Top 10 Stock Picks of Anand Desai’s Darsana Capital Partners

In this article, we will take a look at the top 10 stock picks of Anand Desai’s Darsana Capital Partners. You can skip our detailed analysis of Anand Desai’s history, investment philosophy, and hedge fund performance, and go directly to the Top 5 Stock Picks of Anand Desai’s Darsana Capital Partners.

Anand Desai founded Darsana Capital Partners in 2014 and the fund currently has 18 listed holdings based on the latest SEC 13F filings, as of the second quarter of 2021. Darsana Capital Partners is based in New York. Anand Desai previously worked as Senior Managing Director of Eton Park Capital Management from 2004 to 2013. He has a BS in Economics and a BA in Mathematics degree from the University of Pennsylvania.

With a total portfolio value amounting to $3.5 billion, Anand Desai’s Darsana Capital Partners initiated 3 new positions including Full Truck Alliance Co Ltd (NYSE:YMM), Didi Global Inc (NYSE:DIDI), and Amazon.com, Inc. (NASDAQ:AMZN) in Q2 2021. The fund also closed 4 positions including Alphabet Inc. (NASDAQ:GOOG), Netflix, Inc. (NASDAQ:NFLX), News Corporation (NASDAQ:NWS), and Driven Brands Holdings Inc. (NASDAQ:DRVN).

Keeping all these things in mind, let’s start our list of the top 10 stock picks of Anand Desai’s Darsana Capital Partners. We chose the top 10 stock picks of Anand Desai’s Darsana Capital Partners from the second quarter 13F holdings of the fund.

Why pay attention to hedge funds’ stock picks? 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 86 percentage points since March 2017. Between March 2017 and July 2021 our monthly newsletter’s stock picks returned 186.1%, vs. 100.1% for the SPY. Our stock picks outperformed the market by 86 percentage points (see the details here). 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.

Top 10 Stock Picks of Anand Desai’s Darsana Capital Partners

10. Hilton Worldwide Holdings Inc. (NYSE:HLT)

Desai’s Stake Value: $180,930,000

Percentage of Anand Desai’s 13F Portfolio: 5.14%

Number of Hedge Fund Holders: 45

Hilton Worldwide Holdings Inc. (NYSE:HLT), based out of Virginia, is one of the top hospitality companies with business spread all across the globe. Conrad Hilton founded the company back in May 1919 and it is currently being led by Christopher J. Nassetta. With a market cap of $36.566 billion, Hilton Worldwide Holdings Inc. (NYSE:HLT) has 18 brands in its portfolio.

On August 02, Argus analyst John Staszak maintained a Buy rating on Hilton Worldwide Holdings Inc. (NYSE:HLT), raising the price target from $145 to $154 owing to an increased demand for hotels following the world’s return to normalcy post-COVID-19.

Darsana Capital Partners owns about 1.5 million shares in Hilton Worldwide Holdings Inc. (NYSE:HLT) which is 5.14% of its total portfolio. As of the second quarter of 2021, 45 hedge funds out of the 873 tracked by Insider Monkey held stakes in the company, compared to 47 in the previous quarter.

Along with Full Truck Alliance Co Ltd (NYSE:YMM), Didi Global Inc (NYSE:DIDI), and Amazon.com, Inc. (NASDAQ:AMZN), Hilton Worldwide Holdings Inc. (NYSE:HLT) is among the stocks picked by Capital Darsana Partners.

Here is what LRT Capital Management has to say about Hilton Worldwide Holdings Inc. (NYSE:HLT) in its Q1 2021 investor letter:

Hilton is the second largest hotel company in the world after Marriott International (MAR). The company owns a portfolio of brands from the low end (Hampton Inn, Hilton Garden Inn), through the mid-tier (DoubleTree, Hilton, Curio, Embassy Suites, Homewood Suites), to the luxury high end (Waldorf Astoria, Conrad, LXR). Hilton’s portfolio is almost perfectly balanced between the three categories, while the majority (73%) of the company’s EBITDA geographic exposure is in the United States with Asia Pacific and Europe each contributing another 10%. Hilton today is almost exclusively a manager and franchisor of hotels, not a hotel owner. The company owns 61 hotels, manages 715 and franchises 5,702 – in total 6,478 properties with over 1 million combined rooms.8 Like all franchise based businesses Hilton requires very little capital to grow as it utilizes the investment capital of its hotel-owners/partners to expand. Hilton currently faces a difficult operating environment due to the covid-19 pandemic and uncertainty about the future of business travel. However, the company is an excellent operator with a somewhat leveraged capital structure – if pent-up demand for travel materializes post-Covid, as we expect it will, the company will quickly go from losing money to raking in profits.

