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10 Tech Stocks To Buy According to Daryl Smith’s Kayak Investment Partners

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·12 min read
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In this piece, we will take a look at 10 tech stocks to buy according to Daryl Smith's Kayak Investment Partners. If you want to skip the bottom five stocks, then head on over to 5 Tech Stocks To Buy According to Daryl Smith's Kayak Investment Partners.

Kayak Investment Partners LLC is an investment management and portfolio services provider that is based out of San Francisco, California. Its investment portfolio is worth close to a billion dollars and is managed by Mr. Daryl Smith. Mr. Smith, who co-founded the firm alongside Claude Hazan, Nowell Chernick and Kurt Lanzavecchia, is a graduate of the University of California, in Berkley, California, United States. Among his peers, Mr. Smith is one of the few who has a bachelor's degree in history, having graduated from his alma mater in 1998.

Most of Kayak Investment's holdings are concentrated in the technology industry, with its investment portfolio having a stake in sectors ranging from semiconductors, financial payments, ride sharing, cloud computing, social media and online retailing. Its biggest holding is in Smartsheet Inc. (NYSE:SMAR), but like other portfolios, the top three companies constitute a roughly equal share each. Some of Kayak Investment's other big stakes are in Amazon.com, Inc. (NASDAQ:AMZN) and Roblox Corporation (NYSE:RBLX).

The investment firm is a relatively new player in the financial sector, as it was founded less than a decade ago in 2013. However, its team has more than a decade of experience in the financial sector. Mr. Smith started his financial journey in 2004 as the principal for research and investments at Anchor Capital Management and since then has managed the portfolios of two investment funds simultaneously and served as a partner at Cavalry Asset Management for six years.

As of the second quarter of this year, Kayak Investment's portfolio was worth $707 million, with the top three investments accounting for $150 million of its value by the end of the third quarter of this year. Notably, the third quarter saw Mr. Smith knock off two Chinese companies from his portfolio. During this period, he sold roughly half a million shares of Alibaba Group Holding Limited (NYSE:BABA) and Baidu, Inc. (NYSE:BIDU), despite the two companies' strong presence in their home country.

Alibaba Group Holding Ltd (NYSE:BABA), Logo, big sign, People taking photos, offering, ipo, group, stock
Alibaba Group Holding Ltd (NYSE:BABA), Logo, big sign, People taking photos, offering, ipo, group, stock

Christopher Penler / Shutterstock.com

Our Methodology

In order to keep up with the musings of Mr. Smith's mind and the changes his investment firm makes to its portfolio each quarter, we start off by analyzing Kayak Investment's Form 13-F filings for the third quarter with the Securities and Exchange Commission of the United States of America.

Why pay attention to hedge fund holdings? 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 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.

10 Tech Stocks To Buy According to Daryl Smith's Kayak Investment Partners

10. Advanced Micro Devices, Inc. (NASDAQ:AMD)

Value of Kayak Investment's Stake: $36 million

Percentage of Kayak Investment's 13F Portfolio: 5.11%

Number of Hedge Fund Holders: 63

Advanced Micro Devices, Inc. (NASDAQ:AMD) is a semiconductor designer and seller based in Santa Clara, California. It designs and sells central processing units (CPUs), graphics processing units (GPUs) and custom-built solutions for gaming consoles. The company's products cater to both professional and nonprofessional users.

By the end of the third quarter of this year, Mr. Smith's investment firm held 351,716 Advanced Micro Devices, Inc. (NASDAQ:AMD) shares in a stake that is worth $36 million and accounts for 5.11% of the investment firm's portfolio. Additionally, an Insider Monkey survey of 873 hedge funds' 13-F filings revealed that 63 had held a stake in the company by the end of this year's first half.

At the end of its third fiscal quarter 2021, Advanced Micro Devices, Inc. (NASDAQ:AMD) reported $4.3 billion in revenue and $0.73 in non-GAAP EPS, beating analyst estimates on both counts. Reflecting the strong financial performance, Wedbush upgraded the company's price target to $165 in a November 2021 investor note, citing strong performance in the data center segment that many believe is on the rise.

