In this article, we discuss the top 10 stock picks of Donald Sussman’s Paloma Partners based on Q2 holdings of the fund.
Selwyn Donald Sussman is a philanthropist and asset manager in the United States. He was the vice president and chief financial officer of Titan Industrial Corporation, a privately held trade corporation. Subsequently, he managed money for the partners of Gelberg & Abrams, a New York law firm. In 1981, Sussman founded Paloma Partners, a hedge fund in Greenwich, Connecticut, primarily for institutional investors. In addition to the Paloma funds, Sussman founded Trust Asset Management and New China Capital Management LLC.
Paloma Partners is a multi-strategy investment entity that has operated through several market cycles and decades. It aims to produce good long-term risk-adjusted returns with little market correlation.
Paloma had a 1.5% return in October, thanks to substantial gains in its fixed-income relative value bets. This year, the $4.2 billion multi-strategy fund has gained over 10%.
Microsoft Corporation (NASDAQ:MSFT), Apple Inc. (NASDAQ:AAPL), and Amazon.com, Inc. (NASDAQ:AMZN), among others, are some of the most important holdings of Donald Sussman’s fund as of the second quarter of 2021.
Paloma Partners owns 24,077 shares in Microsoft Corporation (NASDAQ:MSFT) after reducing its stake in the company by 71% in the second quarter of 2021. On November 1, Deutsche Bank analyst Brad Zelnick initiated coverage of Microsoft, rating the stock as “Buy” and gave a price target of $390.
Based on the latest 13F holdings for the second quarter of 2021, Paloma Partners owns 135,198 shares in Apple Inc. (NASDAQ:AAPL) after cutting its holding in the company by 1% from the first quarter of 2021. On November 9, Arete analyst Richard Kramer raised his price target on Apple to $180 from $168 and kept a “Buy” rating on the shares.
Donald Sussman’s Paloma Partners is also bullish on Amazon.com, Inc. (NASDAQ:AMZN), according to the hedge fund’s disclosed holdings data as of the end of the second quarter of 2021. The fund increased its holding in Amazon by 21% in the second quarter, ending the period with 6,942 shares. On November 11, Tigress Financial analyst Ivan Feinseth raised his price target on Amazon.com to $4,460 from $4,370 and kept a “Buy” rating on the shares. According to the analyst, the firm is well-placed to withstand near-term supply chain difficulties and produce solid sales growth in 2022.
Donald Sussman of Paloma Partners
Average investors have to tread the financial markets with extreme caution. Even experts are having a hard time making sense of the rapidly changing world. The hedge fund industry’s reputation has been tarnished in the last decade during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, 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 more than 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.
Here is a list of top 10 stock picks of Donald Sussman’s Paloma Partners. We used Sussman’s 13F portfolio for Q2 2021 for this analysis.
Top Stock Picks of Donald Sussman’s Paloma Partners
10. Global Payments Inc. (NYSE:GPN)
Paloma Partners Stake Value: $19,769,000
Percentage of Paloma Partners’ 13F Portfolio: 0.35%
Number of Hedge Fund Holders: 66
Global Payments Inc. (NYSE:GPN) is a firm that specializes in payment software and technology.
On November 3, Truist analyst Andrew Jeffrey lowered his price target on Global Payments to $165 from $240 but maintained a “Buy” rating on the shares.
On November 2, the company declared a quarterly dividend of $0.25 per share, in line with the previous. Out of the hedge funds being tracked by Insider Monkey, Fisher Asset Management is a leading shareholder in Global Payments Inc. (NYSE:GPN) with 651,087 shares worth more than $102.60 million.
In its second-quarter 2021 investor letter, Carillon Tower Advisers mentioned Global Payments Inc. (NYSE:GPN), and shared their insights on the company. Here is what the fund said:
“Global Payments is a payments technology company delivering innovative payments and software solutions that allow customers to operate their businesses more efficiently. Investors have been disappointed at the pace of the revenue acceleration given the uneven nature of the reopening globally. The U.S. is doing well with issues, but Europe and Asia remain in various stages of reopening and lockdowns and thus, spending has been curtailed. However, we believe that the U.S. is leading the way and as vaccines are rolled out worldwide, Global Payments stands to benefit in the second half of this year and into 2022.”
9. Caterpillar Inc. (NYSE:CAT)
Paloma Partners Stake Value: $19,843,000
Percentage of Paloma Partners’ 13F Portfolio: 0.35%
Number of Hedge Fund Holders: 62
Caterpillar Inc. (NYSE:CAT), a construction and mining equipment manufacturer, is on the list of top 10 stock picks of Donald Sussman’s Paloma Partners.
