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Autodesk (ADSK) Has Risen 54% in Last One Year, Outperforms Market

Alex Smith
·4 min read

If you are looking for the best ideas for your portfolio you may want to consider some of RiverPark Advisors top stock picks. RiverPark Advisors, an investment management firm, is bullish on Autodesk Inc. (NASDAQ:ADSK) stock. In its Q2 2019 investor letter – you can download a copy here – the firm discussed its investment thesis on Autodesk Inc. (NASDAQ:ADSK) stock. Autodesk Inc. (NASDAQ:ADSK) is a software company.

In July 2019, RiverPark Advisors had released its Q2 2019 investor letter. The investment firm said that it initiated a new position in Autodesk Inc. (NASDAQ:ADSK) stock in Q2 2019. Autodesk Inc. (NASDAQ:ADSK) stock has posted a return of 53.9% in the trailing one year period, outperforming the S&P 500 Index which returned 11.8% in the same period. This suggests that the investment firm was right in its decision. On a year-to-date basis, Autodesk Inc. (NASDAQ:ADSK) stock has risen by 25.1%.

In Q2 2019 investor letter, RiverPark Advisors said the Large Growth fund posted a return of 7.4% in the second quarter of 2019, outperforming fund's benchmark the S&P 500 Index which returned 4.3% in the same period. Let’s take a look at comments made by RiverPark Advisors about Autodesk Inc. (NASDAQ:ADSK) stock in the Q2 2019 investor letter.

"ADSK, which has a near monopoly on software for designing, building and managing buildings, as well as software for infrastructure and manufacturing plants, prototyping software for manufacturers of products including autos, machinery, and consumer products, and document sharing. Many of Autodesk’s products require specific training, which has led to very high customer retention rates (in excess of 90%) and upsell (same customer recurring revenue should grow 10%-20% this year). Similar to a few of our other new software holdings, ADSK is transitioning its business from a license and maintenance structure to a SaaS business model with more than 2 million customers having subscribed to annual contracts, more than 1 million additional customers to convert (that are still on maintenance contracts from enterprise purchases) and plans to target and convert its estimated 12 million non-compliant users (pirated copies).

The company expects to grow revenue 15%-19% annually over the next several years and, as we have seen happen in similar SaaS conversions, as revenue scales, operating margins should expand significantly from 2018’s 12% to more than 40% over time, to more in-line with peers. Additionally like our other SaaS holdings, ADSK’s expenses are front-loaded, currently dampening its free cash flow margin at 12%, but this can move to greater than 50% as revenue scales. From current levels, we believe that ADSK shares can compound along with its free cash flow growth (expected to be 20%+ per year) over the next several years."

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Antonio Guillem/Shutterstock.com

Lat month, we published an article revealing Rhizome Partners' bullish investment thesis on Autodesk Inc. (NASDAQ:ADSK) stock. The investment firm said the stock has massive upside potential in the next five years.

In Q2 2020, the number of bullish hedge fund positions on Autodesk Inc. (NASDAQ:ADSK) stock increased by about 3% from the previous quarter (see the chart here), so a number of other hedge fund managers seem to agree with Autodesk's growth potential. Our calculations showed that Autodesk Inc. (NASDAQ:ADSK) isn't ranked among the 30 most popular stocks among hedge funds.

The top 10 stocks among hedge funds returned 185% since the end of 2014 and outperformed the S&P 500 Index ETFs by more than 109 percentage points. We know it sounds unbelievable. You have been dismissing our articles about top hedge fund stocks mostly because you were fed biased information by other media outlets about hedge funds' poor performance. You could have doubled the size of your nest egg by investing in the top hedge fund stocks instead of dumb S&P 500 ETFs. Below you can watch our video about the top 5 hedge fund stocks right now. All of these stocks had positive returns in 2020.

Video: Top 5 Stocks Among Hedge Funds

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. You can subscribe to our free enewsletter below to receive our stories in your inbox:

Disclosure: None. This article is originally published at Insider Monkey.