In this article, we discuss the top 10 stock picks of Christopher Lyle’s SCGE Management.
Christopher Lyle is a Stanford University graduate. In 2002, he started his career as an analyst at JPMorgan Chase. Later, he worked as a senior analyst at Disney, an equity analyst at Bain Capital Public Equity LP, and a VP advisor and chief of business for Google Cloud. Christopher Lyle established SCGE Management in November 2008. Currently, he is the portfolio manager at SCGE Management.
SCGE Management, situated in Menlo Park, California, is a well-known financial advising hedge fund. The hedge fund invests in various firms, from public to late-stage private. Christopher Lyle’s SCGE Management had a $10.78 billion 13F portfolio in the third quarter of 2021, up from $10.67 billion a quarter earlier. The hedge fund has investments in various sectors, including communications, information technology, consumer discretionary, utilities, and telecommunications. In addition, the hedge fund’s 13F portfolio includes notable stocks like Amazon.com, Inc. (NASDAQ:AMZN), Airbnb, Inc. (NASDAQ:ABNB), and Snowflake Inc. (NYSE:SNOW).
In Amazon.com, Inc., Christopher Lyle owns 120,800 shares. The investment covers an impressive 3.68% of the fund’s 13F portfolio. Cowen analyst John Blackledge boosted his price target on Amazon.com, Inc. to $4,500 from $4,300 in December and maintained an “Outperform” rating on the stock, naming it his Best Choice for 2022.
Another notable stock in Christopher Lyle’s portfolio is Airbnb, Inc.. The investor owns a $282.03 million stake in the company. Airbnb, Inc.’s third quarter EPS came in at $1.22, beating consensus estimates by $0.52.
Snowflake Inc. is also part of Christopher Lyle’s portfolio. In December, Credit Suisse analyst Phil Winslow increased his price target on Snowflake Inc. to $465 from $455 and kept an “Outperform” rating on the shares.
Our Methodology
With this economic outlook in mind, let’s start our list of the top 10 stock picks of Christopher Lyle’s SCGE Management. We used Lyle’s 13F portfolio for Q3 2021 for this analysis.
Top Stock Picks of Christopher Lyle’s SCGE Management
10. Robinhood Markets, Inc. (NASDAQ:HOOD)
SCGE Management: $404,100,000
Percentage of SCGE Management’s 13F Portfolio: 3.74%
Number of Hedge Fund Holders: 20
Robinhood Markets, Inc. (NASDAQ:HOOD) is a financial services company. The business focuses on retail brokerage and provides trading in U.S. listed equities, exchange traded funds, associated options, and cryptocurrency trading, in addition to cash management services, such as debit cards. Christopher Lyle added Robinhood Markets, Inc. to his portfolio in the third quarter of 2021 by buying 9.60 million shares.
In December, Deutsche Bank analyst Brian Bedell decreased his price target on Robinhood Markets, Inc. to $17 from $32 and kept a “Hold” rating on the shares. According to the analyst, Robinhood Markets stock now has a greater risk of upward rise.
Overall, 20 hedge funds monitored by Insider Monkey in the third quarter were bullish on Robinhood Markets. The stakes held by these funds are valued at $4.69 billion.
Along with Amazon.com, Inc., Airbnb, Inc., and Snowflake Inc., Robinhood Markets, Inc. is one of the notable stocks according to Christopher Lyle’s Q3 portfolio.
9. Okta, Inc. (NASDAQ:OKTA)
SCGE Management: $424,127,000
Percentage of SCGE Management’s 13F Portfolio: 3.93%
Number of Hedge Fund Holders: 62
Okta, Inc. (NASDAQ:OKTA) is a technology company located in the United States, specializing in identity and access management. Christopher Lyle’s SCGE Management is the most significant stakeholder of Okta, Inc., with 1.79 million shares worth $424.13 million.
