Top 10 Stock Picks of Andrew Immerman’s Palestra Capital

In this article, we discuss the top 10 stock picks of Andrew Immerman’s Palestra Capital.

Andrew Immerman is the Managing Partner at Palestra Capital Management, a New-York based hedge fund he founded in 2011 with his long-time friend Jeremy Schiffman. Immerman went to Wharton School of the University of Pennsylvania for his bachelor’s degree, and subsequently earned an MBA from the prestigious Harvard Business School. Prior to founding Palestra Capital, Immerman worked at a range of firms, honing his investment skills through the years. He started his career at Goldman Sachs Group, as an analyst in the firm’s investment banking division. He moved on to stints at Francisco Partners, Clovis Capital Management LP, and then Viking Global Investors as an analyst in 2006.

Palestra Capital was the first hedge fund to win $100 million in seed funding from Goldman Sachs in 2011. The fund primarily invests in value opportunities and special situations around the globe. Palestra Capital manages $4.71 billion in assets, as of the third quarter of 2021, in comparison to $4.64 billion in the previous quarter. The fund’s investment are concentrated in the financial, technology, services, and consumer goods sectors.

Photo by Nick Chong on Unsplash

Some of the most notable stocks in Immerman’s portfolio include Microsoft Corporation (NASDAQ:MSFT), Alphabet Inc. (NASDAQ:GOOG), and Uber Technologies, Inc. (NYSE:UBER), along with others discussed in detail below.

Our Methodology

For this article, we’ll talk about the top 10 stock picks of Andrew Immerman’s Palestra Capital. Hedge fund sentiment around each stock has been derived using Insider Monkey’s database of 867 elite hedge funds. Analyst ratings and business fundamentals around each stock have also been mentioned to provide readers with context for their investment choices.

Top 10 Stock Picks of Andrew Immerman’s Palestra Capital

10. PagSeguro Digital Ltd. (NYSE:PAGS)

Palestra Capital’s Stake Value: $184.73 million

Palestra Capital’s 13F Portfolio: 3.92%

Number of Hedge Fund Holders: 41

PagSeguro Digital Ltd. (NYSE:PAGS) starts off our list of top stocks to buy according to Andrew Immerman’s Palestra Capital. The Brazil-based company provides financial technology solutions to a range of customers around the globe. In Q3 2021, Palestra Capital reported owning roughly 3.6 million shares in PagSeguro Digital Ltd., worth $184.73 million representing 3.92% of the fund’s overall portfolio.

PagSeguro Digital Ltd.’s (NYSE:PAGS) EPS for the third quarter came in at $0.23, which was in-line with consensus estimates. Quarterly revenue stood at $508.84 million, beating analysts’ forecasts by $17.99 million.

Hedge fund sentiment was positive on PagSeguro Digital Ltd., with 41 hedge funds holding stakes in the company at the close of the third quarter, up from 40 in Q2 2021.

In the last three month period as of January 4, PagSeguro Digital Ltd. has lost 42.14% in value, owing to a slumping Brazilian economy and potential change in prepaid regulation that could affect the company.

9. Activision Blizzard, Inc. (NASDAQ:ATVI)

Palestra Capital’s Stake Value: $215.01 million

Palestra Capital’s 13F Portfolio: 4.56%

Number of Hedge Fund Holders: 80

Then there’s Activision Blizzard, Inc. (NASDAQ:ATVI), the California-based video game giant that offers interactive entertainment content on several platforms. As of the third quarter, Palestra Capital owns 2.78 million shares of Activision Blizzard, Inc., having increased its stake in the company by 30% over the previous quarter, where it held 2.15 million shares.

In the third quarter, Activision Blizzard, Inc. beat EPS estimates by $0.02, coming in at $0.72. Quarterly revenue of $1.88 billion was also above consensus estimates by $610,000.

On December 20, Stifel analyst Drew Crum kept a ‘Buy’ rating on Activision Blizzard, Inc. shares, and lowered the price target to $77 from $95. The company’s King Entertainment division has been the main driver of growth, and generates 30% of company revenue today. Activision Blizzard, Inc. has a low debt burden, and all three segments have operating margins of over 40%

Investors were seen loading up on Activision Blizzard, Inc. stock, with the number of bullish hedge fund bets on the company stock increasing from 78 in the second quarter to 80 in Q3 2021.

Asset management firm Baron Funds talked about many stocks in its Q3 investor letter, and Activision Blizzard, Inc. was one of them. Here’s what the fund said:

“Core Growth businesses were hurt by the rotation into more value and cyclical businesses. Despite the rotation, this business category still outperformed the broader Index. Activision Blizzard, Inc. were pressured by political activities. Activision faced regulatory concerns in China and investors shifted to more stable businesses.”

8. Uber Technologies, Inc. (NYSE:UBER)

Palestra Capital’s Stake Value: $215.66 million

Palestra Capital’s 13F Portfolio: 4.57%

Number of Hedge Fund Holders: 143

Uber Technologies, Inc. is next on our list of top stocks to buy according to Palestra Capital. The company offers ride-hailing, food delivery and other transportation services around the globe. Palestra Capital reported holding 4.81 million shares in Uber Technologies, Inc. at the close of the third quarter, amounting to a 4.57% slice of the fund’s overall holdings.

