In this article, we discuss the top 8 stock picks of Michael Sidhom’s Immersion Capital.
Michael Sidhom has been the managing partner at Immersion Capital, a London-based asset management and investment firm, since October 2014. He manages an impressive portfolio of managed 13F securities, valued at $1.03 billion. His portfolio is immensely concentrated on the information technology and communications sectors.
The largest holding in Sidhom’s 13F portfolio is Facebook, Inc. (NASDAQ:FB) as of the end of the second quarter of 2021, with an approximate stake value of $340.8 million.
Before joining Immersion Capital, Sidhom was the principal and managing director at Ziff Brothers Investments, a private family investment firm in New York City. Sidhom was responsible for their European division, where he managed a multibillion-dollar equities portfolio from 2005 to 2014. Previously, Sidhom was an associate at Morgan Stanley (NYSE:MS), from 2001 to 2005. This was where he started his career in finance, after graduating from the University of Cambridge, with a Bachelor’s degree in 2001.
At the end of June, Sidhom sold out of Airbnb, Inc. (NASDAQ:ABNB) completely, while reducing holdings in Microsoft Corporation (NASDAQ:MSFT) and Facebook, Inc. (NASDAQ:FB) by 1.03% and 0.02%, respectively.
Sidhom’s 13F portfolio comprises stocks that are immensely popular among individual investors and hedge funds alike. Some of the most notable stock picks of Michael Sidhom’s Immersion Capital are Facebook, Inc. (NASDAQ:FB), Microsoft Corporation (NASDAQ:MSFT), Alphabet Inc. (NASDAQ:GOOG), and Netflix, Inc. (NASDAQ:NFLX), among others discussed extensively below.
Why should we pay attention to hedge fund sentiment while choosing stocks? 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 S&P 500 ETF (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.
Our Methodology
With this context in mind, here are some of the top stock picks of Michael Sidhom’s Immersion Capital. We used Immersion Capital’s 13F portfolio for the second quarter of 2021 to rank these stocks. The list was compiled according to the value of each holding in the investment portfolio.
The analyst ratings for each company are also discussed to provide readers with some more context about their investment decisions. The hedge fund sentiment around each stock was gauged using the data of 873 hedge funds tracked by Insider Monkey.
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Top Stock Picks of Michael Sidhom’s Immersion Capital
8. Visa Inc. (NYSE:V)
Immersion Capital’s Stake Value: $3,617,000
Percentage of Immersion Capital’s 13F Portfolio: 0.34%
Number of Hedge Fund Holders: 162
Visa Inc. (NYSE:V) is an American multinational financial services company, headquartered in California.
Sidhom’s Immersion Capital owns 15,470 shares in Visa Inc. (NYSE:V), worth $3.61 million at the end of June.
As of the end of Q2, 162 hedge funds in Insider Monkey’s database reported owning stakes in Visa Inc. (NYSE:V), down from 164 in Q1.
The company reported earnings on October 26. The EPS was $1.49, up $0.14 as compared to estimates. Visa Inc. (NYSE:V)’s revenue was $6.56 billion, exceeding estimates by $45.89 million.
On October 27, JPMorgan analyst Tien-tsin Huang kept an Overweight rating on Visa Inc. (NYSE:V), raising the price target from $267 to $277.
Visa Inc. (NYSE:V) is one of Michael Sidhom’s top stock picks, just like Facebook, Inc. (NASDAQ:FB), Microsoft Corporation (NASDAQ:MSFT), Alphabet Inc. (NASDAQ:GOOG), and Netflix, Inc. (NASDAQ:NFLX).
Here is what Polen Capital has to say about Visa Inc. in its Q3 2021 investor letter:
“Visa Inc. faced pressure as some believe these “old payment infrastructure” businesses will be disrupted by newer fintech companies using blockchain, buy now, pay later (BNPL), or other innovations to provide better/cheaper payment services. However, we believe that some of these technologies have meaningful limitations which could benefit existing payment networks. For example, BNPL transactions are often funded with cards and turn a one-time transaction into many smaller ones with more transaction fees for Visa. Just like with regulation, we continually monitor for competition and technological disruption. As of now, we do not see a significant risk in the foreseeable future to this company.”
7. Uber Technologies, Inc. (NYSE:UBER)
Immersion Capital’s Stake Value: $3,959,000
Percentage of Immersion Capital’s 13F Portfolio: 0.38%
Number of Hedge Fund Holders: 135
Another top stock pick by Michael Sidhom is Uber Technologies, Inc. (NYSE:UBER), a mega corporation that has transformed the face of transportation, making it feasible for millions with its mobility-as-a-service business model.
Immersion Capital holds stakes valued at $3.95 million in Uber Technologies, Inc. (NYSE:UBER), representing 0.38% of Sidhom’s Q2 portfolio.
At the end of June, 135 hedge funds in Insider Monkey’s database were bullish on Uber Technologies, Inc. (NYSE:UBER), up from 130 in the previous quarter.