Advanced Micro Devices, Inc. (NASDAQ:AMD)'s largest shareholder according to Insider Monkey is Martin Taylor's Crake Asset Management, which holds 120,000 shares worth $12 billion.

Like Amazon.com, Inc. (NASDAQ:AMZN), Roblox Corporation (NYSE:RBLX) and Smartsheet Inc. (NYSE:SMAR), Advanced Micro Devices, Inc. (NASDAQ:AMD) is one of Mr. Smith's favorite stocks.

9. ServiceNow, Inc. (NYSE:NOW)

Value of Kayak Investment's Stake: $38 million

Percentage of Kayak Investment's 13F Portfolio: 5.38%

Number of Hedge Fund Holders: 49

ServiceNow, Inc. (NYSE:NOW) is an American company headquartered in Santa Clara, California that provides software for workplace automation and improved information sharing between management and employees. Its platform offers artificial intelligence, machine learning and performance analysis as some of its features.

During the third fiscal quarter, ServiceNow, Inc. (NYSE:NOW) earned $1.5 billion in revenue and $1.55 in EPS, beating analyst estimates on both counts. In a November 2021 analyst note, Argus raised the company's share price target to $805, citing its viewpoint that ServiceNow, Inc. (NYSE:NOW)'s business will only improve alongside the corporate world's recovery from the ongoing pandemic.

Mr. Smith's Kayak Investment held 61,239 ServiceNow, Inc. (NYSE:NOW) by the end of the third quarter of this year, accounting for 5.38% of the 13F portfolio. This stake is worth $38 million. Out of the 873 hedge fund holdings surveyed by Insider Monkey by the end of the year's second quarter, 49 had held shares of ServiceNow, Inc. (NYSE:NOW).

Alexander Becker's Codex Capital is ServiceNow, Inc. (NYSE:NOW)'s biggest stakeholder, owning 9,850 shares worth $5 billion, according to Insider Monkey's data.

Asset management fund Baron Funds mentioned the company in a first-quarter 2021 investor letter, outlining that:

“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.”

ServiceNow, Inc. (NYSE:NOW) is, therefore, one of Mr. Smith's favorite stocks, alongside Roblox Corporation (NYSE:RBLX), Amazon.com, Inc. (NASDAQ:AMZN) and Smartsheet Inc. (NYSE:SMAR).

8. Airbnb, Inc. (NASDAQ:ABNB)

Value of Kayak Investment's Stake: $39 million

Percentage of Kayak Investment's 13F Portfolio: 5.56%

Number of Hedge Fund Holders: 58

Airbnb, Inc. (NASDAQ:ABNB) is known for its online platform that allows hosts and guests all over the world to connect with each other. It is the go to choice for international and local travelers who are looking for affordable options to stay during trips. The company was founded in 2007 and is located in San Francisco, California.

By the end of the third quarter of this year, Mr. Smith's investment firm held 234,624 Airbnb, Inc. (NASDAQ:ABNB) shares in a stake that was worth $39 million and accounted for 5.56% of Kayak Investment's portfolio. Additionally, an Insider Monkey survey of 873 hedge funds' 13-F filings revealed that 58 had held a stake in the company by the end of this year's first half.

At the end of its third fiscal quarter 2021, Airbnb, Inc. (NASDAQ:ABNB) reported $2.2 billion in revenue and $1.22 in GAAP EPS, beating analyst estimates on both counts. Reflecting the strong financial performance, Truist raised the company's price target to $180 in a November 2021 investor note, sharing that new features and travel recovery will fare well for Airbnb, Inc. (NASDAQ:ABNB).

Airbnb, Inc. (NASDAQ:ABNB)'s largest shareholder according to Insider Monkey is Jim Simons's Renaissance Technologies, who holds 2.7 million shares worth $465 million.

Polen Capital mentioned the company during a third-quarter 2021 investor letter, outlining that:

“We believe Airbnb has substantial competitive advantages in a large, fast-growing, and global market. Airbnb acts as a “System of Trust” in the private rental accommodations market, removing a considerable amount of friction so hosts can trust unknown guests and guests can trust unknown hosts/properties.

We believe Airbnb has an attractive growth runway given its unique inventory, powerful platform, and system enhancements that further reduce user friction.