In December, Deutsche Bank analyst Patrick Colville reduced his price target on Okta, Inc. to $250 from $270 and maintained a “Buy” rating on the shares. Okta, Inc. continues to split investors, says Colville in a research note, and the Q3 figures give ammo to both sides for debate.
The number of hedge funds tracked by Insider Monkey holding stakes in Okta, Inc. grew to 62 in the third quarter, up from 57 in the preceding quarter. These stakes hold a consolidated value of $2.26 billion as of Q3, up from $2.09 billion in Q2.
In its second-quarter 2021 investor letter, Lakehouse Capital mentioned Okta, Inc.. Here is what the fund said:
“The Fund held 20 positions as of the end of June and exited four during the year (including) Okta. The companies we exited were sold almost entirely on the basis of their valuations getting stretched well past their norms and to levels where the return profile no longer offered the asymmetric upside that led us to invest in the first place. We dislike selling on valuation as great growth companies are hard to find and letting winners run is an important facet of a winning growth strategy, however, we’re not gluttons for punishment either and in each of those cases we redeployed capital towards other high-quality growth companies with less demanding valuations.”
8. Microsoft Corporation (NASDAQ:MSFT)
SCGE Management: $452,482,000
Percentage of SCGE Management’s 13F Portfolio: 4.19%
Number of Hedge Fund Holders: 250
Microsoft Corporation (NASDAQ:MSFT) is a global technology company based in the United States. The most significant stakeholder of Microsoft Corporation is Ken Fisher’s Fisher Asset Management, with 25.52 million shares worth $7.20 billion.
In December, SMBC Nikko analyst Steve Koenig initiated coverage of Microsoft Corporation, keeping an “Outperform” rating on the stock, with a price target of $410. Microsoft also issued a quarterly dividend of $0.62 per share in December, in line with the previous.
Microsoft Corporation is getting the attention of the smart money, as 250 hedge funds tracked by Insider Monkey reported owning stakes in the company at the end of the third quarter, up from 238 funds a quarter earlier.
In its third-quarter 2021 investor letter, Baron Funds mentioned Microsoft Corporation. Here is what the fund said:
“Shares of Microsoft Corporation, a cloud-software leader and provider of software productivity tools and infrastructure, rose during the quarter following a strong earnings report highlighting solid demand for its broad product stack and continued momentum migrating its business to the cloud. Microsoft’s results continued to be strong across the board, with total revenue beating Street estimates by 4.5%, an acceleration in Commercial Cloud revenue to 31% constant-currency growth, a four-point improvement in Commercial Cloud gross margins (to 70% from 66%), and GAAP earnings up 42%. We believe the company is positioned to deliver 13% to 15% organic growth over the next three years, underpinned by TAM expansion across its disruptive cloud product portfolio, as more companies look to transform and digitize their businesses, as well as strong operating leverage as its cloud products gain scale.”
7. PayPal Holdings, Inc. (NASDAQ:PYPL)
SCGE Management: $467,337,000
Percentage of SCGE Management’s 13F Portfolio: 4.33%
Number of Hedge Fund Holders: 123
PayPal Holdings, Inc. (NASDAQ:PYPL) is a technology platform and digital payments corporation that enables customers and merchants worldwide to make digital and mobile payments. Among the hedge funds tracked by Insider Monkey, Fundsmith LLP is a leading shareholder of PayPal Holdings, Inc., with 12.29 million shares worth more than $3.20 billion.
In December, Wedbush analyst Moshe Katri lowered his price target on PayPal Holdings, Inc. to $220 from $240 and kept an “Outperform” rating on the shares, citing decreasing consumer spending owing to inflationary pressures for the slashed price target.
At the end of the third quarter of 2021, 123 hedge funds in the database of Insider Monkey held stakes worth $12.88 billion in PayPal Holdings, Inc., down from 143 funds in the preceding quarter, holding stakes totaling $16.35 billion.
