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10 Stocks to Buy Based on Michael Pausic’s Foxhaven Asset Management Portfolio

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·8 min read
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In this article, we discuss the 10 stocks to buy based on Michael Pausic's Foxhaven Asset Management Portfolio. If you want to skip our detailed analysis of these stocks, go directly to the 5 Stocks to Buy Based on Michael Pausic's Foxhaven Asset Management Portfolio.

Michael Pausic is the co-founder and portfolio manager of Foxhaven Asset Management. Pausic started his career as a Media and Communications banker. Before that, he completed his BS in engineering from the University of Virginia in 1986 and MBA from Fuqua School of Business at Duke University in 1989.

Meta Platforms, Inc. (NASDAQ:FB), Amazon.com, Inc. (NASDAQ:AMZN), and Visa Inc. (NYSE:V) are some of the notable names in Foxhaven Asset Management’s portfolio. These three companies make up around 25.37% of the fund’s portfolio, and Meta Platforms, Inc. (NASDAQ:FB) is the firm's most significant holding.

Our Methodology

Here is our list of 10 stocks to buy based on Michael Pausic's Foxhaven Asset Management portfolio. These were picked from the Foxhaven Asset Management portfolio at the end of the third quarter of 2021.

10 Stocks to Buy Based on Michael Pausic's Foxhaven Asset Management Portfolio

10. Hilton Worldwide Holdings Inc. (NYSE:HLT)

Foxhaven Asset Management’s Stake Value: $162.9 million

Percentage of Foxhaven Asset Management’s 13F Portfolio: 4.69%

Number of Hedge Fund Holders: 44

Hilton Worldwide Holdings Inc. (NYSE:HLT) is a multinational hospitality company headquartered in Virginia, United States. The company has about 6500 locations worldwide and about 18 different brands covering different market segments.

On October 10, BMO Capital analyst Ari Klein raised the price target for Hilton Worldwide Holdings Inc. (NYSE:HLT) from $135 to $144, keeping a Market Perform rating. The company saw a bit of a downfall during the pandemic; however, analysts are optimistic about the company’s recovery.

Hilton Worldwide Holdings Inc. (NYSE:HLT) is one of the the top picks of Foxhaven Asset Management along with Meta Platforms, Inc. (NASDAQ:FB), Amazon.com, Inc. (NASDAQ:AMZN), and Visa Inc. (NYSE:V).

Pershing Square Holdings, Ltd. mentioned Hilton Worldwide Holdings Inc. (NYSE:HLT) in their second-quarter 2021 investor letter. Here is what the firm said:

“While the hotel industry has been extremely negatively impacted by the COVID-19 pandemic, Hilton has done an excellent job navigating industry volatility, a testament to the company’s high-quality, asset light, high-margin business model and superb management team. From the moment the pandemic began, Hilton’s management team took decisive actions to ensure the company not only managed through what it knew would be a challenging period, but also positioned the company to generate improved margins, cash fl ows and investment returns once the business recovers to pre-COVID-19 demand levels.

Industry RevPAR (the industry metric for same-store sales at a given hotel) bottomed in April 2020 and has shown sequential improvement every quarter as travel and mobility have recovered along with COVID-19 vaccine rollouts and a resumption in travel. In recent months, there is increasing evidence that a robust recovery scenario is underway, led by domestic leisure travel occasions which is currently trending above 2019 demand levels. For the first three weeks of July, the most recent data the company provided, RevPAR has already recovered to 85% of 2019 levels – a signifi cant improvement over prior months driven by increased hotel occupancy and a rapid recovery in rate.

While management anticipates a moderation in leisure demand as we exit the summer, it expects the moderation in leisure travel to be off set by a more pronounced recovery in business transient travel occasions as offi ces reopen this fall. Although there remains near-term uncertainty in domestic travel given the increase in COVID-19 case numbers following the arrival of the Delta variant in the U.S., we believe that the medium-term outlook continues to point to a robust recovery scenario. Throughout the pandemic, Hilton took actions to reduce corporate expenses by about 20% compared to 2019 levels.

Simultaneously, the company provided resources and support to the Hilton owner community which further solidifi ed Hilton as the preferred franchise partner, thereby expanding Hilton’s pipeline of units around the world.

In the most recent quarter Hilton affi rmed its near-to-medium term outlook of mid-single-digit net unit growth, and a resumption of its historical 6-7% net unit growth beginning in 2023-2024, higher growth than competitors, and further evidence of Hilton’s unique business model.

We believe that Hilton will continue to grow its market share over time given independent hotels’ increased interest in seeking an affi liation with global brands, particularly in the wake of the pandemic. While the recovery may continue to be uneven, Hilton has made tremendous progress which will help it become an even more profi table and stronger business going forward.”