Evercore ISI analyst Mark Mahaney recently put Uber Technologies, Inc. on his list of top tech stocks to watch for 2022.  With the mobility business picking up pace again as Covid lockdowns end, Uber Technologies, Inc. shows a strong financial picture, and low valuations within the sector can lead to potentially big returns in 2022.

Out of 867 elite hedge funds tracked by Insider Monkey, 143 disclosed ownership of positions in Uber Technologies, Inc. at the end of the third quarter, with combined holdings of $10.76 billion. This shows an upward trend in comparison to the second quarter, where 135 hedge funds held $10.41 billion worth of stakes in the company.

Tollymore Investment Partners, an investment management firm, mentioned Uber Technologies, Inc. in its third quarter investor letter. Here’s what the fund said:

“Today disruptors are not typically seeking to replace incumbents entirely. Rather, they break the links in the customer journey, in doing so better aligning monetisation with value creation and minimising externalities. For example, Uber broke the link between hailing a taxi. Uber is a specific example of a business model innovation which separated asset use from ownership. This is hardly a novel idea; it’s called renting. Rental models lend themselves to assets which are expensive and durable, and where usage is infrequent.”

7. Alphabet Inc. (NASDAQ:GOOG)

Palestra Capital’s Stake Value: $260.98 million

Palestra Capital’s 13F Portfolio: 5.53%

Number of Hedge Fund Holders: 156

Andrew Immerman holds roughly 98,000 shares of Alphabet Inc. as of the end of September, having lowered his stake in the company by 24% over the previous quarter where he held 127,000 shares. 156 out of 867 elite funds tracked by Insider Monkey held stakes in Alphabet Inc. at the close of the third quarter, up from 155 in the preceding quarter.

In December, Tigress Financial analyst Ivan Feinseth reiterated a ‘Strong Buy’ on Alphabet Inc. shares, raising the price target to $3,540 from $3,185. The firm’s analyst noted that the company’s prioritized focus on artificial intelligence is allowing for significant growth opportunities and increased product functionality.

Investment firm Saturna Capital mentioned Alphabet Inc. in its investor letter for Q3 2021. Here’s what the fund said:

“Alphabet was a new addition to the Fund this year, as we believed it important to have exposure to the top online media and advertising company in the world. Some have raised concerns surrounding Alphabet’s exposure to political interference, but we take comfort from the belief that were the company to be broken up, it would quite likely be worth even more than as a single entity.”

6. Microsoft Corporation (NASDAQ:MSFT)

Palestra Capital’s Stake Value: $261.30 million

Palestra Capital’s 13F Portfolio: 5.54%

Number of Hedge Fund Holders: 250

Microsoft Corporation constitutes 5.54% of Palestra Capital’s overall portfolio, with roughly 926,000 shares valued at $261.30 million.

Microsoft Corporation reported its third quarter earnings on October 26, and disclosed earnings per share of $2.27, which was above consensus estimates by $0.19. The company raked in $45.32 billion in revenue for Q3, outperforming estimates by $1.33 billion.

On December 21, SMBC Nikko analyst Steve Koenig initiated coverage of Microsoft Corporation with an ‘Outperform’ rating and a $410 price target, noting that the company is “well-positioned at the center of big secular trends in software”, and its cloud unit Azure looks set to become a tough competitor to Amazon’s AWS for public market cloud leadership by 2025.

ClearBridge Investments, an investment management firm, talked about Microsoft Corporation in its investor letter for the third quarter. Here’s what it said:

“The Strategy modestly outperformed the benchmark; consistent with our fundamental approach that seeks balanced exposure to industries and the growth and value spectrum, performance was driven by companies from diverse sectors. Microsoft, which develops software including the Windows family of products, the Microsoft Office system and the Azure cloud platform, and is a leader in data protection and customer privacy as well as human rights and diversity, contributed strongly as earnings maintained positive sentiment. Microsoft is seeing a number of businesses reach a new, higher level of engagement, adoption and momentum.”

Just like Alphabet Inc. and Uber Technologies, Inc., Microsoft Corporation is an exciting stock to watch in 2022.

5. Workday, Inc. (NASDAQ:WDAY)

Palestra Capital’s Stake Value: $265.46 million

Palestra Capital’s 13F Portfolio: 5.63%

Number of Hedge Fund Holders: 72

Workday, Inc. (NASDAQ:WDAY) develops enterprise cloud applications that help optimize human and financial resources. The firm reported earnings per share of $1.10 in the third quarter, surpassing estimates by $0.23. It also beat quarterly revenue estimates by $15.64 million, with revenue coming in at $1.33 billion.

According to regulatory data for the third quarter, Palestra Capital holds 1.06 million shares of Workday, Inc., valued at $265.46 million and amounting to 5.63% of the fund’s total holdings. 72 hedge funds were long Workday, Inc. at the close of the third quarter, holding stakes worth $6.38 billion.