Hilton last reported earnings on February 17th, with both top and bottom line disappointing investment analysts’ expectations. However, these poor results are not indicative of the company’s long-term outlook. In normal times, Hilton generates prodigious free cash flow which we expect will resume once travel demand returns. Over the longer term we expect Hilton to grow its topline at least twice as fast as GDP due to rising revenues per room and the growing number of rooms. Most importantly, the industry continues to consolidate with chain branded hotels taking market share from independent operations. With the superior marketing and loyalty programs offered by hotel chains (Hilton Honors has 112 million members) driving demand, independent hotel owners see the benefits of signing up with one of the dominant hotel chains (Hilton, IHG and Marriott). Furthermore, the company’s main growth opportunities remain abroad, as hotel chain penetration remains much lower outside the United States. Shares are up 9.34% year-to-date. We believe the shares are undervalued at 31.72x forward earnings.”

9. Comcast Corp (NASDAQ:CMCSA)

Desai’s Stake Value: $199,570,000

Percentage of Anand Desai’s 13F Portfolio: 5.67%

Number of Hedge Fund Holders: 84

Having a market cap of $261.581 billion, Comcast Corp (NASDAQ:CMCSA) is a renowned cable and entertainment company with three primary businesses. In addition to offering high-speed internet, phone, and video, in the US, the company operates NBC Universal worldwide and Sky in Europe.

Pivotal Research analyst Jeffrey Wlodarczak maintained a Buy rating on the stock, raising the price target from $72 to $75 on September 29.

Anand Desai’s Darsana Capital Partners holds a total of 3.5 million shares in the company worth $199.57 million, making up 5.67% of the total holdings. Out of the hedge funds being tracked by Insider Monkey, 84 held stakes in Comcast Corp in Q2 as compared to 88 in Q2 2021.

In the Q2 2021 investor letter of ClearBridge Investments, the fund mentioned Comcast Corporation (NASDAQ: CMCSA). Here is what ClearBridge Investments has to say about the company:

“We funded the shift primarily with trims in Comcast following big gains in this name. Comcast is a long-term holding that have been and remain core holdings. During the quarter, however, we took gains and resized the positions to reflect their current risk-reward post strong increases in the stocks.

Comcast, like Blackstone, has been a meaningful long-term holding whose stock performance has at times lagged its robust fundamental performance. Over the last nine months the stock price caught up some with the fundamentals and looked like it had more room to run. Our thesis on the name evolved, however, following the May 17 announcement that competitor Discovery was merging its operations with Time Warner. This deal positions the new company as a credible competitor to Netflix, Amazon Prime, Hulu and Disney, and results in Comcast being left without the proverbial dance partner in the evolving pay TV/DTC landscape. While we continue to believe Comcast’s cable systems business is well-positioned and that NBCUniversal remains valuable, the competitive dynamic for NBCUniversal has stiffened. Our reduced position size reflects both our continued enthusiasm for many parts of the franchise and emerging concerns given the evolving pay TV/DTC landscape.”

8. Shopify Inc. (NYSE:SHOP)

Desai’s Stake Value: $219,147,000

Percentage of Anand Desai’s 13F Portfolio: 6.23%

Number of Hedge Fund Holders: 85

Shopify Inc. (NYSE:SHOP), a Canadian company, is one of the most trusted names for e-commerce stores as over one million businesses are powered by the company owing to its reliable services and class-leading tools. Some of the world’s biggest brands such as PepsiCo (NASDAQ:PEP) and Gymshark use Shopify.

On July 29, DA Davidson analyst Tom Forte maintained a Neutral rating on Shopify’s shares and raised the price target from $1,275 to $1,450.

Darsana Capital Partners owns 150,000 shares in the company which are worth about $219.147 million. According to the data of Insider Monkey, the number of hedge funds that owned shares of the company as of Q2 has dropped to 85 from 91 in the previous quarter.