9. Visa Inc. (NYSE:V)

Foxhaven Asset Management’s Stake Value: $166.15 million

Percentage of Foxhaven Asset Management’s 13F Portfolio: 4.78%

Number of Hedge Fund Holders: 143

Visa Inc. (NYSE:V) is a California-based multinational company that provides financial services mainly in electronic funds transfers around the globe. The most common forms of its products are credit, debit, and prepaid cards.

According to the third-quarter 13F filings, Foxhaven Asset Management owns 745,908 shares of Visa Inc. (NYSE:V) worth $166.5 million, representing 4.78% of the fund’s portfolio.

L1 Capital mentioned Visa Inc. (NYSE:V) in their third-quarter investor letter. Here is what the firm said:

“In our view, the payment network company, Visa, remain very well positioned to participate in an ever-expanding market for electronic payments. In time, ‘Buy now, Pay Later’ may have a modest impact on Visa’s transaction volumes, however in aggregate, we believe it will have the greater effect of supporting growth in electronic payments more broadly. Nearer term, we believe the recovery in international travel as the world gradually normalises and learns to live with COVID-19 will be materially positive for Visa’s financial performance. eCommerce will also remain a positive key driver for Visa growth.”

8. Pegasystems Inc. (NASDAQ:PEGA)

Foxhaven Asset Management’s Stake Value: $171.29 million

Percentage of Foxhaven Asset Management’s 13F Portfolio: 4.93%

Number of Hedge Fund Holders: 25

Pegasystems Inc. (NASDAQ:PEGA) is a software company that primarily focuses on Automation, Robotic Process Automation, and Artificial Intelligence. The company has around 6000 employees, 46 locations and more than 250 global partners worldwide.

The investment management firm Carillon Tower Advisers mentioned Pegasystems Inc. (NASDAQ:PEGA) in their second-quarter 2021 investor letter. Here is what it said:

“Pegasystems develops software used in automating business tasks. The company’s artificial intelligence-driven recommendations for customer service contact centers is a key growth driver, and a mix shift towards cloudcomputing should result in a higher valuation over time. Investors have appreciated this dynamic, sending the shares higher.”

7. Coupang, Inc. (NYSE:CPNG)

Foxhaven Asset Management’s Stake Value: $255.9 million

Percentage of Foxhaven Asset Management’s 13F Portfolio: 7.37%

Number of Hedge Fund Holders: 45

Coupang, Inc. (NYSE:CPNG) is a South-Korean e-commerce and digital distribution company founded in 2010. The company is South Korea’s most prominent online marketplace. In 2021, Coupang, Inc. (NYSE:CPNG) announced expanding its operations to Japan and Taiwan.

In 2020, Coupang, Inc. (NYSE:CPNG) was the fastest-growing company among 250 retailers worldwide.

In the third quarter of 2021, Coupang, Inc. (NYSE:CPNG) saw some capacity limitations due to warehouse fire and COVID-related costs. On November 15, Mizuho analyst James Lee decreased the company's price target from $40 to $32 and held a Neutral rating on Coupang, Inc. (NYSE:CPNG) shares.

6. Intuit Inc. (NASDAQ:INTU)

Foxhaven Asset Management’s Stake Value: $256.1 million

Percentage of Foxhaven Asset Management’s 13F Portfolio: 7.38%

Number of Hedge Fund Holders: 64

Intuit Inc. (NASDAQ:INTU) is an American company that provides enterprise application software to its customers. The company operates in 9 countries, and its major products are TurboTax, QuickBooks, Mint, and Credit Karma. In the third quarter of 2021, Intuit Inc. (NASDAQ:INTU) also acquired Mailchimp, an email marketing service, for $12 billion

Terry Smith’s Fundsmith LLP owns the most significant number shares in Intuit Inc. (NASDAQ:INTU), with 4.58 million shares worth $2.47 billion, representing 6.83% of Fundsmith’s portfolio. Foxhaven Asset Management reduced its activity in Intuit Inc. (NASDAQ:INTU) by 13% in the third quarter of 2021.

Cooper Investors mentioned Intuit Inc. (NASDAQ:INTU) in their third-quarter 2021 investor letter. Here is what they said:

“The other meaningful deal during the quarter was Intuit’s acquisition of Mailchimp for $12bn. Intuit has reinvented itself over the last decade and thrived with a leadership position in QuickBooks Online, the financial accounting software for small businesses (effectively the ‘Xero of the US’). We originally invested in Intuit in February 2020, excited by the QuickBooks prospects.

Management have executed exceptionally well on the opportunity set which has seen the shares double since our initial purchase. However, the company has now conducted two meaningful deals in Mailchimp and Credit Karma worth a combined US$20bn over the last 12 months. The investment proposition has shifted from a focus on QuickBooks to now being a financial and small business software conglomerate. We continue to very much admire the company, but with Intuit now trading on 50x forward earnings we no longer see such attractive latency on offer, nor the rewards for the level of execution risk and thus we have exited the position.”

 

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Disclosure: None. 5 Stocks to Buy Based on Michael Pausic's Foxhaven Asset Management Portfolio is originally published on Insider Monkey.