OFor the past quarter, institutions, hedge funds and investors with over $100 million in assets under management have been filing Form 13F with the Securities and Exchange Commission (SEC). A 13F provides insight into what a fund manager or wealthy investor has bought, sold, and held over the past quarter.
In one respect, the 13Fs are dated. By the time we take a look under the hood, a minimum of 45 days has passed. However, we have a look at the stocks and trends that intrigue Wall Street’s top performing fund managers.
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By mid-February, when the last set of 13Fs expired for the fourth quarter of 2021, it was apparent that billionaire fund managers had a soft spot for high-growth, innovative stocks that were being beaten by their highs. In fact, you could go so far as to say that billionaires love the following three beats. growth stocks.
Airbnb
The first fast-paced corporate wealth managers can’t seem to get enough is a stay and accommodation platform Airbnb (NASDAQ: ABNB). Shares of the company have fallen 27% since hitting a record high in November.
A quick look at 13F filings shows strong purchases of Jim Simons’ Renaissance Technologies, John Overdeck and David Siegel’s Two Sigma Investment and Ken Griffin’s Citadel Advisors during the fourth quarter. Together, these billionaire funds own about 5.5 million shares of Airbnb.
Airbnb’s appeal appears to be the company’s ability to disrupt the traditional hospitality industry, as well as infiltrate the $8 trillion travel industry. Most people know Airbnb for its lodging market. The platform currently has around 4 million hosts, but that number will likely grow significantly as landlords realize the cash flow potential of renting out their properties.
the most interesting aspect of the Airbnb market that’s where the growth comes from. According to the company, extended stays, defined as stays of 28 days or more, are its fastest growing category. With the COVID-19 pandemic changing the traditional workplace, more people than ever are finding it easier to work remotely. Airbnb is responding to this increase in the number of teleworkers by allowing them to combine work and pleasure. According to Airbnb, 28-day stays accounted for 22% of gross nights booked, compared to 16% of gross nights booked in Q4 2019.
In addition to providing more convenient and secure stay options, Airbnb is also looking to gobble up more travel dollars with its Experiences segment. This operating segment partners with local experts to lead travelers on an adventure. It’s likely only a matter of time before Airbnb explores other transportation and/or catering partnerships to garner a larger percentage of travelers’ vacation spend.
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Assets received
A second cloud-based lending platform Assets received (NASDAQ: UPST). Upstart shares have fallen more than 81% since hitting an all-time high in October.
Based on February 13 filings with the SEC, Susquehanna International’s Jeff Yass, Jim Simons’ Renaissance and Ken Griffin’s Citadel were all heavy buyers. Susquehanna and Citadel more than doubled their existing positions, compared to where each ended in the third quarter of 2021.
What probably makes Upstart so attractive to billionaire fund managers is its artificial intelligence AI-based lending platform. About 70% of all loan applicants get immediate approval with Upstart’s loan service, saving banks and credit unions time and money.
Additionally, Upstart’s AI lending platform opens the door to applicants with lower credit scores who might otherwise not be approved through a traditional verification process. Yet despite these lower credit scores, applicants approved through Upstart did not have higher delinquency rates than traditionally approved loan applicants. In my view, this makes it even more likely that financial institutions will rely on Upstart’s technology as lending rates rise and loan applications slow down.
Another thing to note is that Upstart has no credit exposure. In the fourth quarter, 94% of its revenue came from fees and services. Even if loan delinquencies increase, Upstart won’t be worse off for wear and tear because of it.
Billionaire fund managers are likely also excited about Upstart’s potential to push towards AI-powered automatic loan originations. The auto loan market is much larger than the personal loan market, giving Upstart a long streak to generate double-digit growth.
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Sea Limited
The third Singapore-based conglomerate Sea Limited (NYSE: SE). Shares of Sea have fallen 76% since hitting a record high six months ago.
During the fourth quarter, three top billionaire investors piled into Sea, including Chase Coleman of Tiger Global, Ole Andreas Halvorsen of Viking Global and Israel Englander’s Millennium Management. Sea is a new position for Viking Global. Meanwhile, Tiger Global has increased its stake to nearly 11.4 million shares.
The reason these billionaires jumped on the Sea Limited bandwagon appears to be the company boosted growth prospects for its three operating segments.
Currently, only its gaming division, known as Garena, generates earnings before interest, taxes, depreciation and amortization (EBITDA). What’s particularly impressive about this mobile gaming segment is that 11.8% of its 654 million quarterly active users paid to play. The pay-to-play conversion rate for mobile games is typically under 10 figures. Even as mobile games growth slows, Sea can generate healthy cash flow from a pay-to-play conversion rate that is several multiples above the industry average.
The company’s digital financial services segment, known as SeaMoney, is also booming. With Sea operating in a number of emerging markets where consumer access to basic banking services is limited, the company’s digital wallet services could quietly become a major profit driver. Sea ended 2021 with 45.8 million quarterly digital wallet users (up 90% from the comparable quarter of 2020).
Finally, there’s Shopee, a rapidly growing e-commerce platform. In the fourth quarter, gross orders increased 90% to $2 billion, while gross merchandise value (GMV) traded on the platform increased to $18.2 billion. To put that into context, Shopee’s annual GMV run rate is now nearly $73 billion. In 2018, Shopee saw $10 billion in GMV flow through its platform.
While Sea is expected to lose money for the foreseeable future, there’s no denying the moat it’s building.
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Sean Williams has no position in the stocks mentioned. The Motley Fool owns and endorses Airbnb, Inc., Sea Limited, and Upstart Holdings, Inc. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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