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Gabriel Plotkin’s Melvin Capital Portfolio: Top 10 Picks

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·11 min read
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  • ALGN
  • SNOW
  • JD
  • GOOGL
  • AMZN
  • V
  • IAA
  • EXPE

In this piece, we will be taking a look at Gabriel Plotkin's Melvin Capital portfolio: Top 10 picks. If you want to skip our detailed analysis of Gabriel Plotkin's history, investment philosophy, and hedge fund performance, then head on over to Gabriel Plotkin's Melvin Capital Portfolio: Top 5 Picks.

Gabriel Plotkin is an American hedge fund manager who is behind the reins at the hedge fund Melvin Capital. Mr. Plotkin is a millionaire courtesy of his hedge fund, and he has also spent his career at several hedge funds such as Citadel LLC, North Sound Capital, and SAC Capital.

Melvin Capital is known for its short-selling approach towards stocks, which is a controversial practice according to some viewpoints. In the financial world, short selling involves borrowing a company's shares and then selling them on the open market in hopes of a price decrease. Should such a drop take place, the short seller buys the shares cheaper, returns them to the owner and keeps the difference.

Mr. Plotkin is also one of the more mysterious investors out there, who maintains a low profile and does not have any social media accounts. By the end of the second quarter, his hedge fund had a portfolio worth $17 billion.

This portfolio consists of more than a hundred companies, with varying kinds of holdings. Some of the top companies in it are Amazon.com, Inc (NASDAQ:AMZN), Visa Inc. (NYSE:V) and Expedia Group, Inc. (NASDAQ:EXPE). Apart from these, the bulk of Mr. Plotkin's investments also remain in the technology sector, but he expends his attention to others as well.

Gabriel Plotkins' Melvin Capital Portfolio: Top 10 Picks
Gabriel Plotkins' Melvin Capital Portfolio: Top 10 Picks

Our Methodology

In order to determine which stocks and companies are on Mr. Plotkin's radar, we took a look at Melvin Capital's Form 13-F filings for the second quarter with the Securities and Exchange Commission (SEC). This enabled us to pick out the top ten stocks in the investor's portfolio, and when this information was supplemented by Insider Monkey's survey of 873 hedge funds, earnings reports, analyst coverage and investor letters, it let us gain a holistic picture.

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.

Gabriel Plotkin's Melvin Capital Portfolio: Top 10 Picks

10. IAA, Inc. (NYSE:IAA)

Mr. Plotkin's Stake Value: $353.1 million

Percentage of Mr. Plotkin's 13F Portfolio: 2.02%

Number of Hedge Fund Holders: 33

IAA, Inc. (NYSE:IAA) is an American company that deals with the auctioning of damaged or out-of-commission vehicles in the United States. The company targets both individual and corporate buyers and sellers and it also provides a host of solutions such as replacing inventory and meeting vehicle rebuild requirements.

Mr. Plotkin held 6.4 million shares of the company worth $353 million and which constituted 2.02% of his portfolio by the end of the second quarter.

The company's largest stakeholder after Melvin Capital is Jeffrey Gates' Gates Capital Management, which holds 2.2 million shares worth $120 million.

In a June 2021 investor note, Stephens analyst Daniel Imbro kept IAA, Inc. (NYSE:IAA)'s price target at $70 along with an Overweight rating, believing that a recent selloff presented an excellent buying opportunity.

9. JD.com, Inc. (NASDAQ:JD)

Mr. Plotkin's Stake Value: $379 million

Percentage of Mr. Plotkin's 13F Portfolio: 2.17%

Number of Hedge Fund Holders: 76

JD.com, Inc. (NASDAQ:JD) is a Chinese electronic commerce and retail services provider that focuses its attention on the East Asian country. Not only does it run a diverse marketplace that features products from nearly every walk of life, but the company also provides marketing and other services for corporations.

Mr. Plotkin's investment firm Melvin Capital added 4.7 million shares of JD.com, Inc. (NASDAQ:JD) to its portfolio in the second quarter of this year. This stake is worth $379 million and it represents 2.17% of the firm's portfolio holdings.

JD.com, Inc. (NASDAQ:JD)'s largest shareholder is Rishi Renjen's ROAM Global Management, which owns $7.2 billion equity through 90,300 shares.

Insider Monkey's survey of the holdings of 873 hedge funds reveals that 76 held a stake in the online retailer by the end of the second quarter, and Stifel analyst Derek Johnston kept the stock's rating at Buy and increased its price target to $100 in an investor note released in September 2021. The analyst believes that reduced regulatory risk will serve the company well.

Arisaig Partners, an investment management firm, mentioned JD.com, Inc. (NASDAQ:JD) in its second-quarter 2021 investor letter. Here is what the fund said:

JD.com, for example, continues to display impressive operating momentum, with sales on track to grow around 30% this year by our estimates. Looking longer term, this company is making a credible claim to be the dominant player in Chinese grocery ecommerce, an enormous chunk of overall consumption in China, and the last one yet to move online in a big way. We think that JD has a clear advantage over rivals here thanks to its integrated and fully self-managed logistics capabilities. Whereas an offline big box retailer might have 10-20,000 SKUs, JD offers 8 million. 90% of orders fulfilled by JD Logistics can be delivered on the same day or the next day to 500 million customers. The fact that JD has just 30 days of inventory tells us that this is a highly-optimised fulfilment chain. It is very hard to be both fast and efficient, and in order to achieve this it is necessary to know what inventory to hold in which warehouse, and when to hold it (“right place, right time, right person”), a highly information-intensive challenge. The only other retailer that comes close to being able to manage that level of complexity is Amazon, and indeed these are capabilities that are very hard to replicate, taking decades of painstaking investment, trial and error testing, and data accumulation."