In its third-quarter 2021 investor letter, Baron Funds mentioned PayPal Holdings, Inc. and detailed its position on the company. Here is what the fund said:
“For the full year 2020, one of the top performers was PayPal, which we purchased in 2019, the company continues to take market share in digital payments and has seen an acceleration in user adoption and engagement, especially within their “silver tech” or older user demographic. We expect many more years of ongoing double-digit growth from their various business segments and new initiatives.”
6. ServiceNow, Inc. (NYSE:NOW)
SCGE Management: $518,413,000
Percentage of SCGE Management’s 13F Portfolio: 4.8%
Number of Hedge Fund Holders: 87
ServiceNow, Inc. (NYSE:NOW) is a cloud computing company that specializes in enterprise solutions. In November, Credit Suisse analyst Phil Winslow initiated coverage of ServiceNow, Inc., awarding an “Outperform” rating to the stock, with a price target of $850.
ServiceNow, Inc.’s third quarter revenue came in at $1.51 billion, up 32.5% year-over-year, exceeding market predictions by $30 million. The hedge fund chaired by Christopher Lyle holds 833,100 shares in ServiceNow, Inc. as of Q3 2021, worth over $518.41 million. It is the sixth-largest holding of SCGE Management.
In Q3 2021, 87 hedge funds were bullish on ServiceNow, Inc., down from 91 funds in the preceding quarter.
Just like Amazon.com, Inc., Airbnb, Inc., and Snowflake Inc., ServiceNow, Inc. is one of the stocks gaining the attention of Christopher Lyle.
RiverPark Funds, an investment management firm, in its third-quarter 2021 investor letter, mentioned ServiceNow, Inc.. Here is what the fund said:
“NOW shares were our final top contributor for 3Q on a strong beat and raise quarter. The company reported 31% subscription revenue growth, 30% subscription billings growth, and a 19% non-GAAP FCF margin for the quarter, while raising full year subscription revenue and billings guidance to 29% and 31%, respectively, as well as raising non-GAAP FCF margin by 100 basis points to 31%.
ServiceNow is a best-of-breed provider of both IT Service Management (ITSM) and IT Operations Management (ITOM) solutions to enterprise customers. The company’s products serve mainly its clients’ internal employee base with a current focus on automating the process of IT deployment, configuration and service and management of IT assets across an organization. Both its ITSM and ITOM solutions are delivered as a software-as-a-service (SaaS), and are each leading solutions in growing markets, driven by the secular trend of enterprises transitioning all aspects of their business and operations to the cloud. As the company maintains and adds customers, upsells them, and expands into adjacent markets, we believe NOW should sustain a strong long-term revenue and FCF growth trajectory.”
5. Sea Limited (NYSE:SE)
SCGE Management: $718,678,000
Percentage of SCGE Management’s 13F Portfolio: 6.66%
Number of Hedge Fund Holders: 117
Sea Limited (NYSE:SE) is an online gaming firm that operates on internet and mobile platforms. Digital Entertainment, E-Commerce, and Digital Financial Services are the three segments of the company. Sea Limited’s third quarter active users increased by 27.4% year-over-year to 729 million.
After rolling forward values following the company’s Q3 results, CLSA analyst Neel Sinha upgraded Sea Limited to “Buy” from “Outperform” in November, with a price target of $455, up from $352. With 10.41 million shares worth $3.32 billion, Tiger Global Management is the largest shareholder of Sea Limited as of Q3.
Overall, hedge funds are loading up on Sea Limited, as 117 out of the 867 funds tracked by Insider Monkey held stakes in the online gaming company, up from 104 funds a quarter earlier.
