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Tech Stock Portfolio: 10 Stock Picks from Andrew Immerman and Jeremy Schiffman’s Palestra Capital Management

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·11 min read
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In this article, we discuss the 10 tech stock picks from Andrew Immerman and Jeremy Schiffman's Palestra Capital Management based on Q2 holdings of the fund. If you want to skip our detailed analysis of Immerman and Schiffman's history, investment philosophy, and hedge fund performance, go directly to the 5 Tech Stock Picks from Andrew Immerman and Jeremy Schiffman's Palestra Capital Management.

Andrew Immerman holds a Bachelor's degree from the University of Pennsylvania and a Master's degree from Harvard Business School. He is presently the Managing Partner at Palestra Capital Management. Formerly Andrew Immerman worked as an Analyst at Goldman Sachs. He has also worked at Francisco Partners, Clovis Capital Management LP, Viking Global Investors LP and CR Intrinsic Investors.

Jeremy Schiffman has previously worked as an Investment Banking Analyst at Goldman Sachs, an Investment Associate at TPG Global, and a Partner at TPG-Axon Capital.

New York-based Palestra Capital Management was formed in 2011 by Andrew Immerman and Jeremy Schiffman. Goldman Sachs and TPG provided startup funding to the hedge fund. In the second quarter of 2021, the total value of the Palestra Capital Management 13F portfolio is $4.64 billion, versus $4.76 billion in the previous quarter.

Some of the top technology stocks in the investment portfolio of Palestra Capital Management in the second quarter of 2021 were Microsoft Corporation (NASDAQ: MSFT), Alphabet Inc. (NASDAQ: GOOG), and Amazon.com, Inc. (NASDAQ: AMZN), among others discussed in detail below.

Based on the latest 13F holdings for the second quarter of 2021, Palestra Capital Management owns 931,881 shares in Microsoft Corporation (NASDAQ: MSFT), worth $252.45 million. On September 17, Tigress Financial analyst Ivan Feinseth raised his price target on Microsoft Corporation (NASDAQ: MSFT) to $366 from $303 and maintained a “Buy” rating on the shares. Shares of Microsoft Corporation (NASDAQ: MSFT) rallied 41.89% in the last 12 months, resulting in a $2.25 trillion market capitalization.

In Alphabet Inc. (NASDAQ: GOOG), Andrew Immerman and Jeremy Schiffman own 127,010 shares. The investment covers an impressive 6.67% of the fund's portfolio. On September 17, Jefferies analyst Brent Thill raised his price target on Alphabet Inc. (NASDAQ: GOOG) to $3,325 from $3,150 and kept a “Buy” rating on the shares. Alphabet Inc. (NASDAQ: GOOG) currently has a $1.88 trillion market capitalization and was able to deliver 89.72% return in the past 12 months.

Amazon.com, Inc. (NASDAQ: AMZN) is a new arrival on Andrew Immerman and Jeremy Schiffman’s portfolio, as their hedge fund bought about 42,265 shares of Amazon.com, Inc. (NASDAQ: AMZN), worth $145.40 million. On September 14, Evercore ISI analyst Mark Mahaney raised his price target on Amazon.com, Inc. (NASDAQ: AMZN) to $4,700 from $4,200 and maintained an “Outperform” rating on the shares.

Source:pexels

Why it is important to pay attention to hedge funds’ stock picks? 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.

With this context and industry outlook in mind, let’s start our list of the 10 tech stock picks from Andrew Immerman and Jeremy Schiffman's Palestra Capital Management. We picked stocks from the Q2 portfolio of Immerman and Schiffman.

Tech Stock Picks from Andrew Immerman and Jeremy Schiffman's Palestra Capital Management

10. Twilio Inc. (NYSE:TWLO)

Immerman and Schiffman's Stake Value: $91,049,000

Percentage of Andrew Immerman and Jeremy Schiffman's 13F Portfolio: 1.96%

Number of Hedge Fund Holders: 98

Twilio Inc. (NYSE:TWLO), located in San Francisco, is a cloud communications platform company. It was founded in 2008 and is placed tenth on the list of 10 tech stock picks from Andrew Immerman and Jeremy Schiffman's Palestra Capital Management. Shares of Twilio Inc. (NYSE:TWLO) surged 45.88% in the past 12 months.

On September 16, Summit Insights analyst Srini Nandury reiterated coverage of Twilio Inc. (NYSE:TWLO) with a “Buy” rating setting his price target at $450. On July 29, Twilio Inc. (NYSE:TWLO) announced earnings for the second quarter of 2021. It posted earnings per share of -$0.11, beating the estimates by $0.02.