ClearBridge Investments mentioned Uber Technologies, Inc. (NYSE:UBER) in its Q2 2021 investor letter. Here is what they said:
“The pandemic has also brought attention to the question of gig worker employment status for companies, including ClearBridge holdings Uber and Lyft. In the U.K., Uber proactively classified its drivers as “workers” ahead of final rulings from the British court system. The worker status in the U.K. is a designation between self-employed and employed status that entitles drivers to minimum wage, holiday pay and in some cases a pension.
ClearBridge has engaged with Uber on labor issues since its IPO, and we have given feedback over that time to the CEO, CFO, Chief Legal Officer and Investor Relations on labor relations as well as strategy and communications. Uber’s agreement on this designation is ahead of other competitors in the market and the legal mandate represents a step forward in the company’s thinking about labor. The agreement represents a short-term hit to earnings, yet in some ways it places Uber ahead of the market in its ability to balance labor and shareholder interests. Workers benefit from improved conditions, with new contributions amounting to roughly 3% of a driver’s earnings, while Uber establishes more certainty on costs and visibility into its regulatory environment and operation conditions in the future.”
6. ServiceNow, Inc. (NYSE:NOW)
Immersion Capital’s Stake Value: $76,401,000
Percentage of Immersion Capital’s 13F Portfolio: 7.36%
Number of Hedge Fund Holders: 91
ServiceNow Inc. (NYSE:NOW) is an American software company specializing in cloud based platforms that help enterprise level firms manage their business operations efficiently.
Sidhom’s Immersion Capital owns 139,025 shares in ServiceNow Inc. (NYSE:NOW), amounting to $76.4 million, and making up 7.36% of Sidhom’s 13F portfolio.
At the end of the second quarter of 2021, 91 hedge funds in Insider Monkey’s database held stakes amounting to $7.01 billion in ServiceNow Inc. (NYSE:NOW), up from 98 in the previous quarter with stakes worth over $6.13 billion.
The company reported third quarter’s earnings per share of $1.55 on October 27, beating analysts’ consensus estimates by $0.16. ServiceNow Inc. (NYSE:NOW)’s revenue was $1.51 billion, exceeding analysts’ expectations by $33.34 million.
Here is what Baron Opportunity Fund has to say about ServiceNow, Inc. (NYSE:NOW) in their Q1 2021 investor letter:
“We believe short-term focused investors and consensus often miss the longer-term strength and durability of growth and business-model efficiency (earnings and free cash flow margins) of truly special businesses. An example of this is ServiceNow, a SaaS-industry leader and pioneer, and a long-time Fund investment. As shown in the table below, over the seven years from March 2014 through March 2021, ServiceNow experienced eight multiple declines that averaged –32%, ranging from a low of –19% to a high of –52%.
But during that period, ServiceNow demonstrated compounding revenue performance and stronger operating leverage and FCF generation than expected by consensus. The table below shows the first quarter 2014 projections of one of the top software analysts on the Street, Keith Weiss of Morgan Stanley, versus what ServiceNow achieved.
As you can see, over this three-year period, ServiceNow beat revenue expectations by $315 million, or 29%, and generated FCF margins of 23%, trouncing estimates by $186 million, or 138%.The compounding effects of seven years of strong revenue growth and FCF generation drove ServiceNow’s share price to increase from $70.03 on March 5, 2014 to $500.11 on March 31, 2021, a 32% annualized return. A 7-bagger!
ServiceNow delivered these point-a-to-point-b returns despite the eight multiple pullbacks described above, including the one that occurred towards the end of the first quarter. The power of faster-for-longer, cash-generative business models.”
5. Netflix, Inc. (NASDAQ:NFLX)
Immersion Capital’s Stake Value: $127,346,000
Percentage of Immersion Capital’s 13F Portfolio: 12.27%
Number of Hedge Fund Holders: 113
The next top stock in Michael Sidhom’s Q2 portfolio is Netflix, Inc. (NASDAQ:NFLX), an online streaming service and an original programming production company.
Sidhom’s Immersion Capital owns 241,090 shares in Netflix, Inc. (NASDAQ:NFLX), amounting to $127.34 million. This accounts for 12.27% of Sidhom’s Q2 portfolio.
As of the end of the second quarter of 2021, 113 hedge funds tracked by Insider Monkey were long Netflix, Inc. (NASDAQ:NFLX), with reported stakes of $13.2 billion, down from 110 in the previous quarter with stakes worth $14.1 billion.
On October 19, the company reported earnings for the third quarter. The EPS for Netflix, Inc. (NASDAQ:NFLX) was $3.19, exceeding estimates by $0.63. The revenue exceeded analysts’ estimates by $0.16 million at $7.48 billion.
Here is what Ensemble Capital has to say about Netflix, Inc. in its Q3 2021 investor letter:
“Netflix stock had a disappointing first half of 2021 performance, treading water while the S&P 500 rallied, after a very strong 67% return in 2020. It benefited from the global pandemic in 2020, signing on 36.6 million new subscribers vs the typical 25 million or so it typically does. Total subscribers exceeded 200 million, up 22% over the previous year. However, in the first half of 2021, new subscriber additions slowed substantially, totaling only 5.5 million due to slower new content additions impacted by production delays, a resumption of outdoor activity as people everywhere adjusted to living with COVID, and the impact of a “pull-forward effect” on subscriber growth in last year’s very strong results. The third quarter saw new content velocity start to pick up, which is usually what drives new subscribers to the service, with expectations of an even stronger content slate going into the final quarter of the year, causing the stock to increase 15% in the quarter.”