We see Airbnb as well-positioned to benefit from secular growth in travel, the increasingly mainstream nature of private rentals, and as hybrid work/travel can lead to more frequent and longer stays. Unlike traditional online travel agencies like Booking.com and Expedia, Airbnb’s user traffic comes almost entirely directly, which speaks to the brand’s strength. This also means that Airbnb does not need to pay Google or other meta-search engines nearly as much money for generating booking leads, which is a favorable structural business model advantage in our view. We expect the company’s bookings and revenue to compound at a high-teens rate or better over the next five years and margins to expand by thousands of basis points as it scales its fixed costs base, leading to 40%+ earnings per share growth over that period.”

7. Warner Music Group Corp. (NASDAQ:WMG)

Value of Kayak Investment's Stake: $39.5 million

Percentage of Kayak Investment's 13F Portfolio: 5.58%

Number of Hedge Fund Holders: 29

Warner Music Group Corp. (NASDAQ:WMG) is an American music entertainment company founded in 1929 and headquartered in New York, New York. The company is involved at all stages of music production, from working with artists to publishing their work with its labels.

During its fourth fiscal quarter, Warner Music Group Corp. (NASDAQ:WMG) earned $1.3 billion in revenue and $0.05 in GAAP EPS, beating analyst estimates for revenue. In a November 2021 analyst note, Citi raised the company's share price target to $48, sharing that the stock offered a balance of risk and reward.

Mr. Smith's Kayak Investment held 924,229 Warner Music Group Corp. (NASDAQ:WMG) shares by the end of the third quarter of this year, that were worth $39.5 million and accounted for 5.58% of the 13F portfolio. Out of the 873 hedge fund holdings surveyed by Insider Monkey by the end of the year's second quarter, 29 had held shares of Warner Music Group Corp. (NASDAQ:WMG).

Anand Desai's Darsana Capital Partners is Warner Music Group Corp. (NASDAQ:WMG)'s biggest stakeholder, owning 4.2 million shares worth $179 million, according to Insider Monkey's data.

6. Snowflake Inc. (NYSE:SNOW)

Value of Kayak Investment's Stake: $44.4 million

Percentage of Kayak Investment's 13F Portfolio: 6.27%

Number of Hedge Fund Holders: 70

Snowflake Inc. (NYSE:SNOW) is an American big data cloud services provider that enables its customers to derive insights through crunching big data. The company is headquartered in Montana and was incorporated in 2012.

In an investor note issued in October 2021, JMP Securities raised its price target to $320 per share from an earlier $300 per share, expressing optimism for Snowflake Inc. (NYSE:SNOW)’s crucial role in its industry.

Snowflake Inc. (NYSE:SNOW)’s largest investor by the second quarter was Brad Gerstner’s Altimeter Capital Management who owned 21 million shares worth $6 billion.

During the third quarter, Mr. Smith's Kayak Investment Partners held 146,842 Snowflake Inc. (NYSE:SNOW) shares worth $44 million, which represented 6.27% of his firm's overall portfolio. At the same time, 70 out of the 873 hedge funds polled by Insider Monkey had held a stake in the company by the end of the second quarter.

Therefore, it’s a no-brainer that Snowflake Inc. (NYSE:SNOW) is a part of Mr. Smith’s elite stock picks such as Amazon.com, Inc (NASDAQ:AMZN), Roblox Corporation (NYSE:RBLX), and Smartsheet Inc. (NYSE:SMAR).

In its first-quarter 2021 investor letter published earlier this year, RiverPark Funds had the following to say about Snowflake Inc. (NYSE:SNOW):

“We also established a position in Snowflake during the quarter. Snowflake offers cloud-based data storage and analytics, generally termed “data warehouse-as-a-service.” The data warehousing market—created by the massive, growing amount of user, customer, and account data and the need to search and analyze it—has historically stored its data on physical servers located on-premises. The cloud data platform market—storing data off-premises on cloud servers—is a relatively new $70 billion+ market. Significantly, incremental warehouse data capacity and renewals are expected to be driven by and to the cloud, with more than 75% of databases in the cloud by 2022.”

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Disclosure. None. 10 Tech Stocks To Buy According to Daryl Smith's Kayak Investment Partners is originally published on Insider Monkey.