Tao Value, an investment management firm, in its second-quarter 2021 investor letter, mentioned Sea Limited. Here is what the fund said:
“Sea continued to execute above expectation. The gaming business continued strong momentum, recording bookings of $1.1 billion, growing 117% y-o-y. The major franchise Free Fire showed no sign of slowing down in established ASEAN & LatAm market and received positive reception from new markets like US. On e-commerce side, Shopee demonstrated early success in expanding to Brazil, by adopting a low-price category & gamification strategy. For 2021, Shopee is now top downloaded e-commerce app in Brazil, almost 2x of the second-place local leader Mercado Libre (MELI). I also see the most promising development is in its FinTech business – SeaMoney, which more than doubled its revenue in Q1 2021 from the previous quarter! With online lending products rolling out, SeaMoney is poised to grow rapidly, becoming the 3rd growth curve for Sea.”
4. DoorDash, Inc. (NYSE:DASH)
SCGE Management: $882,442,000
Percentage of SCGE Management’s 13F Portfolio: 8.18%
Number of Hedge Fund Holders: 42
DoorDash, Inc. (NYSE:DASH) is a company that designs, develops, and operates a meal delivery and logistics platform. It serves consumers based in the United States, Canada, and Australia. The hedge fund of Christopher Lyle entered the third quarter of 2021 with 4.28 million shares of DoorDash, Inc., worth around $882.44 million. The company has featured on Lyle’s portfolio since the fourth quarter of 2020.
In December, JPMorgan analyst Doug Anmuth lowered his price target on DoorDash, Inc. to $175 from $220 and kept a “Neutral” rating on the shares. The analyst forecasts slower growth as many companies face severe comparisons and work towards normalization.
DoorDash, Inc. saw a decrease in hedge fund sentiment in Q3 2021. The number of long hedge fund positions reduced to 42 at the end of the third quarter, compared to 45 positions in the previous quarter.3. Twilio Inc. (NYSE:TWLO)
SCGE Management: $887,948,000
Percentage of SCGE Management’s 13F Portfolio: 8.23%
Number of Hedge Fund Holders: 96
Twilio Inc. is a communications software company that offers a cloud-based platform and services. Twilio Flex, messaging, programmable voice, programmable video, elastic SIP trunking, and IoT are some of the company’s offerings. As of September 30, 2021, there were 250,000 active client accounts, an increase as compared to 208,000 active client accounts as of September 30, 2020.
In December, Goldman Sachs analyst Kash Rangan initiated coverage of Twilio Inc. with a “Buy” rating and a price target of $350. Out of the hedge funds tracked by Insider Monkey, Catherine D. Wood’s ARK Investment Management is the biggest shareholder of Twilio Inc., with 3.25 million shares worth $1.04 million.
In the third quarter, hedge fund sentiment decreased for Twilio Inc.. Insider Monkey’s data shows that 96 hedge funds held stakes in the company at the end of the third quarter, down from 98 funds a quarter earlier.
RiverPark Funds, in its third-quarter 2021 investor letter, mentioned Twilio Inc.. Here is what the fund said:
“TWLO shares were also a top detractor for the quarter. Just like after 1Q, despite another quarterly beat in 2Q, management guidance–which we believe to be conservative–disappointed some investors. Second quarter revenue of $669 million was up 67% year over year, significantly exceeding management’s guidance of 47%-50% revenue growth. Management guided 3Q21 revenue to 50%-52% revenue growth, which was ahead of expectations, but due to continued investment also guided to a non-GAAP operating loss of $25 million-$30 million, which was below the Street’s forecast of a $12 million loss.
The COVID crisis has accelerated the adoption of the company’s cloud-based, integrated communications platform that allows companies in a wide range of businesses to embed digital communications capabilities (video, chat, voice, SMS, fax, and email) into their customer facing applications without needing to build back-end infrastructure and interfaces. Twilio’s total addressable market is now greater than $40 billion, which should grow by 50% over the next few years, providing a strong secular tailwind for the company. We expect the company’s gross margin to continue to expand from 54% in the second quarter toward management’s long-term goal of 60%-65%, and, as the company grows to scale, we expect its non-GAAP operating margin to expand to 25%.”