4. Microsoft Corporation (NASDAQ:MSFT)
Immersion Capital’s Stake Value: $132,584,000
Percentage of Immersion Capital’s 13F Portfolio: 12.77%
Number of Hedge Fund Holders: 238
Microsoft Corporation (NASDAQ:MSFT) is an American multinational tech mega corporation, offering computer software, consumer electronics, personal computers, and related services. The company is best known for Microsoft Windows, the Microsoft Office suite, Internet Explorer, and Microsoft Edge browsers.
Out of the 873 hedge funds in Insider Monkey’s extensive database, 238 funds were long Microsoft Corporation (NASDAQ:MSFT), with stakes worth $62.46 billion at the end of June, down from 251 in the previous quarter, with a total stake value of $58.9 billion.
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. salesforce.com, inc. (NYSE:CRM)
Immersion Capital’s Stake Value: $134,456,000
Percentage of Immersion Capital’s 13F Portfolio: 12.95%
Number of Hedge Fund Holders: 108
Sidhom’s Immersion Capital owns stakes worth $134.45 million in salesforce.com, inc. (NYSE:CRM), representing 12.95% of Sidhom’s Q2 portfolio.
Out of the 873 hedge funds monitored closely by Insider Monkey, 108 funds were bullish on salesforce.com, inc. (NYSE:CRM), with stakes valued at $11.76 billion at the end of June. This is compared to 91 hedge funds in the previous quarter, with stakes worth $8.83 billion.
Here is what Polen Capital has to say about salesforce.com, inc. (NYSE:CRM) in its Q3 2021 investor letter:
“Salesforce came under pressure earlier in the year after agreeing to purchase Slack for about $26 billion. Since then, management has articulated well the strategic rationale and integration of Slack into its other software offerings and has demonstrated continued double-digit organic revenue growth within its legacy product offerings. At its recent investor day, the company also outlined long-term growth plans in line with our estimates but probably above what others may have been expecting, especially on margin expansion.”
2. Alphabet Inc. (NASDAQ:GOOG)
Immersion Capital’s Stake Value: $218,396,000
Percentage of Immersion Capital’s 13F Portfolio: 21.04%
Number of Hedge Fund Holders: 155
Immersion Capital owns 89,441 shares in Alphabet Inc. (NASDAQ:GOOG), valued at $218.39 million, representing 21.04% of Sidhom’s 13F portfolio.
As of the end of June, 155 hedge funds in Insider Monkey’s database were bullish on Alphabet Inc. (NASDAQ:GOOG), down from 159 in the previous quarter.
On October 27, Monness Crespi analyst Brian White kept a Buy rating on Alphabet Inc. (NASDAQ:GOOG), stating a price target of $3660, up from $3500. He said that the company’s Q3 results were enviable, and Alphabet Inc. (NASDAQ:GOOG) is set to capitalize on the strong trend of digital advertising.
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. Facebook, Inc. (NASDAQ:FB)
Immersion Capital’s Stake Value: $340,808,000
Percentage of Immersion Capital’s 13F Portfolio: 32.84%
Number of Hedge Fund Holders: 266
Facebook, Inc. (NASDAQ:FB) ranks first on our list of the top stock picks of Michael Sidhom’s Immersion Capital. The California-based multinational technology corporation operates as a social networking service, with over 2.9 billion active monthly users as of 2021. Facebook, Inc. (NASDAQ:FB) is one of the most valuable global companies, and is recognized as one of the Big Five companies in the US tech sector. Facebook, Inc. (NASDAQ:FB) acquired competing social media platforms, namely Instagram, WhatsApp, and Oculus in 2014.
Sidhom owns 980,150 shares in Facebook, Inc. (NASDAQ:FB), worth $340.8 million, accounting for 32.84% of Sidhom’s Q2 portfolio.
The stock is extremely sought-after by the smart money. 266 hedge funds in Insider Monkey’s database were bullish on Facebook, Inc. (NASDAQ:FB) at the end of June, up from 257 in the previous quarter.
Facebook, Inc. (NASDAQ:FB) reported earnings for the third quarter on October 25. The EPS for Facebook, Inc. (NASDAQ:FB) was $3.22, surpassing estimates by $0.04. The actual revenue for the company was $29.01 billion, missing estimated revenue by -$513.23 million.
On October 26, Truist analyst Youssef Squali kept a Buy rating on Facebook, Inc. (NASDAQ:FB), but lowered the price target from $425 to $400, after the Q3 results.
Here is what Polen Capital has to say about Facebook, Inc. (NASDAQ:FB) in its Q3 2021 investor letter:
“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.”
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Disclosure: None. Top 8 Stock Picks of Michael Sidhom’s Immersion Capital is originally published by Insider Monkey.