In November, Needham analyst Scott Berg raised the firm’s price target on Workday, Inc. to $360 from $310, and maintained a ‘Buy’ rating on the shares, noting impressive Q3 results which showed accelerated 24-month subscription growth, and increased subscription revenue growth.

4. Fidelity National Information Services, Inc. (NYSE:FIS)

Palestra Capital’s Stake Value: $288.97 million

Palestra Capital’s 13F Portfolio: 6.13%

Number of Hedge Fund Holders: 69

Fidelity National Information Services, Inc. (NYSE:FIS) offers technology solutions through its segments: Merchant, Banking, and Capital Markets. As of the third quarter, 69 out of 867 hedge funds tracked by Insider Monkey were bullish on the company stock, compared to 72 in the preceding quarter. In the third quarter, Andrew Immerman’s Palestra Capital reported owning 2.37 million shares in Fidelity National Information Services, Inc., valued at $288.97 million. This shows an increase of 7% as compared to the second quarter where the fund held 2.22 million shares.

Fidelity National Information Services, Inc. posted an EPS of $1.73 for the third quarter, beating analysts’ forecasts by $0.05.

Investment firm Baron Funds mentioned Fidelity National Information Services, Inc. in its third quarter investor letter. Here’s what the fund said:

“Fidelity National Information Services, Inc. provides software to financial institutions and enables merchants to accept electronic payments. The company reported solid quarterly financial results that exceeded expectations and raised annual guidance for revenue and earnings. However, the stock fell due to concerns that Fidelity National’s legacy technology is losing market share to newer competitors with more modern technology. We believe these concerns are overblown and that Fidelity National remains well positioned to grow revenues organically at a high single-digit rate and earnings at a double-digit rate over time.”

3. Avantor, Inc. (NYSE:AVTR)

Palestra Capital’s Stake Value: $319.25 million

Palestra Capital’s 13F Portfolio: 6.77%

Number of Hedge Fund Holders: 53

Up next we have Avantor, Inc. (NYSE:AVTR), which deals in the provision of products and services to the biopharma, education, healthcare, and applied materials industries around the globe. Palestra Capital’s 7.8 million shares in the firm represent 6.77% of the fund’s overall portfolio.

On December 9, Cowen analyst Dan Brennan reiterated an ‘Outperform’ rating on Avantor, Inc. stock, and increased the price target to $50 from $48, seeing upside as the company strategically invests in its proprietary products that drive better growth and margins. Avantor, Inc. reported earnings per share of $0.35 for the third quarter, surpassing estimates by $0.03.

Hedge funds were loading up on Avantor, Inc. stock. 53 hedge funds held stakes in the company in the third quarter, which is up from 44 hedge funds bullish on Avantor, Inc. a quarter ago.

Investment management firm ClearBridge Investments discussed Avantor, Inc. in its investor letter for the third quarter. It said:

“Avantor, which distributes proprietary, higher-margin consumables products to life science research companies, has benefited from accretive research & development as well as paying down debt, which has contributed to increased margins and strong stock performance.”

2. Alliance Data Systems Corporation (NYSE:ADS)

Palestra Capital’s Stake Value: $354.57 million

Palestra Capital’s 13F Portfolio: 7.52%

Number of Hedge Fund Holders: 31

Alliance Data Systems Corporation (NYSE:ADS) is Andrew Immerman’s second largest holding, with 3.51 million shares valued at $354.57 million, representing a 7.52% slice of his overall portfolio at Palestra Capital. The company deals in the provision of data-driven marketing, loyalty, and payment solutions to clients around the world.

In the third quarter, Alliance Data Systems Corporation reported earnings per share (GAAP) of $4.47, exceeding consensus estimates by $1.25.

31 hedge funds were long Alliance Data Systems Corporation at the close of the third quarter, holding positions worth $1.11 billion. In comparison, 34 hedge funds held stakes worth $1.33 billion in the company a quarter ago.

1. DISH Network Corporation (NASDAQ:DISH)

Palestra Capital’s Stake Value: $437.51 million

Palestra Capital’s 13F Portfolio: 9.28%

Number of Hedge Fund Holders: 51

DISH Network Corporation (NASDAQ:DISH) provides pay-TV services in the United States and operates through its segments: Pay-TV and Wireless. According to regulatory data filed for the third quarter, Palestra Capital owns 10.06 million shares in DISH Network Corporation, amounting to a value of $437.51 million which represents 9.28% of the fund’s overall portfolio.

On November 10, Deutsche Bank analyst Bryan Kraft maintained a ‘Buy’ rating on DISH Network Corporation shares while lowering the price target to $71 from $77, citing the company’s $4 billion spectrum purchase as the reason for the change in price target. DISH Network Corporation’s (NASDAQ:DISH) revenue for the third quarter stood at $4.45 billion, missing estimates by $1.79 million. EPS came in at $0.88, falling below consensus estimates by $0.02.

You can also take a look at 10 Best Tech Stocks To Invest in Now and Billionaire Daniel Sundheim’s Top 10 Picks.

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