2. HubSpot, Inc. (NYSE:HUBS)
SCGE Management: $951,935,000
Percentage of SCGE Management’s 13F Portfolio: 8.83%
Number of Hedge Fund Holders: 48
HubSpot, Inc. (NYSE:HUBS) is a software company based in the United States, specializing in inbound marketing, sales, and customer care. In December, HubSpot, Inc. was given a “Buy” rating and a $953 price objective by Goldman Sachs analyst Gabriela Borges.
SCGE Management began building its position in HubSpot, Inc. in the first quarter of 2018, and holds 1.41 million shares in the company as of Q3 2021, valued at $951.94 million. The HubSpot, Inc. stock represents 8.83% of the hedge fund’s 13F portfolio for the third quarter.
At the end of the third quarter of 2021, 48 hedge funds in the database of Insider Monkey held stakes totaling $2.86 billion in HubSpot, Inc., down from 54 funds in the preceding quarter , holding stakes worth $2.67 billion in HubSpot, Inc..
In its third-quarter 2021 investor letter, Artisan Partners mentioned HubSpot, Inc.. Here is what the fund said:
“As we set our priorities for 2022, diversity is an area of focus. We think a reasonable place for us to start is at the boardroom level. Studies have shown board diversity can meaningfully impact how companies make decisions, deploy capital and ensure management’s actions align with the interests of all stakeholders. Additional benefits include increased creativity and innovation, a reduced potential for groupthink and entrenchment and more openness to a wider variety of value creation strategies such as R&D and/or risk management. Research has also shown diversity correlates with better financial performance.
Today’s corporate boardrooms and leadership teams do not always align with the gender and ethnic makeup of the broader workforce, which has evolved significantly over the past several decades, and we believe this is an opportunity for US domiciled companies. Today’s US civilian labor force consists of approximately 50% women (vs. 29% in 1950) and 20% ethnic minorities (vs. 12% in 1980). Meanwhile, according to 2021 data provided by an ISS ESG review of 45,643 director roles, 21% of board members were female and 14% were non-white. While progress has been made in recent decades, it has been slow, and we believe it is important for companies to remain focused on closing this gap.
Two holdings we believe are particularly forward leaning in this area and have already or are starting to disclose gender and ethnicity metrics (which includes) HubSpot. Both companies’ boards are at least 40% female, and their public disclosures include varying degrees of gender, ethnicity and age metrics across different levels of the organization and how they have trended historically. We believe this level of transparency is important. It not only provides relevant stakeholders with a baseline to measure against over time, but it also provides more transparency into who the company is hiring, who is present and who is getting promoted.”
1. Shopify Inc. (NYSE:SHOP)
SCGE Management: $1,212,067,000
Percentage of SCGE Management’s 13F Portfolio: 11.24%
Number of Hedge Fund Holders: 73
Shopify Inc. (NYSE:SHOP) is a popular e-commerce platform for small and medium-sized enterprises. In December, Evercore ISI analyst Mark Mahaney upgraded Shopify Inc. to “Outperform” from “In Line” with a price target of $1,770.
In the third quarter of 2021, SCGE Management owned 894,000 shares in Shopify Inc., worth $1.21 billion. The stock represents 11.24% of the Q3 investment portfolio of the hedge fund.
As of the end of the third quarter, 73 hedge funds in Insider Monkey’s database of 867 elite funds held stakes in Shopify Inc., as compared to 85 funds in the second quarter.
ClearBridge Investments, in its second-quarter 2021 investor letter mentioned Shopify Inc.. Here is what the fund said:
“Shopify (is one of the) companies that have become go-to platforms for small and medium size businesses (SMBs) engaged in e-commerce and social media marketing, rebounded strongly in the quarter after being caught in the selloff among high-multiple growth names since Vaccine Monday. These and the portfolio’s other disruptors had thrived through the first part of the pandemic, leading us to trim positions into strength and reallocate cash into more attractively priced evolving opportunities and steady compounders that had been overly punished by lockdowns and a drop in economic activity.”
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This article is originally published at Insider Monkey.