On October 29, UBS analyst Steven Fisher upgraded Caterpillar to “Buy” from “Neutral” with a price target of $235, up from $232. The hedge fund chaired by Donald Sussman holds close to 91,180 shares in the company worth over $19.84 million. In addition, Paloma Partners’ stake in the company’s shares increased by 1358% in the second quarter of 2021.
At the end of the second quarter of 2021, 62 hedge funds in the database of Insider Monkey held stakes worth $5.26 billion in Caterpillar Inc. (NYSE:CAT), up from 53 in Q1, with a total stake value of almost $4.96 billion.
8. Microchip Technology Incorporated (NASDAQ:MCHP)
Paloma Partners Stake Value: $19,954,000
Percentage of Paloma Partners’ 13F Portfolio: 0.36%
Number of Hedge Fund Holders: 50
Microchip Technology Incorporated (NASDAQ:MCHP) is a good investment option for income investors as the semiconductor manufacturing company offered a dividend of $0.232 on November 4, a 6.2% increase from previous dividend. In addition, in the second quarter of 2021, the company’s revenue came in at $1.65 billion up 26.9% YoY.
On October 14, Stifel analyst Tore Svanberg initiated coverage of Microchip rating the stock as “Hold” and gave a price target of $76. Shares of Microchip Technology Incorporated (NASDAQ:MCHP) rallied 31.15% over the last 12 months, and it features on the list of top 10 stock picks of Donald Sussman’s Paloma Partners.
The company is also getting the attention of the smart money, as 50 hedge funds tracked by Insider Monkey reported owning stakes in the company at the end of the second quarter, up from 42 funds a quarter earlier.
In addition to Microsoft Corporation (NASDAQ:MSFT), Apple Inc. (NASDAQ:AAPL), and Amazon.com, Inc. (NASDAQ:AMZN), Microchip Technology Incorporated (NASDAQ:MCHP) is one of the stocks attracting the attention of Donald Sussman’s Paloma Partners.
7. Las Vegas Sands Corp. (NYSE:LVS)
Paloma Partners Stake Value: $20,270,000
Percentage of Paloma Partners’ 13F Portfolio: 0.36%
Number of Hedge Fund Holders: 48
Las Vegas Sands Corp. (NYSE:LVS), a developer of destination resorts, announced its financial results for the third quarter. The company’s revenue came in at $857 million, missing the estimates by $353 million. The company’s shares are down 29% over the last 12 months, and it features on the list of top 10 stock picks of Donald Sussman’s Paloma Partners.
On October 21, Credit Suisse analyst Ben Combes lowered his price target on Las Vegas Sands to $60 from $69 and maintained an “Outperform” rating on the shares following third quarter results. According to the analyst, increased pandemic-related restrictions and reduced visitation continue to impact financial results.
At the end of the second quarter of 2021, 48 funds out of the 873 tracked by Insider Monkey had stakes in Las Vegas Sands Corp. (NYSE:LVS), compared to 62 in the previous quarter. Paloma Partners owns 384,693 shares of the company after increasing its stake by 686% in the second quarter of 2021.
Baron Funds, an asset management firm, in its second-quarter 2021 investor letter, mentioned Las Vegas Sands Corp. (NYSE:LVS). Here is what the fund said:
“The shares of Las Vegas Sands Corporation, a leading developer of luxury casino resorts in Macau and Singapore, declined in the most recent quarter in large part due to COVID-19 travel-related restrictions. We believe the shares are attractively valued and will recover sharply when travel restrictions are lifted.”
6. Norfolk Southern Corporation (NYSE:NSC)
Paloma Partners Stake Value: $20,278,000
Percentage of Paloma Partners’ 13F Portfolio: 0.36%
Number of Hedge Fund Holders: 58
Norfolk Southern Corporation (NYSE:NSC), a transportation firm that runs a freight train, is one of the top 10 stock picks of Donald Sussman’s Paloma Partners. In the third quarter, the company posted an EPS of $3.06 beating the consensus by $0.14. Revenue over the period was $2.85 billion, up 13.5% YoY.
On October 28, TD Securities analyst Cherilyn Radbourne raised her price target on Norfolk Southern to $330 from $315 and kept a “Buy” rating on the shares after third-quarter results. On October 26, the company declared a quarterly dividend of $1.09 per share, in line with the previous.