8. Align Technology, Inc. (NASDAQ:ALGN)

Mr. Plotkin's Stake Value: $386.2 million

Percentage of Mr. Plotkin's 13F Portfolio: 2.21%

Number of Hedge Fund Holders: 57

Align Technology, Inc. (NASDAQ:ALGN) is an American healthcare equipment provider that is headquartered in Arizona. Its primary products are scanners and aligners that are sold to dental practitioners and the company serves the needs of both dentists and orthodontists.

During its second quarter, Align Technology, Inc. (NASDAQ:ALGN) earned $1 billion in revenue and $3.04 in non-GAAP EPS, beating analyst estimates on both counts. In a September 2021 analyst note, Stifel increased the company's price target to $32 and kept a Hold rating on the shares explaining that while Align Technology, Inc. (NASDAQ:ALGN) had posted strong earnings, he preferred companies in other sectors.

By the end of the second quarter 2021, Mr. Plotkin held 632,000 shares of Align Technology, Inc. (NASDAQ:ALGN). These were worth $386 million and made up for 2.21% of his portfolio. During the same time, 57 out of 873 hedge funds polled by Insider Monkey had held a stake in the company.

Align Technology, Inc. (NASDAQ:ALGN) largest investor is Andrew Dalrymple and Barry Mccorkell's Aubrey Capital Management who owns 11,100 shares worth $6.7 billion.

7. Snowflake Inc. (NYSE:SNOW)

Mr. Plotkin's Stake Value: $465.5 million

Percentage of Mr. Plotkin's 13F Portfolio: 2.67%

Number of Hedge Fund Holders: 70

Snowflake Inc. (NYSE:SNOW) is an American big data cloud services provider that is headquartered in Montana. Its cloud platform enables users to store and analyze their data for insights that are possible only through crunching heavy numbers and large amounts of data.

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 about the entire software segment and Snowflake Inc. (NYSE:SNOW)'s role in it.

During the second quarter, Mr. Plotkin held 1.9 million Snowflake Inc. (NYSE:SNOW) shares. These were worth $465 million and represented 2.67% of his overall portfolio. At the same time, 70 out of the 873 hedge funds polled by Insider Monkey had held a stake in the company.

Snowflake Inc. (NYSE:SNOW)'s largest investor by the second quarter was Brad Gerstner's Altimeter Capital Management who owned 24 million shares worth $6 billion.

Therefore, it's a no brainer that Snowflake Inc. (NYSE:SNOW) is a part of Mr. Plotkin's elite stock picks such as Amazon.com, Inc (NASDAQ:AMZN), Expedia Group, Inc. (NASDAQ:EXPE) and Visa Inc. (NYSE:V)

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."

6. Alphabet Inc. (NASDAQ:GOOG)

Mr. Plotkin's Stake Value: $488.4 million

Percentage of Mr. Plotkin's 13F Portfolio: 2.8%

Number of Hedge Fund Holders: 155

Alphabet Inc. (NASDAQ:GOOG) is the parent company of Google, which is the world's largest internet search engine. Not only is Google responsible for cataloging the modern day Internet, but it also has a host of other divisions such as YouTube, Cloud and Other Bets, which reflect the diverse nature of the company's interests.

Mr. Plotkin held 200,000 shares of Alphabet Inc. (NASDAQ:GOOG) by the end of the second quarter. These were worth $488 million and represented 2.8% of his portfolio. During the same time period, 155 out of the 873 hedge funds surveyed by Insider Monkey held a stake in the company.

During its third quarter, Alphabet Inc. (NASDAQ:GOOG) earned $65.12 billion in revenue and $27.99 in GAAP EPS, beating analyst estimates on both counts. The company's price target was raised to $3,100 by Mizuho in an October 2021 analyst note which highlighted that higher search spending and the upcoming holiday season make for positive catalysts.

Alphabet Inc. (NASDAQ:GOOG)'s largest investor is Robert W. Koehn's Ivy Lane Capital who owns 9,700 shares worth $24 billion.

In its third-quarter 2021 investor letter, Madison Funds mentioned Alphabet Inc. (NASDAQ:GOOG). Here is what the fund said:

We are also enjoying results from portfolio companies that are benefitting in the current environment. Our largest holding, Alphabet, is experiencing vigorous growth as digital advertising is very strong in the current environment. Google Search and YouTube revenues were $50 billion last quarter, up 69% year-over-year, and up 25% compounded annually over the two-year period since to 2019. We believe these results are driven by robust consumer on-line activity and strong advertising spending from retailers, brand advertisers, travel and financial service companies, and media and entertainment companies. More advertisers are also shifting their spending from traditional TV to YouTube, and this trend should continue as people spend massive hours consuming content there. Last quarter Alphabet management said YouTube has 2 billion monthly active users consuming over a billion hours of video content every day. An equally striking statistic, according to Google Senior Vice President Phillip Schindler, is that 70% of YouTube’s reach was to an audience not reached by advertisers’ traditional TV media. YouTube’s advertising business is accelerating with scale, which adds diversity to Alphabet’s advertising revenue streams.”

Alphabet Inc. (NASDAQ:GOOG) joins other big names in Mr. Plotkin's portfolio such as Amazon.com, Inc (NASDAQ:AMZN), Expedia Group, Inc. (NASDAQ:EXPE), and Visa Inc. (NYSE:V).

Click to continue reading and see Gabriel Plotkin's Melvin Capital Portfolio: Top 5 Picks.

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Disclosure. None. Gabriel Plotkin's Melvin Capital Portfolio: Top 10 Picks is originally published on Insider Monkey.