Palestra Capital Management bought 230,995 shares in Twilio Inc. (NYSE:TWLO), worth $91.05 million, representing 1.96% of their portfolio. ARK Investment Management is the biggest stakeholder in Twilio Inc. (NYSE:TWLO), with 3.72 million shares worth $1.47 billion.

Microsoft Corporation (NASDAQ: MSFT), Alphabet Inc. (NASDAQ: GOOG), and Amazon.com, Inc. (NASDAQ: AMZN) are some of the best tech stocks to buy according to Andrew Immerman and Jeremy Schiffman's Palestra Capital Management, along with Twilio Inc. (NYSE:TWLO).

Lakehouse Capital, in its second-quarter 2021 investor letter, mentioned Twilio Inc. (NYSE:TWLO). Here is what the fund said:

“The Fund held 20 positions as of the end of June and exited four during the year (including) Twilio. The companies we exited were sold almost entirely on the basis of their valuations getting stretched well past their norms and to levels where the return profile no longer offered the asymmetric upside that led us to invest in the first place. We dislike selling on valuation as great growth companies are hard to find and letting winners run is an important facet of a winning growth strategy, however, we’re not gluttons for punishment either and in each of those cases we redeployed capital towards other high-quality growth companies with less demanding valuations.”

9. PagSeguro Digital Ltd. (NYSE:PAGS)

Immerman and Schiffman's Stake Value: $99,694,000

Percentage of Andrew Immerman and Jeremy Schiffman's 13F Portfolio: 2.14%

Number of Hedge Fund Holders: 40

PagSeguro Digital Ltd. (NYSE:PAGS), with its subsidiaries, provides financial technology solutions and services for consumers globally. It was founded in 2006 and stands ninth on the list of 10 tech stock picks from Andrew Immerman and Jeremy Schiffman's Palestra Capital Management. Their bet on PagSeguro Digital Ltd. (NYSE:PAGS) is also paying off. Shares of the company surged 42.12% over the last 12 months.

On August 13, PagSeguro Digital Ltd. (NYSE:PAGS) declared earnings for the second quarter of 2021. It announced earnings per share of $0.16, missing the estimates by $0.05. However, revenue over the period was $451.03 million, beating the market predictions by $10.91 million. On June 7, Itau BBA analyst Marco Calvi upgraded PagSeguro Digital Ltd. (NYSE:PAGS) to “Outperform” from “Market Perform” and gave his price target of $65.

Palestra Capital Management added this stock to its portfolio in the second quarter by buying 1.78 million shares worth $99.69 million. According to our database, the number of PagSeguro Digital Ltd. (NYSE:PAGS) long hedge funds positions increased in the second quarter of 2021. There were 40 hedge funds that hold a position in PagSeguro Digital Ltd. (NYSE:PAGS) compared to 33 funds in the first quarter of 2021.

Artisan Partners, in its first-quarter 2021 investor letter, mentioned PagSeguro Digital Ltd. (NYSE:PAGS). Here is what Artisan Partners has to say about PagSeguro Digital Ltd. (NYSE:PAGS) in its letter:

“We also reduced our position in PagSeguro. PagSeguro is making good progress establishing a fast-growing digital bank and expanding its Brazilian payments business despite the pandemic. However, the company’s growth initiatives will require another year of heavy investment spending in 2021. This comes as Brazil’s progress combatting COVID-19 trails many major economies’, casting a cloud over the broader economic outlook. Given these potential headwinds, we trimmed our position to fund higher conviction holdings.”

8. Amazon.com, Inc. (NASDAQ:AMZN)

Immerman and Schiffman's Stake Value: $145,398,000

Percentage of Andrew Immerman and Jeremy Schiffman's 13F Portfolio: 3.13%

Number of Hedge Fund Holders: 271

Amazon.com, Inc. (NASDAQ:AMZN), based in Seattle, Washington, specializes in e-commerce, digital streaming, cloud computing, and artificial intelligence. The company was founded in 1994 and is placed eighth on the list of 10 tech stock picks from Andrew Immerman and Jeremy Schiffman's Palestra Capital Management. Amazon.com, Inc. (NASDAQ:AMZN) currently has a market capitalization of $1.7 trillion.

On September 21, Amazon (NASDAQ:AMZN) and Lendistry unveiled Amazon Community Lending, a collaborative pilot initiative to help small and medium-sized companies sell in Amazon's shop expand.

L1 Capital, in its second-quarter 2021 investor letter, mentioned Amazon.com, Inc. (NASDAQ: AMZN). Here is what the fund said:

Amazon flipped from being the largest detractor from portfolio performance in the March 2021 quarter, to one of the leading contributors in the June 2021 quarter. We took advantage of negative near-term sentiment in the March 2021 quarter to add to our Amazon investment. We continue to view Amazon as one of the best positioned businesses globally, with its share price still not reflecting fair value.”

