The big day we've been waiting for arrived on Tuesday, Feb. 16. As required by the Securities and Exchange Commission roughly 45 days following the end to a quarter, money management firms with over $100 million in assets under management filed Form 13F.
A 13F provides an under-the-hood look at what the brightest minds on Wall Street were up to in the most recent quarter. Even though it's a bit dated (in this instance, accurate through Dec. 31, 2020), 13Fs allow Wall Street and investors to understand what companies and trends are captivating money managers.
In the December-ended quarter, growth stocks remained very much in focus among billionaire money managers. In particular, the following five growth stocks look to have been bought hand-over-fist by billionaires and 13F filers in Q4.
There's no doubt about it: Billionaires love the prospects for telehealth giant Teladoc Health (TDOC 6.48%). Larry Fink's BlackRock added 3.17 million shares to its existing position, while Jeff Yass' Susquehanna International Group increased its stake by over 290,000 shares. Even though she's not a billionaire, ARK Investment Management CEO and Chief Investment Officer Cathie Wood has been wildly successful in recent quarters, and she loaded up on 5.82 million shares of Teladoc in Q4.
The bull thesis behind Teladoc is pretty simple to understand. As the treatment process becomes more personalized, convenience and cost-efficiency will be paramount. Virtual visits allow patients to consult with their doctors from the comfort of their home. For physicians, it can allow for more consultations per day. Meanwhile, for insurers, it usually results in a lower billed expenses than an office visit. Translation: Virtual visits are going to become more commonplace over time.
Teladoc also raised eyebrows with the closure of its Livongo Health acquisition in early November. Livongo is a leading applied health signals company that aims to help patients with chronic conditions lead healthier lives. It's signed up more than 500,000 diabetics and should have a mammoth pool of potential enrollees when it expands into weight control management and hypertension. Long story short, Livongo boosts the growth potential of any already impressive company.
Although edge cloud services provider Fastly (FSLY 9.77%) left something to be desired with its fourth-quarter operating results, it was a favorite of billionaire money managers in the previous quarter. Aggregate share ownership by all 13F filers grew by close to 23% from the sequential third quarter, with Susquehanna International more than doubling its stake in the company and ARK Investments opening a 1.14-million-share position.
The excitement surrounding Fastly has to do with the role it's going to play in securely expediting the delivery of content to end users. With more consumers and businesses shifting online and into the cloud, the role of edge cloud services should only grow more important over time. This is evidenced in Fastly's 45% revenue growth in 2020. Chances are good that Fastly can maintain a 30% or greater annual growth rate over the next three to five years.
On the other hand, Fastly's customer growth slowed notably in the fourth quarter (an increase of 37 to 2,084), while its net retention rate sank 7 percentage points to 115%. Existing clients are still spending more than they were in the previous year, but the magnitude of these spending increases is beginning to slow a bit. Fastly still looks like a fantastic long-term growth story. But it wouldn't be surprising if its stock stagnated a bit until its operating results catch up to its lofty price-to-sales multiple.
Data-mining company Palantir Technologies (PLTR 4.06%) was another hot add by 13F filers and billionaire money managers during the fourth quarter. The aggregate number of shares held by 13F filers jumped by 82% from the sequential quarter, with the total number of funds holding Palantir more than doubling. Not to sound like a broken record, but BlackRock and Susquehanna were big buyers. BlackRock added over 4 million shares to its now 33.4-million-share position, with Susquehanna opening a 3.94-million-share stake.
Similar to Fastly, Palantir delivered sizzling full-year growth, but had difficulty matching lofty investor expectations following its Q4 report. Revenue in 2020 surged 47% to $1.1 billion, with the company's government-focused Gotham platform predominantly driving growth. New contract wins in recent quarters have really propelled topline growth and pushed the company safely into recurring adjusted profitability.
However, Palantir's key to long-term success is going to be its Foundry platform, which provides data mining analyses for enterprise customers. Until we see Palantir really gain momentum from Foundry, the company's lofty price-to-sales ratio could place a ceiling on its upside.
The parade of tech stocks that billionaires can't stop buying continues with cloud-based data warehousing company Snowflake (SNOW 8.09%). In the fourth quarter, nearly 100 additional funds required to file a 13F added Snowflake to their investment portfolio. Billionaire Chase Coleman's Tiger Global Management tacked on over 503,000 shares to its existing position, while the tech-loving Susquehanna bought nearly 505,000 shares.
Snowflake's operating model is definitely unique, and it seems to be resonating with both its customers and investors. For instance, Snowflake isn't a subscription service. Rather, it offers a pay-as-you-go model that charges clients based on the amount of data they store and the number of Snowflake Compute Credits used. Also, Snowflake's layering atop the most popular cloud infrastructure providers makes for the seamless sharing of cloud data across otherwise rival platforms.
In its first quarter as a public company (ended Oct. 31, 2020), Snowflake delivered revenue growth of 115% and provided midpoint fourth-quarter sales guidance of 100% year-on-year growth. Snowflake looks destined to benefit from this ongoing enterprise shift into the cloud during and after the pandemic. The $64,000 question is: Can it maintain its nosebleed valuation with large ongoing losses? I'm not entirely sure it can.
Finally, billionaire money managers and 13F filers fancied electric-vehicle (EV) kingpin Tesla Motors (TSLA 0.14%) in the fourth quarter. A grand total of 1,949 funds now hold Tesla stock, which is up 318 from the sequential third quarter. BlackRock upped its holdings in the company by almost 12.1 million shares, with (surprise!) Susquehanna adding 1.5 million shares. You could safely say that Jeff Yass' team sought out growth stocks in Q4.
The bullishness surrounding Tesla has to do with the company's success in developing mass-produced, affordable EVs. Tesla is the first auto company to build itself from the ground up to mass production in over five decades. Last year, it missed CEO Elon Musk's target of 500,000 deliveries by a mere 450 EVs. The company also produced its first full year of profits.
Then again, Tesla's profitability has been contingent on the sale of renewable energy credits to other automakers. Excluding these credits, the company still isn't profitable despite selling close to 500,000 EVs on an annual basis. Although Tesla does have clear-cut battery advantages when it comes to power, range, and capacity, maintaining these advantages could be a tall task.