Overall, hedge funds are loading up on Norfolk Southern Corporation (NYSE:NSC), as 58 out of the 873 funds tracked by Insider Monkey held stakes in the company, compared to 46 funds a quarter earlier. The company’s shares are up 18.56% year to date. Ken Fisher’s Fisher Asset Management is the most significant stakeholder in the company, with 636,834 shares worth $152.36 million.
Microsoft Corporation (NASDAQ:MSFT), Apple Inc. (NASDAQ:AAPL), and Amazon.com, Inc. (NASDAQ:AMZN) are some of the notable stocks in Donald Sussman’s Paloma Partners 13F portfolio in Q2, just like Norfolk Southern Corporation (NYSE:NSC).
5. Monster Beverage Corporation (NASDAQ:MNST)
Paloma Partners Stake Value: $21,568,000
Percentage of Paloma Partners’ 13F Portfolio: 0.38%
Number of Hedge Fund Holders: 46
Monster Beverage Corporation (NASDAQ:MNST) is a beverage company located in California that makes and sells energy beverages. The company features on the list of the top 10 stock picks of Donald Sussman’s Paloma Partners.
In the third quarter of 2021, Monster Beverage Corporation reported earnings per share of $0.63 below the estimates by $0.04. However, the company also reported revenue amounting to $1.41 billion, surpassing forecast estimates by $20 million. Donald Sussman’s Paloma Partners presently holds 236,100 shares of Monster Beverage Corporation, amounting to $21.57 million in worth and representing 0.38% of the fund’s portfolio.
On November 2, Deutsche Bank analyst Steve Powers lowered his price target on Monster Beverage to $105 from $108 and kept a “Buy” rating on the shares.
By the end of the second quarter of 2021, 46 hedge funds out of the 873 tracked by Insider Monkey held stakes in the company, worth $2.31 billion, compared to 45 hedge funds in the previous quarter worth $2.38 billion.
4. Activision Blizzard, Inc. (NASDAQ:ATVI)
Paloma Partners Stake Value: $22,111,000
Percentage of Paloma Partners’ 13F Portfolio: 0.39%
Number of Hedge Fund Holders: 78
Activision Blizzard, Inc. (NASDAQ:ATVI), which is on the list of top 10 stock picks of Donald Sussman’s Paloma Partners, announced its third-quarter 2021 results on November 2. The American video game holding company’s revenue grew by 6.2% to $1.88 billion in the third quarter. Total MAUs for the third quarter was 390 million, compared to 408 million in the second quarter.
On November 3, MKM Partners analyst Eric Handler downgraded Activision Blizzard to “Neutral” from “Buy” with a price target of $75, down from $108. According to the analyst, the company’s reported delays of Overwatch 2 and Diablo 4 are no longer major growth drivers for 2022.
As of the end of the second quarter, 78 hedge funds tracked by Insider Monkey reported owning stakes in Activision Blizzard, Inc. (NASDAQ:ATVI). The total worth of these stakes is $3.65 billion. Paloma Partners holds 231,673 shares in the firm, worth over $22.11 million. The latest data reveals that the hedge fund’s stake in Activision Blizzard, Inc. stock increased by 3256% in the second quarter of 2021.
In its third-quarter 2021 investor letter, Cooper Investors mentioned Activision Blizzard, Inc. (NASDAQ:ATVI). Here is what the fund said:
“In late July the California Department of Fair Employment and Housing filed a complaint against Activision Blizzard. Based on a two-year investigation, it accused the company of failing to comply with the state’s workplace protection laws. Specifically: the unfair treatment of women including the lack of women in leadership positions, the difficulties they have faced in gaining promotions and discrepancy in pay. The suit also described Activision Blizzard’s culture as a “breeding ground” for harassment against women. The US Equal Employment Opportunity Commission also launched a lawsuit against the company along similar grounds.
Our investment in Activision Blizzard is predicated on an attractive industry backdrop for video game publishers, with positive trends for the owners of the best intellectual property as they monetise their content across multiple vectors (console/PC, mobile, Free to Play, Live Services etc.). It is our belief that they are the owners of the best portfolio of IP in gaming, and their strategy to focus resource here would lead to a significant increase in free cash flow generation over the coming years.
However, this is a moot point if the company is culturally unsound. Attractive financial outcomes cannot persist without the company culture necessary to support them. Further, Cooper Investors’ Responsible Investing framework codifies our belief that financial or shareholder outcomes, whilst important, are not the solitary performance indicator of a company.”