7. Workday, Inc. (NASDAQ:WDAY)

Immerman and Schiffman's Stake Value: $151,076,000

Percentage of Andrew Immerman and Jeremy Schiffman's 13F Portfolio: 3.25%

Number of Hedge Fund Holders: 72

Workday, Inc. (NASDAQ:WDAY) is a global provider of business cloud software. It was incorporated in 2005 and stands seventh on the list of 10 tech stock picks from Andrew Immerman and Jeremy Schiffman's Palestra Capital Management. Shares of Workday, Inc. (NASDAQ:WDAY) surged 27.13% in the past 12 months.

On September 20, Wells Fargo analyst Michael Turrin initiated coverage of Workday, Inc. (NASDAQ:WDAY) with an “Overweight” rating and gave his price target of $320. On September 8, Workday (NASDAQ:WDAY) reached a formal deal to purchase Zimit. The deal's financial specifics were not disclosed.

The stock is a new arrival on Andrew Immerman and Jeremy Schiffman's portfolio, as their hedge fund bought about 632,805 shares of Workday, Inc. (NASDAQ:WDAY), worth $151.08 million. Workday, Inc. (NASDAQ:WDAY) saw an increase in hedge fund sentiment recently. The number of long hedge fund positions increased to 72 in the second quarter of 2021, compared to 69 positions in the previous quarter.

Just like Microsoft Corporation (NASDAQ: MSFT), Alphabet Inc. (NASDAQ: GOOG), and Amazon.com, Inc. (NASDAQ: AMZN), Workday, Inc. (NASDAQ:WDAY) is one of the best tech stocks to buy according to Andrew Immerman and Jeremy Schiffman's Palestra Capital Management.

ClearBridge Investments, in its first-quarter 2021 investor letter, mentioned Workday, Inc. (NASDAQ:WDAY). Here is what the fund said:

“In addition to the new issue market, we have been tactically adding growth exposure. We took advantage of the selloff in disruptors that comprise a large portion of the portfolio to initiate a position in enterprise software maker Workday.”

6. Activision Blizzard, Inc. (NASDAQ:ATVI)

Immerman and Schiffman's Stake Value: $205,154,000

Percentage of Andrew Immerman and Jeremy Schiffman's 13F Portfolio: 4.41%

Number of Hedge Fund Holders: 78

Activision Blizzard, Inc. (NASDAQ:ATVI) is a California-based video game company. It was founded in 2008 and is placed sixth on the list of 10 tech stock picks from Andrew Immerman and Jeremy Schiffman's Palestra Capital Management. Activision Blizzard, Inc. (NASDAQ:ATVI) currently has a market capitalization of $61.87 billion.

On August 3, Activision Blizzard, Inc. (NASDAQ:ATVI) posted earnings for the second quarter of 2021. It reported earnings per share of $0.91, beating the estimates by $0.16. In addition, the revenue over the second quarter of 2021 was $1.92 billion, down 7.7% YoY, beating the market predictions by $30 million. On August 16, Truist analyst Matthew Thornton lowered his price target on Activision Blizzard, Inc. (NASDAQ:ATVI) to $101 from $112 but maintained a “Buy” rating on the shares.

Palestra Capital Management holds 2.15 million shares in Activision Blizzard, Inc. (NASDAQ:ATVI), worth $205.15 million, representing 4.41% of their portfolio. The hedge fund has decreased its stake in Activision Blizzard, Inc. (NASDAQ:ATVI) by 4% in the second quarter of 2021. Marcio Appel’s Adam Capital is a leading stakeholder in Activision Blizzard, Inc. (NASDAQ:ATVI), with 1.39 million shares worth $216.67 billion.

In addition to Microsoft Corporation (NASDAQ: MSFT), Alphabet Inc. (NASDAQ: GOOG), and Amazon.com, Inc. (NASDAQ: AMZN), analysts are paying attention to Activision Blizzard, Inc. (NASDAQ:ATVI) amid the company's long-term growth potential.

Cooper Investors, in its first-quarter 2021 investor letter, mentioned Activision Blizzard, Inc. (NASDAQ: ATVI). Here is what the fund said:

“The portfolio established a position in video game publisher Activision Blizzard. As a watchlist company we have followed Activision for several years. As a reminder the role of the watchlist is to allow us to focus on a select group of companies where we seek to observe important signals around either value latency, industry trends or management behaviour that portend attractive investment propositions.

Technology can often play a disruptive role in content, however video games are a clear beneficiary of technology, both in terms of more immersive and realistic gaming experiences as well as the monetisation opportunities this creates) …” (Click here to see the full text)

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Disclosure: None. Tech Stock Portfolio: 10 Stock Picks from Andrew Immerman and Jeremy Schiffman's Palestra Capital Management is originally published on Insider Monkey.