Vulcan Value Partners, an investment management firm, published its “Vulcan Value Partners Large Cap Fund” fourth quarter 2021 investor letter – a copy of which can be downloaded here. Vulcan’s Large Cap Composite Fund delivered a 1.2% net return for the fourth quarter of 2021, compared to its benchmarks, the Russell 1000 Value Index and S&P 500 Index which delivered 7.8% and 11% returns respectively for the same period. Spare some time to check the fund’s top 5 holdings to have a clue about their top bets for 2022.
Vulcan Value Partners Large Cap Fund, in its Q4 2021 investor letter, mentioned Splunk Inc. (NASDAQ:SPLK) and discussed its stance on the firm. Founded in 2003, Splunk Inc. (NASDAQ:SPLK) is a San Francisco, California-based software company with a $22.0 billion market capitalization, and is currently spearheaded by its CEO, Graham Smith. Splunk Inc. (NASDAQ:SPLK) delivered a 20.03% return since the beginning of the year, while its 12-month returns are up by 2.93%. The stock closed at $138.90 per share on March 22, 2022.
Here is what Vulcan Value Partners Large Cap Fund has to say about Splunk Inc. (NASDAQ:SPLK) in its Q4 2021 investor letter:
“Splunk Inc., a new purchase during the quarter, is a software company that helps customers manage and gain insights from their machine data. The company sells to many businesses including over 90% of the Fortune 100. Through its software and services, Splunk enables its customers to identify ways to increase efficiencies in real time. Splunk has the ability to incorporate unstructured data that resides both within a customer’s on-premise servers and in the cloud and present the takeaways from that data in an easy to understand way that doesn’t require the customer to be a data scientist. Splunk has consistently reported approximately 130% cloud dollar-based net retention for many years, meaning that for every dollar a customer spends with Splunk, that same customer spends $1.30 with Splunk the next year. Splunk is the clear leader in this specialized data analytics market niche.
Splunk is also a material detractor during the quarter. Splunk is transitioning to selling more subscription-based and cloud business and less perpetual licenses and on-premise business. Splunk has a history of strong revenue growth and free cash flow generation, but the transition to the cloud is temporarily obscuring the underlying strength of the company. We expect its business to stabilize which should result in higher margins and revenue. The departure of the company’s CEO, coupled with lower-than-expected guidance and the broader technology industry selloff contributed to the company’s stock price decline. The interim CEO, Graham Smith, has been on Splunk’s board for over a decade, has been Chairman since 2019, and was the former CFO of Salesforce.com. Regardless of the short term noise, Splunk has a large and growing addressable market, a capable management team, and we expect the company’s value to grow over the long-term. Although Splunk was a material detractor during the quarter, we are pleased to own this outstanding business with a substantial margin of safety.”
Our calculations show that Splunk Inc. (NASDAQ:SPLK) failed to obtain a mark on our list of the 30 Most Popular Stocks Among Hedge Funds. Splunk Inc. (NASDAQ:SPLK) was in 47 hedge fund portfolios at the end of the fourth quarter of 2021, compared to 41 funds in the previous quarter. Splunk Inc. (NASDAQ:SPLK) delivered a 21.78% return in the past 3 months.
In February 2022, we also shared another hedge fund’s views on Splunk Inc. (NASDAQ:SPLK) in another article. You can find other letters from hedge funds and prominent investors on our hedge fund investor letters 2021 Q4 page.
Disclosure: None. This article is originally published at Insider Monkey.