 Here is what Polen Capital has to say about Shopify Inc. in its Q2 2021 investor letter:

Shopify, a Canadian software company, enables merchants and entrepreneurs to run their operations efficiently. We like the focus Shopify brings to merchants. Its products allow merchants to set up an online store, manage inventory, interact with customers, accept payments, and monitor the flow of goods through various distribution channels in one centralized dashboard. Though it offers missioncritical capabilities, Shopify subtly operates in the background while allowing merchants to interact with customers.

As the world increasingly sees direct-to-consumer interactions take flight, both nascent and established brands are adopting Shopify. Today, nearly two million businesses utilize Shopify to sell more than $150 billion in merchandise across the platform. We think these numbers can grow significantly from here. Further, newer product categories like lending and fulfillment (along with a litany of other future merchant pain points we think Shopify can help solve) coupled with higher attach rates for payments could drive higher monetization of a growing user base in the coming five years. We believe Shopify can grow its earnings power at a 30% rate for the coming five years.”

7. Peloton Interactive Inc. (NASDAQ:PTON)

Desai’s Stake Value: $223,236,000

Percentage of Anand Desai’s 13F Portfolio: 6.34%

Number of Hedge Fund Holders: 67

Peloton Interactive Inc. (NASDAQ:PTON), headquartered in New York City, is a first-of-its-kind fitness platform that offers premium wellness content for its members. Founded in 2012, Peloton already has over 3.6 million members spread across the globe with the ability to access high-quality fitness content from their devices.

On August 27, Needham analyst Bernie McTernan kept a Buy rating on the company’s stock despite lowering the price target from $135 to $130.

Just like Didi (NYSE:DIDI), Full Truck Alliance Co Ltd (NYSE:YMM), and Amazon.com, Inc. (NASDAQ:AMZN), Peloton Interactive Inc. (NASDAQ:PTON) is a noteworthy stock in Anand Desai’s Darsana Capital Partners’ portfolio.

Artisan Mid Cap Fund, in its Q1 2021 investor letter, mentioned Peloton Interactive, Inc. (NASDAQ:PTON). Here is what Artisan Mid Cap Fund has to say about the company:

“Among our bottom Q1 contributors was Peloton Interactive. Peloton’s growth has accelerated throughout the pandemic as consumers replace in-person gym workouts with the company’s connected bikes and online classes. This has increased brand awareness, decreased the need for advertising spending and quickly proved the company’s high-margin, recurring revenue business model. These benefits were on clear display in Peloton’s Q4 results, which showed subscription growth trends remain robust entering 2021. However, this demand, combined with global supply chain bottlenecks, is resulting in bike shipment delays and has led the company to spend $100 million in the coming months to expedite deliveries. While this will pressure near-term profits, we expect trends to improve later this year as the company’s investments in manufacturing capacity bear fruit and as it rolls out a new, affordable treadmill. We trimmed our position early in the quarter based on valuation concerns, but the stock’s subsequent selloff brought the valuation back into an attractive range, in our view.”

6. Ferrari N.V. (NYSE:RACE)

Desai’s Stake Value: $257,563,000

Percentage of Anand Desai’s 13F Portfolio: 7.32%

Number of Hedge Fund Holders: 27

The world-famous manufacturer of sports cars, Ferrari N.V. (NYSE:RACE) is headquartered in Maranello, Italy. The company also makes apparel, watches, earphones as well as numerous other accessories.

On July 16, BofA analyst John Murphy lowered the company’s price target from $287 to $281 while keeping a Buy rating on the shares. The price target has been decreased due to a severe shortage of semi-conductor chip across the globe which is delaying delivery times and decreased production.

In the Q2 2021 investor letter of Ensemble Capital, the fund mentioned Ferrari N.V. (NYSE:RACE). Here is what Ensemble Capital has to say:

Ferrari: After posting standout performance in 2020, beating the S&P 500 by over 20%, Ferrari’s share price performance has lagged for much of this year. The main issue this quarter was the company pushing out their medium-term financial targets due to development and production delays caused by COVID, but this only led to a 1% decline in the stock price for the full quarter. While we believe the company did a fantastic job maintaining production in light of COVID, it did not surprise us that some of their longer-term, new model introductions might be delayed by a couple of quarters. While disappointing of course, Ferrari is curating a set of extremely exclusive mechanical works of art and we are much happier seeing them take the time to do things right, rather than rushing to meet a self-imposed financial target.”

 

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Disclosure: None. Top 10 Stock Picks of Anand Desai’s Darsana Capital Partners is originally published on Insider Monkey.