In this article, we present the list of the 5 stocks that Stephen Perkins’ Toronado Partners can’t live without. If you want to read our comprehensive analysis of Toronado Partners’ history, investment philosophy, and hedge fund performance, go directly to The 10 Stocks That Stephen Perkins’ Toronado Partners Can’t Live Without.
5. BlackLine, Inc. (NASDAQ:BL)
Toronado Partners’ Stake Value: $32,820,000
Percentage of Toronado Partners’ 13F Portfolio: 11.53%
Number of Hedge Fund Holders: 18
Toronado Partners appears to be a big fan of several software-as-a-service stocks, including BlackLine, Inc. (NASDAQ:BL), of which it owned 277,998 shares of on September 30. Hedge fund ownership of Blackline has dipped by over 25% over the past two quarters, though several funds think highly of the company.
One of them is Ensemble Capital, which discussed BlackLine, Inc. (NASDAQ:BL) in its Q4 2021 investor letter, declaring that the company is worth materially more than its current market rate. It believes Blackline has a long runway of growth ahead of it and a very competitive moat, which has allowed it to post strong customer and revenue retention rates over the past few years.
BlackLine, Inc. (NASDAQ:BL) shares are down by 40% over the last year after gaining 140% during the previous one-year period, as the pandemic has negatively impacted the company’s aforementioned revenue retention rate, which fell to 106% in the first half of this year compared to 110% in 2019.
Ensemble Capital, an investment management firm, published its fourth-quarter 2021 investor letter and mentioned BlackLine, Inc. (NASDAQ:BL). Here‘s what the fund said:
“Blackline’s stock was down, along with other high-growth Software as a Service stocks, during the quarter. While we believe that many of these types of businesses became very over valued earlier this
year and their declines this quarter were justified, we think Blackline is worth materially more than the current market price. We will be discussing this company at length later in this letter. The stock finished the quarter down 12%.”
4. Impinj, Inc. (NASDAQ:PI)
Toronado Partners’ Stake Value: $35,435,000
Percentage of Toronado Partners’ 13F Portfolio: 12.45%
Number of Hedge Fund Holders: 22
Toronado owns 620,245 shares of Impinj, Inc. (NASDAQ:PI) as of the end of September, a position valued at $35.44 million at that time. The fund has owned a position in the company since the final quarter of 2018, during which time the stock has gained over 400%.
A maker of radio-frequency identification chips for tracking and authenticating items, Impinj, Inc. (NASDAQ:PI) is on track to grow revenue by over 30% this year after a disappointing 2020 which was heavily impacted by the pandemic. While this year’s sales growth was against the weaker comps of 2020, it’s nonetheless an impressive rate for a company that trades at just 11x sales.
The current supply chain crisis and the pandemic’s effect on in-store sales are likely to help drive further demand for Impinj, Inc. (NASDAQ:PI)’s chips, shipments of which are already lagging behind demand but which should see improvement in the coming quarters with wafer supplies set to accelerate.
3. MagnaChip Semiconductor Corporation (NYSE:MX)
Toronado Partners’ Stake Value: $36,354,000
Percentage of Toronado Partners’ 13F Portfolio: 12.78%
Number of Hedge Fund Holders: 35
Toronado is also a fan of another chip maker, MagnaChip Semiconductor Corporation (NYSE:MX), which it owned 2.05 million shares of on September 30, a 24% increase quarter-over-quarter. It’s far from the only fund that’s been buying MagnaChip, as hedge fund ownership of the stock among the funds tracked by Insider Monkey sits at an all-time high.
MagnaChip Semiconductor Corporation (NYSE:MX) posted a sizable improvement to its gross margins in Q3, which grew by more than 50% to 36.7%. Supply constraints are expected to impact the South Korean chipmaker for the foreseeable future, however, which is likely to limit sales and earnings growth. Of further interest to investors is the fact that MagnaChip Semiconductor Corporation (NYSE:MX) has plans to launch another attempt to sell itself after its planned merger pact with two investment vehicles of Wise Road Capital fell through last year.
Wasatch Global Investors, an investment management firm, published its “Wasatch Micro Cap Value Fund” first quarter 2021 investor letter and mentioned MagnaChip Semiconductor Corporation (NYSE:MX). Here‘s what the fund said:
“Magnachip Semiconductor Corp. (MX) also contributed to Fund performance. The company designs, develops and manufactures mixed-signal and digital multimedia semiconductors. We think Magnachip is a classic “growth at a reasonable price” (GARP) company. The stock was a laggard in 2020, but our belief was that Wall Street underappreciated the company’s earnings and that the P/E ratio would exceed expectations going forward. In the first quarter, we think Magnachip benefited from the realization that the company is a steady—if not spectacular—grower as there was a rotation in preference away from higher-priced growth stocks and toward lower-priced growth stocks. The stock also benefited from news that the company has agreed to be acquired.”
2. Mitek Systems, Inc. (NASDAQ:MITK)
Toronado Partners’ Stake Value: $37,784,000
Percentage of Toronado Partners’ 13F Portfolio: 13.28%
Number of Hedge Fund Holders: 18
Mitek Systems, Inc. (NASDAQ:MITK) is another software provider that has found a home in the 13F portfolio of Toronado Partners. 2.04 million MITK shares were owned by the fund on September 30, down by 11% quarter-over-quarter, as Mitek fell from being the fund’s former top stock pick to its second-largest holding.
Mitek Systems, Inc. (NASDAQ:MITK)’s digital identity verification revenue jumped by 30% year-over-year in its fiscal first quarter of 2022 for the period ended December 31 as a growing number of online platforms develop the need to verify their customers’ and users’ identities. Overall revenue climbed by 25% to $32.5 million, while non-GAAP net income soared by 65% to $10.2 million.
Mitek Systems, Inc. (NASDAQ:MITK) believes it has a huge untapped market for its biometric authentication methods, noting in its fiscal Q1 earnings call that a study it conducted in collaboration with PYMNTS found that over half of U.S consumers believe biometrics to be easier to use and more secure than traditional passwords or PINs, though just 10% of consumers currently use the technology.
1. Tenable Holdings, Inc. (NASDAQ:TENB)
Toronado Partners’ Stake Value: $46,651,000
Percentage of Toronado Partners’ 13F Portfolio: 16.39%
Number of Hedge Fund Holders: 29
Tenable Holdings, Inc. (NASDAQ:TENB) ranks as the top stock pick that Stephen Perkins’ Toronado Partners can’t live without, as the fund raised its stake in the cybersecurity company by 6% during Q3 to just over 1.01 million shares, a position valued at $46.65 million as of September 30.
One of the 5 Best Security Stocks to Buy Now, Tenable Holdings, Inc. (NASDAQ:TENB)’s Nessus platform is used by over 30,000 organizations worldwide, ranking it as the most popular vulnerability management tool. The platform also protects against more of the common exposures and vulnerabilities (67,000) that have been documented by the U.S government’s database than any other tool. With such potent and customizable vulnerability protection tools, it’s unsurprising that Tenable has grown its base of six-figure customers more than 8-fold over the past five years, to just under 1,000.
Tenable Holdings, Inc. (NASDAQ:TENB) is also one of the few cybersecurity stocks that is profitable, with the company expecting to earn between $0.15 and $0.19 per share in 2022 alongside projected revenue growth of 22%. Tenable expects that rate to be the standard for the next few years, projecting a 20% revenue CAGR from 2021 to 2025, with 2025 revenue hitting $1.1 billion.
You can also take a peek at 10 Best Healthcare Dividend Stocks and Top 15 Dividend Stocks With Upside Potential.
