In this article, we discuss the top 10 stock picks of Brad Farber’s Atika Capital.
Brad Farber is the founder of Atika Capital, having established the New York-based investment firm in 2013. Currently, he serves as the chief investment officer at Atika Capital, managing a portfolio worth $1.67 billion as of September this year. Farber focuses on a long/short equity strategy, with his portfolio mainly consisting of finance, information technology, healthcare, consumer discretionary, and communications stocks.
Farber graduated from the University of Michigan in 1996 with a Bachelor’s in international relations. The following year, he started his career with UBS Group AG (NYSE:UBS) as an analyst. In April 1999, he moved on to Gilder Gagnon Howe & Co as a portfolio manager, where he remained until December 2012. He left Gilder Gagnon Howe & Co to establish Atika Capital in 2013.
As of the latest 13F filings in September, Farber’s Atika Capital purchased 44 new stocks, bought additional stakes in 34 companies, sold out of 26, and reduced holdings in 21 securities. Farber’s top buys for Q3 included Upstart Holdings, Inc. (NASDAQ:UPST), Olaplex Holdings, Inc. (NASDAQ:OLPX), and iShares Russell 2000 ETF (NYSE:IWM). Whereas, he reduced holdings in Roku, Inc. (NASDAQ:ROKU), Zillow Group, Inc. (NASDAQ:Z), and PayPal Holdings, Inc. (NASDAQ:PYPL).
The most notable stocks in Farber’s Q3 portfolio are Microsoft Corporation (NASDAQ:MSFT), Alphabet Inc. (NASDAQ:GOOG), Amazon.com, Inc. (NASDAQ:AMZN), and Airbnb, Inc. (NASDAQ:ABNB), among others discussed in detail ahead. These stocks are immensely popular with the hedge funds as well.
Brad Farber of Atika Capital
Our Methodology
We used Brad Farber’s Q3 portfolio to create a list of his top 10 stock picks, arranging the stocks according to Farber’s stake value in each holding.
Top Stock Picks of Brad Farber’s Atika Capital
10. Airbnb, Inc. (NASDAQ:ABNB)
Atika Capital’s Stake Value: $27,176,000
Percentage of Atika Capital’s 13F Portfolio: 1.61%
Number of Hedge Fund Holders: 58
Airbnb, Inc. (NASDAQ:ABNB) offers an online platform to customers who can book vacation rentals to accommodate their stay, offering properties all over the world. Airbnb, Inc. (NASDAQ:ABNB) is a huge competitor for the hotel industry, and one of the main players in the hospitality and tourism sectors. Farber’s Atika Capital holds a $27.1 million stake in Airbnb, Inc. (NASDAQ:ABNB), as of September this year.
Airbnb, Inc. (NASDAQ:ABNB) posted its Q3 results on November 4. EPS in the period totaled $1.22, beating estimates by $0.52. The $2.24 billion Q3 revenue was a result of occupancy in the quarter increasing by 29% year-over-year to 79.7 million bookings.
Naved Khan from Truist raised the price target on Airbnb, Inc. (NASDAQ:ABNB) to $180 from $160 on November 8, keeping a Hold rating on the stock post the Q3 earnings. The analyst is positive about Airbnb, Inc. (NASDAQ:ABNB)’s growth catalysts in the near future, but he believes that the stock valuation is “full”.
Here is what Polen Capital has to say about Airbnb, Inc. (NASDAQ:ABNB) in its Q3 2021 investor letter:
“We believe Airbnb has substantial competitive advantages in a large, fast-growing, and global market. Airbnb acts as a “System of Trust” in the private rental accommodations market, removing a considerable amount of friction so hosts can trust unknown guests and guests can trust unknown hosts/properties.
We believe Airbnb has an attractive growth runway given its unique inventory, powerful platform, and system enhancements that further reduce user friction.
We see Airbnb as well-positioned to benefit from secular growth in travel, the increasingly mainstream nature of private rentals, and as hybrid work/travel can lead to more frequent and longer stays. Unlike traditional online travel agencies like Booking.com and Expedia, Airbnb’s user traffic comes almost entirely directly, which speaks to the brand’s strength. This also means that Airbnb does not need to pay Google or other meta-search engines nearly as much money for generating booking leads, which is a favorable structural business model advantage in our view. We expect the company’s bookings and revenue to compound at a high-teens rate or better over the next five years and margins to expand by thousands of basis points as it scales its fixed costs base, leading to 40%+ earnings per share growth over that period.”