3. Amazon.com, Inc. (NASDAQ:AMZN)
Paloma Partners Stake Value: $23,882,000
Percentage of Paloma Partners’ 13F Portfolio: 0.43%
Number of Hedge Fund Holders: 271
Among the list of top 10 stock picks of Donald Sussman’s Paloma Partners is Amazon.com, Inc. (NASDAQ:AMZN), an American multinational tech company. For the third quarter, the company posted lower-than-expected results. The company’s EPS was $6.12, missing the estimates by $2.81. In addition, AWS net sales came in at $11.6 billion, vs. forecast of $15.40 billion.
Hedge fund sentiment increased for Amazon.com, Inc. in the second quarter. Insider Monkey’s data shows that 271 elite hedge funds held stakes in the company at the end of the second quarter, up from 243 funds a quarter earlier.
Polen Capital, an investment management firm, in its third-quarter 2021 investor letter, mentioned Amazon.com, Inc. (NASDAQ:AMZN). Here is what the fund said:
“Amazon has also lagged as its revenue growth is slowing on the very difficult comparisons from last year when this behemoth was growing revenue by over 40%. We still expect exceptional long-term growth and significant margin expansion as the fastest growing (and now large) segments of Amazon are also generating the highest margins.”
2. Meta Platforms, Inc. (NASDAQ:FB)
Paloma Partners Stake Value: $24,056,000
Percentage of Paloma Partners’ 13F Portfolio: 0.43%
Number of Hedge Fund Holders: 266
Meta Platforms, Inc. (NASDAQ:FB)’s Facebook platform has 2.91 billion monthly active users in the third quarter of 2021, providing advertisers with a mix of reach, relevance, social context, and engagement to boost the value of their advertising.
Hedge funds are loading up on Meta Platforms, Inc. (NASDAQ:FB), as Insider Monkey’s data shows that 266 hedge funds held a stake in the company as of the end of the second quarter of 2021, compared to 257 funds in the previous quarter. The stock returned 21.24% year to date.
On October 26, Truist analyst Youssef Squali reduced his price target on Facebook to $400 from $425 but maintained a “Buy” rating on the shares.
In the third quarter 2021 investor letter of Polen Capital, the fund mentioned Meta Platforms, Inc. (NASDAQ:FB), and discussed its opinion on the firm. Here is what the fund said:
“Facebook’s stock was pressured on concerns about regulation in the quarter. We are constantly monitoring the potential regulatory risks to Facebook (and all of our holdings). At this point, we see very little chance that regulation changes Facebook’s business model in a meaningful and adverse way. Regarding the recent data shared by a former Facebook employee and the company itself on some of the unfortunate negative consequences of social media, we recognize these types of issues will inevitably linger in different forms and fashions well into the future. We have been focused on the ability of
Facebook to identify and mitigate these negative consequences while amplifying the value users typically cite for its apps across a long list of use cases. We continuously monitor the vibrance of the user base on Facebook’s apps to confirm that value.”
1. Colgate-Palmolive Company (NYSE:CL)
Paloma Partners Stake Value: $24,405,000
Percentage of Paloma Partners’ 13F Portfolio: 0.44%
Number of Hedge Fund Holders: 58
Colgate-Palmolive Company (NYSE:CL), the manufacturer and seller of consumer products, makes it way to the list of top 10 stock picks of Donald Sussman’s Paloma Partners. In the second quarter, the company’s revenue was $4.41 billion increasing 6.3% year over year.
On November 2, Berenberg analyst Fulvio Cazzol lowered his price target on Colgate-Palmolive to $77 from $85 and reiterated a “Hold” rating on the shares. Cazzol informs investors that the firm recorded mixed Q3 results, declining margins due to rising raw material and distribution expenses. In addition, the company announced a quarterly dividend of $0.45 per share, in line with the previous.
First Eagle Investment Management is the company’s largest shareholder, with shares worth $880.83 million. Overall, 58 hedge funds tracked by Insider Monkey have stakes in Colgate-Palmolive Company (NYSE:CL) in Q2 2021, up from 48 in the previous quarter.
First Eagle Investment Management, in its first-quarter 2021 investor letter, mentioned Colgate-Palmolive Company (NYSE:CL). Here is what the fund said:
“The leading detractors in the quarter (included) Colgate-Palmolive Company. After a strong 2020 fueled in part by lockdown-driven demand, consumer staples stocks generally cooled during the first quarter as investors shifted attention to the more economically sensitive areas of the market likely to benefit from re-openings and improved discretionary spending. The effects of this rotation could be seen in the share price underperformance of names like Colgate-Palmolive.”
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Disclosure: None. Top 10 Stock Picks of Donald Sussman’s Paloma Partners is originally published on Insider Monkey.
