You may not have realized it, but this past Friday, August 14th, was one of the most important days of the third quarter. That’s because it marked the submission deadline for Form 13F with the Securities and Exchange Commission.
For those unfamiliar, 13Fs are required for companies with more than $ 100 million in assets under management. They take a look under the hood, so to speak, to see what the brightest and most successful sentences on Wall Street were in the previous quarter. Given the increased volatility we saw in 2020 due to the coronavirus 2019 pandemic (COVID-19), understanding how top money managers put their money to work has certainly been important.
With the second quarter having the strongest rally for the broad-based S&P 500 since 1998 it is no surprise that we saw some active buying. But what investors may not be able to capture is how billionaire money managers simply cannot stop buying the next four forms of high growth in the second quarter.
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Social media site Pinterest (NYSE: PINS) is the first stock that billionaire investors simply could not stay away from. Larry Fink’s Black Rock gobbled more than 10.1 million shares in the second quarter, with Gabriel Plotkin of Melvin Capital Management initiating a new 4.4 million share position. As a whole, all management companies increased to submit a 13F, increasing their aggregate ownership in Pinterest by 17.7% from the following first quarter.
Why Pinterest? Look no further than the stellar growth of the company. While most social media sites look to keep users growing after a few years, Pinterest has continued to gather steam, especially in international markets. By June 2020, Pinterest had 416 million monthly active users (MAUs), with 106 million of the 116 million MAUs added over a 12-month period outside the United States. Although international users generate lower average revenue per user (ARPU), there is an unbelievable chance of long-term growth of foreign ARPU.
In addition, Pinterest is a growing e-commerce game. It only makes sense to connect small businesses with users who literally tell the world about products and services that interest them. By working with Shopify, improving product accessibility and lookup, and focusing on video content to increase membership engagement, Pinterest seems to have a winning formula that should translate to long-term double-digit growth.
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Innovative industrial features
Surprise! Billionaire money managers could not keep their hands off marijuana supplies either. In particular, cannabis-targeted real estate investments in real estate (REIT) Innovative industrial features (NYSE: IIPR) was quite popular. Steven Cohen’s Point72 Asset Management added more than 229,000 shares in the second quarter, with BlackRock also raising nearly 235,000 shares. All told, aggregate ownership of 13F filers was up 22.7% from the following first quarter.
Although marijuana has to be one of the fastest growing sectors this decade, most pot stocks are a growing pain. That is not the case for Innovative Industrial Properties, which is the most profitable pure-play cannabis stock per share basis. Beyond large upfront costs to purchase new crops and processing equipment, REITs have a low management model that promotes healthy business profits and substantial dividend payments.
Innovative Industrial Properties owns 61 properties in 16 states, which is significantly up from the 11 holdings it had in early 2019. These properties sport a weight-average lease length of 16.1 years. The company is on track to recover its invested capital in about six years, based on the latest reported average return on invested capital of more than 13% in the first quarter. In other words, Innovative Industrial Properties offers consistency in a very unpredictable space.
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Fast
Maybe it comes as no shock to that work-from-home cloud compiler Fast (NYSE: FSLY) is another stock that billionaires could not stop buying in the second quarter. Jeff Yass’ Susquehanna International added nearly 256,000 shares of Fastly in Q2, with Ken Griffin’s Citadel Advisors raising just over 142,000 shares. In total, ownership of shares by 13F filers increased by almost 45% from the following first quarter.
The interest in Fastly by billionaires makes perfect sense. This is a company whose sole purpose is to make content delivery fast and secure. In the past five months, consumers have had little choice but to avoid crowds and more of them shopping than ever online because of the pandemic. This growing dependence on e-commerce plays directly into the hands of Fastly, as it did not have much difficulty in becoming the preferred cloud platform platform for Shopify and Pinterest, among other leading Internet-focused companies.
Fastly is also growing at a lightning-fast pace. The company’s most recent quarterly report showed 62% year-on-year sales with a net expansion rate of $ 137%, up 133% in the following quarter. Not only do existing clients continue to exist with Fastly, but the overall customer count grew at its fastest pace in Q2 since the company’s IPO. All signs point to the growth rate of Fastly potentially accelerating in the coming years.
Image Source: Zoom Video Communications.
Zoom video communication
Billionaire money managers also could not stop pushing the buy button when it came to cloud-based communication platform Zoom video communication (NASDAQ: ZM). Jim Simons’ Renaissance Technologies added nearly 4.5 million shares to its existing position in the second quarter, increasing BlackRock’s stake by nearly 3.8 million shares. As of June 30, aggregate ownership in Zoom’s share had grown by 30% among 13F filers.
Similar to Fast, connecting the dots has become really easy with Zoom due to the ongoing pandemic. With the standard office mostly for now dead, work meetings are conducted virtually. Cloud-based communication, voice and audio platform Zoom has been a prime advantage.
Back in early June, Zoom Video reported its fiscal first-quarter fiscal results through April 30, destroying even Wall Street’s most robust expectations. The number of customers contributing more than $ 100,000 to 12-month-a-year returns was 90% year-on-year, while clients with at least 10 employees grew a cool 354%, meaning a rise in small and medium-sized businesses. Total revenue increased 169% from the previous year period, with free cash flow catapulting to $ 251.7 million from $ 15.3 million in the previous year period.
Zoom shatters it, and billionaires ride right in his jacket.