9. Olaplex Holdings, Inc. (NASDAQ:OLPX)
Atika Capital’s Stake Value: $27,195,000
Percentage of Atika Capital’s 13F Portfolio: 1.61%
Number of Hedge Fund Holders: N/A
Brad Farber’s Atika Capital holds 1.11 million shares in Olaplex Holdings, Inc. (NASDAQ:OLPX), worth $27.1 million as of September, representing 1.61% of the firm’s Q3 portfolio. Olaplex Holdings, Inc. (NASDAQ:OLPX) is a hair care brand, offering products which nurture, maintain, and protect hair. Its patented formulas also claim hair growth and rejuvenation.
Olaplex Holdings, Inc. (NASDAQ:OLPX) on November 10 posted its Q3 results. EPS for the period came in at $0.11, beating estimates by $0.02. Revenue for Q3 totaled $161.62 million, surpassing estimated revenue by $16.46 million.
Morgan Stanley analyst Dara Mohsenian upgraded Olaplex Holdings, Inc. (NASDAQ:OLPX) to Overweight from Equal Weight with a $31 price target. The analyst stated that the brand’s valuation is compelling, and it is growing steadily with market competitive margins. Consumers are also taking a heightened interest in Olaplex Holdings, Inc. (NASDAQ:OLPX), according to Mohsenian’s research.
In addition to Microsoft Corporation (NASDAQ:MSFT), Alphabet Inc. (NASDAQ:GOOG), Amazon.com, Inc. (NASDAQ:AMZN), and Airbnb, Inc. (NASDAQ:ABNB), Olaplex Holdings, Inc. (NASDAQ:OLPX) is a notable stock in Farber’s Q3 portfolio.
8. Jacobs Engineering Group Inc. (NYSE:J)
Atika Capital’s Stake Value: $28,759,000
Percentage of Atika Capital’s 13F Portfolio: 1.71%
Number of Hedge Fund Holders: 29
Jacobs Engineering Group Inc. (NYSE:J) is an American professional services company that offers technical engineering, architectural, and construction expertise to customers. Its clientele includes corporate and government clients from around the world. Atika Capital holds a $28.75 million stake in Jacobs Engineering Group Inc. (NYSE:J) as of September 2021, which accounts for 1.71% of the firm’s 13F portfolio.
Jacobs Engineering Group Inc. (NYSE:J) is a leading engineering corporation, which recently secured contracts with the US Department of State Bureau of Overseas Buildings Operations, NASA, the US Department of Energy, and the Department of Defense, to name a few.
As of the second quarter of 2021, 29 hedge funds in the database of Insider Monkey were bullish on Jacobs Engineering Group Inc. (NYSE:J), with stakes worth over $1 billion.
7. DocuSign, Inc. (NASDAQ:DOCU)
Atika Capital’s Stake Value: $29,141,000
Percentage of Atika Capital’s 13F Portfolio: 1.73%
Number of Hedge Fund Holders: 58
DocuSign, Inc. (NASDAQ:DOCU) is a California-based company that facilitates electronic agreements via e-signatures. DocuSign Agreement Cloud is used by millions of users across more than 180 countries. DocuSign, Inc. (NASDAQ:DOCU) has partnered with salesforce.com, inc. (NYSE:CRM) to facilitate electronic agreements globally. Organizations who use Slack can now increase collaboration, drive quicker ROI, and manage contracts with the AI-based, smart solutions that the two companies are developing using Salesforce Customer 360.
Farber’s Atika Capital owns 113,200 shares in DocuSign, Inc. (NASDAQ:DOCU), worth $29.1 million, representing 1.73% of the firm’s Q3 portfolio.
As of June this year, 58 hedge funds tracked by Insider Monkey’s database of elite funds were long DocuSign, Inc. (NASDAQ:DOCU), down from 60 in the preceding quarter. Aubrey Capital Management holds the largest stake in DocuSign, Inc. (NASDAQ:DOCU) as of the third quarter, valued at $8.34 billion.
