10 maintained a Buy rating on Light & Wonder, Inc. but slashed the price target on the shares to $90 from $105 to reflect multiple compression amongst the peer group.
According to Insider Monkey’s data, 27 hedge funds were bullish on Light & Wonder, Inc. at the end of June 2022, compared to 34 funds in the last quarter. Debra Fine’s Fine Capital Partners is the biggest position holder in the company, with 9.5 million shares worth $445.4 million.
2. Meta Platforms, Inc. (NASDAQ:META)
Harvard Management Company’s Stake Value: $183,166,000
Number of Hedge Fund Holders: 184
The Harvard University stock portfolio had 1.13 million shares of Meta Platforms, Inc. in the second quarter of 2022, worth over $183 million and representing 21.2% of the total 13F securities. The hedge fund trimmed its Meta stake by 8% during the June quarter.
The company disclosed a mixed third-quarter earnings report, with the revenue topping market expectations, whereas profits lagged amid warnings of short-term sales challenges. CEO Mark Zuckerberg, however, assured investors that the company will focus on efficiency in 2023 to return to stronger revenue growth.
On October 28, Edward Jones analyst David Heger downgraded Meta Platforms, Inc. to Hold from Buy following the Q3 earnings report. While the company is executing relatively well in the tough macroeconomic backdrop and continues to steadily grow users across its platforms, the analyst is worried about how long the steep metaverse investment will take to deliver a significant return.
According to Insider Monkey’s data, 184 funds were long Meta Platforms, Inc. at the end of June 2022, down from 200 funds in the earlier quarter. Ken Fisher’s Fisher Asset Management owned a prominent position in the company, consisting of 11.5 million shares worth $1.86 billion.
Here is what Weitz Investment specifically said about Meta Platforms, Inc. in its Q3 2022 investor letter:
“Facebook parent Meta Platforms, Inc. was the portfolio’s top year-to-date detractor. Fears of a recession and a resultant pullback in ad spending have added insult to injury as Meta attempts to gain traction with its short-form video product called Reels. Meta’s progress in monetizing Reels and the heavyweight bout with video-sharing app TikTok for consumers’ attention are clearly the main event, but we are also encouraged that, behind the scenes, management is taking a more disciplined approach to investing and expense management. Investors looking for greater detail on Meta are encouraged to read equity analyst Jon Baker’s Analyst Corner feature from earlier this year.”
1. Alphabet Inc. (NASDAQ:GOOG)
Harvard Management Company’s Stake Value: $262,769,000
Number of Hedge Fund Holders: 153
Alphabet Inc. has been part of the Harvard University stock portfolio since Q2 2018, with minor breaks over the years. In Q2 2022, the hedge fund boosted its Alphabet Inc. stake by 39%, holding 2.4 million shares worth $262.7 million and representing 30.42% of the total 13F securities.
On October 27, Alphabet Inc. announced that it has introduced a Blockchain Node Engine (“BNE”) based on Google Cloud for Ethereum projects, in a bid to enhance its presence in the web3 space. Ethereum will be the first blockchain supported by BNE. Using BNE, web3 firms can perform transactions, deploy smart contracts, and read or write blockchain data directly on Google Cloud.
Oppenheimer analyst Jason Helfstein on October 26 maintained an Outperform rating on Alphabet Inc. after the Q3 results but trimmed the price target on the shares to $135 from $155 to reflect lower 2023 estimates on the back of softer first half of the year and slower headcount growth.
According to Insider Monkey’s data, 153 hedge funds were long Alphabet Inc. at the end of Q2 2022, compared to 160 funds in the prior quarter. Chris Hohn’s TCI Fund Management is a significant position holder in the company, with 2.4 million shares worth $5.4 billion.
Bronte Capital made the following comment about Alphabet Inc. in its Q3 2022 investor letter:
Consensus longs—those stocks widely held and admired by fund managers—have recently underperformed the market. Consensus shorts have been bad shorts. We have over 500 shorts, of which a few are consensus, and we have noticed this effect. But we also own what we think is (alas) the most consensus long in this market: Alphabet Inc.. We find it hard to find any strong reason not to own it. Internet advertising is going from strength to strength and Google’s place in the market is mostly improving. Some of the other bets such as cloud services are beginning to pay off, and finally the CEO is expressing discipline on costs. (Per the consensus, the biggest problem with Google has been a lack of discipline on costs. Every time we look there are another 20 thousand employees.) Being a consensus long, it is down hard. We did say consensus longs are not going well…” (Click here to read the full text)
You can also take a look at 15 Best Large Cap Dividend Growth Stocks To Buy and Top 10 ESG Companies in 2022.
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This article is originally published at Insider Monkey.
