It's that time again, folks. Earlier this week marked the deadline for institutional investment firms, hedge funds, and the ultra-rich to file Form 13F with the Securities and Exchange Commission (SEC). This quarterly filing is a requirement for any company or person managing at least $100 million in assets.
Without digging too far into the weeds, a 13F provides a snapshot of what the brightest minds on Wall Street have been up to over the previous quarter (in this case, 4/1 to 6/30). Although it's a dated snapshot that can be at least six weeks old at the time of the SEC filing, it still provides insight into the stocks and trends billionaire money managers might be chasing or shying away from.
After poring over 13F data from aggregator WhaleWisdom.com, it became plainly evident that growth stocks were still very much on the minds of billionaire money managers. In fact, billionaires bought the following four stocks hand over fist in the second quarter.
One of the most-popular additions during the second quarter was e-commerce kingpin Amazon (AMZN -3.31%). Although only 1.5 million net shares were added by all 13F filers in Q2, the stock was a favorite buy among billionaire investors.
Jeff Yass's Susquehanna International, Ole Andreas Halvorsen's Viking Global Investors, and Jim Simons' Renaissance Technologies respectively purchased 334,200 shares, 293,150 shares, and 244,800 shares in Q2. Amazon is Viking's largest holding, comprising nearly 5% of its portfolio.
The logic here is pretty simple to understand: Amazon is utterly dominant in two fast-growing niches. According to an April report from eMarketer, it's expected to gobble up a 40.4% share of online retail sales in the U.S. in 2021, which is over 33 percentage points above the next-closest competitor.
Even though online retail margins are nothing to write home about, Amazon has been able to monetize its success by signing up 200 million people worldwide to a Prime membership. The tens of billions in fees collected from Prime members helps to buoy its margins and solidifies its ability to undercut brick-and-mortar retailers on price.
Amazon is equally dominant in the cloud infrastructure service space. Amazon Web Services (AWS) controlled nearly a third of all global cloud infrastructure spending in Q1 2021, according to a report from Canalys. Because cloud service margins are leaps-and-bounds higher than retail margins, AWS, along with subscription services and advertising, should help more than double the company's operating cash flow by 2025.
Another go-to stock for billionaires in the second quarter was cryptocurrency exchange and ecosystem Coinbase Global (COIN -3.50%). Since Coinbase went public in mid-April, there's no comparison to Q1. However, 13F filers acquired 43.6 million shares, with Chase Coleman's Tiger Global Management, Ken Griffin's Citadel Advisors, and Larry Fink's BlackRock respectively buying 2.63 million shares, 1.01 million shares, and around 741,000 shares in Q2.
Why Coinbase? The simple answer is it's the most-popular crypto exchange among investors and is seeing increased demand as the price of Bitcoin and Ethereum soar. For some context, monthly transacting users on the platform jumped from 1.5 million in Q2 2020 to 8.8 million in the June-ended quarter. Meanwhile, profits catapulted from $32 million to $1.61 billion year over year. The more excitement there is in the crypto space, the more likely Coinbase is to benefit.
On the other hand, it's hard to overlook the fact that there's no barrier to entry in the crypto brokerage space. Another platform could easily undercut Coinbase's transaction or service fees.
Equally concerning, Bitcoin has a history of losing a significant portion of its value in long-winded bear markets. The last time Bitcoin shed 80% of its value -- a decline that's happened three times over the past decade -- Coinbase saw its revenue nearly halve. Suffice it to say, billionaires look to be playing with fire here.
Billionaire money managers also couldn't get enough of hypergrowth cloud data-warehousing company Snowflake (SNOW -9.42%). Aggregate 13F filers picked up 7.8 million new shares, with 184.6 million shares now held by institutional investment firms, hedge funds, or ultra-wealthy individuals.
But what stands out are the buys from Tiger Global, BlackRock, and Renaissance Technologies, totaling a respective 1.96 million shares, 1.71 million shares, and 642,700 shares. The latter represents a brand-new position for Simons' Renaissance.
One reason billionaires really like Snowflake is the company's competitive advantages. For instance, while most cloud service providers bill based on subscriptions, Snowflake has opted for a pay-as-you-go platform. By billing clients based on the storage and Snowflake Compute Credits they use, it makes for a more transparent experience.
Likewise, Snowflake's platform is layered atop the most popular cloud infrastructure providers. This allows Snowflake members to easily share data, even across competing platforms.
There's also no denying that Snowflake is growing faster than virtually all cloud service companies. Product revenue more than doubled in the April-ended quarter, with existing customers spending 68% more year over year.
However, being valued at 74 times projected sales in fiscal 2022 is equally a stretch. It may take years before Snowflake is able to live up to its lofty valuation, even with its noted competitive edge.
Zoom Video Communications
Fourth and finally, billionaires bought shares of cloud-based web-conferencing platform Zoom Video Communications (ZM -1.90%) hand over fist. The aggregate number of shares held by 13F filers rose nearly 11% to 138 million. But the most notable buys came from Tiger Global, John Overdeck's and David Siegel's Two Sigma Investments, and Philippe Laffont's Coatue Management. Respectively, this trio added 1.83 million shares, nearly 257,000 shares, and almost 255,000 shares in Q2.
With Zoom's share price effectively halving in the second quarter from an all-time high in October 2020, billionaires thought it prudent to hop onboard the most dominant web-conferencing platform in the United States. Even if a return to some semblance of normalcy slows its growth rate, Zoom's platform has clearly demonstrated that it can improve the hybrid work model and keep projects going in any economic environment.
Billionaires should also be thrilled that Zoom is going on the offensive with acquisitions. Last month, it announced a $14.7 billion all-stock deal to acquire cloud contact center software company Five9. This purchase fits seamlessly within its ecosystem of client-oriented services and gives Zoom access to the $24 billion opportunity that is the cloud contact center market.
As one final note, CEO and Founder Eric Yuan holds a large stake in his company. Businesses where founders remain involved and have a lot of skin in the game tend to do quite well.