Here is what Carillon Tower Advisers has to say about DocuSign, Inc. (NASDAQ:DOCU) in its Q2 2021 investor letter:
“DocuSign provides electronic signature solutions. The firm reported an excellent quarter and investors have appreciated the strong growth combined with the excellent margins the company has posted. DocuSign has a long runway of growth ahead and we believe that it remains in a favorable position to continue gaining market share from traditional manual and paper-based signature solutions.”
6. Zai Lab Limited (NASDAQ:ZLAB)
Atika Capital’s Stake Value: $30,258,000
Percentage of Atika Capital’s 13F Portfolio: 1.80%
Number of Hedge Fund Holders: 36
Zai Lab Limited (NASDAQ:ZLAB) is a Chinese pharmaceutical company that uses its extensive research capabilities to create effective and transformative medication for autoimmune diseases, cancer, and other infectious illnesses. Brad Farber, via Atika Capital, owns 287,100 shares in Zai Lab Limited (NASDAQ:ZLAB), worth $30.25 million at the end of September, representing 1.8% of the firm’s Q3 portfolio.
As of the second quarter of 2021, 36 hedge funds monitored by the database of Insider Monkey reported owning stakes in Zai Lab Limited (NASDAQ:ZLAB) worth $1.02 billion. This is an increase from the preceding quarter, when 32 funds held stakes valued at $666 million in Zai Lab Limited (NASDAQ:ZLAB).
Zai Lab Limited (NASDAQ:ZLAB) posted its Q3 results on November 9. EPS in the quarter totaled -$1.01, beating estimates by $0.26. Revenue for Q3 amounted to $43.1 million, missing estimated revenue by -$0.67 million.
In addition to Microsoft Corporation (NASDAQ:MSFT), Alphabet Inc. (NASDAQ:GOOG), Amazon.com, Inc. (NASDAQ:AMZN), and Airbnb, Inc. (NASDAQ:ABNB), Zai Lab Limited (NASDAQ:ZLAB) is a notable stock in Farber’s Q3 portfolio.
Here is what Baron Funds has to say about Zai Lab Limited (NASDAQ:ZLAB) in its Q3 2021 investor letter:
“Zai Lab Limited is a leading biotechnology company helping to modernize the Chinese health care industry. Zai’s initial focus centered around in-licensing western medicines for commercialization in China; this has expanded into internal pipeline efforts. Shares fell alongside the broader Chinese equity markets given concerns around regulations the government has enacted in education, technology, and real estate. While we are paying attention to these developments, so far, we think health care will not be subject to any draconian rulings.”
5. Inspire Medical Systems, Inc. (NYSE:INSP)
Atika Capital’s Stake Value: $32,626,000
Percentage of Atika Capital’s 13F Portfolio: 1.94%
Number of Hedge Fund Holders: 32
Inspire Medical Systems, Inc. (NYSE:INSP) is a medical company dedicated to treating sleep apnea with its FDA approved obstructive sleep apnea device. Atika Capital, as of Q3, owns 140,100 shares in Inspire Medical Systems, Inc. (NYSE:INSP), worth $32.62 million, representing 1.94% of the firm’s total investments.
Marshall Wace LLP is the leading stakeholder in Inspire Medical Systems, Inc. (NYSE:INSP) as of September this year. Of the 873 hedge funds tracked by Insider Monkey, 32 funds were bullish on Inspire Medical Systems, Inc. (NYSE:INSP) as of Q2, up from 28 in the preceding quarter.
Q3 EPS for Inspire Medical Systems, Inc. (NYSE:INSP) on November 2 totaled -$0.38, exceeding estimates by $0.26. Revenue for the period equaled $61.69 million, up 72.10% year-over-year.
Lake Street analyst Frank Takkinen on November 3 raised the price target on Inspire Medical Systems, Inc. (NYSE:INSP) to $320 from $260 and kept a Buy rating on the stock after Inspire Medical Systems, Inc. (NYSE:INSP) outperformed on revenue in the third quarter, opened new centers, and established new territory. He raised the FY21 revenue guidance as well.
Here is what Headwaters Capital has to say about Inspire Medical Systems, Inc. (NYSE:INSP) in its Q2 2021 investor letter:
“Top Detractor: Inspire Medical Systems (INSP) -7%. Inspire’s underperformance during the quarter was largely driven by Q1 results where the company raised full year revenue guidance by less than expected combined with commentary that the company might increase spending, which would delay the company’s path to break even profitability. I believe management’s full year revenue guidance is conservative based on the cadence of new center openings combined with positive utilization trends seen during Q1. Additionally, following the release of Q1 results, Anthem (second largest health insurer) announced that they would begin providing insurance coverage for INSP’s sleep apnea product, which should provide additional support for revenue growth later in the year.”
4. Microsoft Corporation (NASDAQ:MSFT)
Atika Capital’s Stake Value: $38,059,000
Percentage of Atika Capital’s 13F Portfolio: 2.26%
Number of Hedge Fund Holders: 238
One of the top stocks from Atika Capital’s Q3 portfolio is Microsoft Corporation (NASDAQ:MSFT). Brad Farber’s Atika Capital owns 135,000 shares in Microsoft Corporation (NASDAQ:MSFT), valued at more than $38 million, representing 2.26% of the firm’s stock portfolio. Microsoft Corporation (NASDAQ:MSFT) is one of the Big Five US tech corporations, which was awarded an Outperform rating on November 16 by Credit Suisse analyst Phil Winslow, with a $400 price target. He expects revenue, EPS, and free cash flow to grow over the next five years, stating that current levels of sustained growth and profitability are not completely reflected in consensus estimates or the stock’s valuation.
As of the second quarter of 2021, 238 hedge funds in the database of the exclusive funds tracked by Insider Monkey were long Microsoft Corporation (NASDAQ:MSFT), with an approximate stake value of $62.4 billion. British investor Martin Taylor’s hedge fund, Crake Asset Management, is the biggest stakeholder in Microsoft Corporation (NASDAQ:MSFT), with a total stake value of $57.4 billion at the end of September.
Here is what Alger has to say about Microsoft Corporation (NASDAQ:MSFT) in its Q3 2021 investor letter:
“Microsoft Corporation was among the top contributors to performance during the third quarter. Microsoft is a Positive Dynamic Change beneficiary of corporate America’s transformative digitization. Microsoft’s enterprise cloud product, Azure, is rapidly growing and accruing market share. Microsoft reported that Azure grew 51% in the second quarter. This high unit volume growth is a primary driver of the company’s higher share price, but the company’s strong operating execution has enabled margin expansion that has also helped to increase forward earnings estimates. We believe Microsoft’s subscription-based software offerings and cloud computing services have a durable growth profile because they enhance customers’ growth initiatives and help them to diminish costs. Additionally, investors appreciate Microsoft’s strong free cash flow generation and its return of cash to shareholders in the form of dividends and share repurchases.”
3. Amazon.com, Inc. (NASDAQ:AMZN)
Atika Capital’s Stake Value: $44,019,000
Percentage of Atika Capital’s 13F Portfolio: 2.62%
Number of Hedge Fund Holders: 271
Billionaire Jeff Bezos’ Amazon.com, Inc. (NASDAQ:AMZN) is a global economic and cultural force to be reckoned with, specializing in ecommerce, artificial intelligence, online video streaming, and on-demand services. Atika Capital holds a $44 million stake in Amazon.com, Inc. (NASDAQ:AMZN) as of September 2021, which accounts for 2.62% of the firm’s Q3 investments.
As of June this year, 271 hedge funds monitored by Insider Monkey have been bullish on Amazon.com, Inc. (NASDAQ:AMZN), with stakes worth over $60.4 billion. Of the 873 hedge funds tracked by Insider Monkey, Ken Fisher’s Fisher Asset Management is one of the leading Amazon.com, Inc. (NASDAQ:AMZN) stakeholders, with a total stake value of $6.34 billion.
Amazon.com, Inc. (NASDAQ:AMZN)’s Q3 earnings were disclosed on October 28, with the EPS being $6.12, missing estimates by -$2.78. Revenue for the quarter totaled $110.81 billion, missing target revenue by -$784.89 million.
Tigress Financial analyst Ivan Feinseth raised the price target on Amazon.com, Inc. (NASDAQ:AMZN) from $4,370 to $4,460 and kept a Buy rating on the shares, stating that the company can tackle the supply chain headwinds and is set to deliver strong sales growth in 2022.
Here is what Polen Capital has to say about Amazon.com, Inc. (NASDAQ:AMZN) in its Q3 2021 investor letter:
“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. Alphabet Inc. (NASDAQ:GOOG)
Atika Capital’s Stake Value: $45,310,000
Percentage of Atika Capital’s 13F Portfolio: 2.69%
Number of Hedge Fund Holders: 155
Brad Farber’s Atika Capital owns 17,000 shares in Alphabet Inc. (NASDAQ:GOOG), as of the third quarter, worth $45.31 million, representing 2.69% of the firm’s investment portfolio. Alphabet Inc. (NASDAQ:GOOG) is the parent company of Google and Google subsidiaries, formed in 2015 after Google was restructured to enhance transparency and accountability throughout the organisation.
As of the second quarter of 2021, 155 hedge funds were bullish on Alphabet Inc. (NASDAQ:GOOG), with stakes worth $33.79 billion. One of the leading stakeholders of Alphabet Inc. (NASDAQ:GOOG), according to the database of Insider Monkey, is Chris Hohn’s TCI Fund Management, with a stake value of $7.86 billion.
Alphabet Inc. (NASDAQ:GOOG) posted its Q3 results on October 26. The Q3 EPS for the company totaled $27.99, beating estimates by $4.75. Revenue for the quarter was up 41.03% year-over-year, amounting to $65.12 billion.
Alphabet Inc. (NASDAQ:GOOG) price target was raised to $3,500 from $3,325 at Jefferies by analyst Brent Thill on October 27, following a solid Q3 earnings beat. He stated that despite tougher comps, Alphabet Inc. (NASDAQ:GOOG) is set to have strong Q4 earnings.
Here is what Alger has to say about Alphabet Inc. (NASDAQ:GOOG) in its Q3 2021 investor letter:
“Alphabet Inc. was among the top contributors to performance during the third quarter. Alphabet is a leading internet search provider and is a beneficiary in the share shift of advertising dollars from traditional mediums like television, radio and newspapers to digital platforms. The company is a leader in implementing Al, autonomous vehicles and cloud computing and owns the highly trafficked YouTube property. Alphabet contributed to performance due to a strong quarterly report highlighted by revenue growth that beat consensus expectations across segments. The company’s core search revenues have increased 10% over the past two years, with cloud computing increasing 8%. Results from YouTube also exceeded expectations. When discussing quarterly results, Alphabet management said retail, entertainment and travel were end markets that were particularly strong. The fixed cost structure of Alphabet’s search service resulted in profitability resulting from the increase in revenues being better than expected.”
1. Upstart Holdings, Inc. (NASDAQ:UPST)
Atika Capital’s Stake Value: $86,072,000
Percentage of Atika Capital’s 13F Portfolio: 5.12%
Number of Hedge Fund Holders: 21
Upstart Holdings, Inc. (NASDAQ:UPST) is the largest holding in Atika Capital’s Q3 portfolio, with the firm owning 272,000 shares in Upstart Holdings, Inc. (NASDAQ:UPST), worth over $86 million, representing 5.12% of the fund’s total investment securities.
Upstart Holdings, Inc. (NASDAQ:UPST) is a financial technology company that employs artificial intelligence to use non-traditional metrics like employment and education to assess creditworthiness for consumer lending. As of June this year, 21 hedge funds were bullish on Upstart Holdings, Inc. (NASDAQ:UPST), up from 13 in the preceding quarter. Jim Simons’ Renaissance Technologies holds a $292 million stake in the company, making it one of the leading Upstart Holdings, Inc. (NASDAQ:UPST) stakeholders.
On November 9, the Q3 EPS for Upstart Holdings, Inc. (NASDAQ:UPST) came in at $0.60, exceeding estimated EPS by $0.27. Revenue for the quarter equaled $228.45 million, outperforming estimates by $13.57 million.
Here is what Third Point Management has to say about Upstart Holdings, Inc. (NASDAQ:UPST) in its Q3 2021 investor letter:
“Our top winners on a percentage basis in Q3 were our two largest positions (which includes) Upstart, up 153%. Upstart has started to upend the FICO-dependent, $84 billion unsecured personal loan market with its AI-driven underwriting approach and is ramping up its footprint in the $685 billion auto lending market. In its most recent earnings report, the company raised its full-year revenue estimates by 25%.”
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Disclosure: None. Top 10 Stock Picks of Brad Farber’s Atika Capital is originally published on Insider Monkey.
