Top 10 Stock Picks of Brad Farber’s Atika Capital

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In this article, we discuss the top 10 stock picks of Brad Farber’s Atika Capital. If you want to skip our detailed analysis of these stocks, go directly to the Top 5 Stock Picks of Brad Farber’s Atika Capital.

Brad Farber is the founder of Atika Capital, having established the New York-based investment firm in 2013. Currently, he serves as the chief investment officer at Atika Capital, managing a portfolio worth $1.67 billion as of September this year. Farber focuses on a long/short equity strategy, with his portfolio mainly consisting of finance, information technology, healthcare, consumer discretionary, and communications stocks.

Farber graduated from the University of Michigan in 1996 with a Bachelor’s in international relations. The following year, he started his career with UBS Group AG (NYSE:UBS) as an analyst. In April 1999, he moved on to Gilder Gagnon Howe & Co as a portfolio manager, where he remained until December 2012. He left Gilder Gagnon Howe & Co to establish Atika Capital in 2013.

As of the latest 13F filings in September, Farber’s Atika Capital purchased 44 new stocks, bought additional stakes in 34 companies, sold out of 26, and reduced holdings in 21 securities. Farber’s top buys for Q3 included Upstart Holdings, Inc. (NASDAQ:UPST), Olaplex Holdings, Inc. (NASDAQ:OLPX), and iShares Russell 2000 ETF (NYSE:IWM). Whereas, he reduced holdings in Roku, Inc. (NASDAQ:ROKU), Zillow Group, Inc. (NASDAQ:Z), and PayPal Holdings, Inc. (NASDAQ:PYPL).

The most notable stocks in Farber’s Q3 portfolio are Microsoft Corporation (NASDAQ:MSFT), Alphabet Inc. (NASDAQ:GOOG), Amazon.com, Inc. (NASDAQ:AMZN), and Airbnb, Inc. (NASDAQ:ABNB), among others discussed in detail ahead. These stocks are immensely popular with the hedge funds as well.

Top 10 Stock Picks of Brad Farber’s Atika Capital

Brad Farber of Atika Capital

Our Methodology

We used Brad Farber’s Q3 portfolio to create a list of his top 10 stock picks, arranging the stocks according to Farber’s stake value in each holding.

Top Stock Picks of Brad Farber’s Atika Capital

10. Airbnb, Inc. (NASDAQ:ABNB)

Atika Capital’s Stake Value: $27,176,000

Percentage of Atika Capital’s 13F Portfolio: 1.61%

Number of Hedge Fund Holders: 58

Airbnb, Inc. (NASDAQ:ABNB) offers an online platform to customers who can book vacation rentals to accommodate their stay, offering properties all over the world. Airbnb, Inc. (NASDAQ:ABNB) is a huge competitor for the hotel industry, and one of the main players in the hospitality and tourism sectors. Farber’s Atika Capital holds a $27.1 million stake in Airbnb, Inc. (NASDAQ:ABNB), as of September this year.

Airbnb, Inc. (NASDAQ:ABNB) posted its Q3 results on November 4. EPS in the period totaled $1.22, beating estimates by $0.52. The $2.24 billion Q3 revenue was a result of occupancy in the quarter increasing by 29% year-over-year to 79.7 million bookings.

Naved Khan from Truist raised the price target on Airbnb, Inc. (NASDAQ:ABNB) to $180 from $160 on November 8, keeping a Hold rating on the stock post the Q3 earnings. The analyst is positive about Airbnb, Inc. (NASDAQ:ABNB)’s growth catalysts in the near future, but he believes that the stock valuation is “full”.

Here is what Polen Capital has to say about Airbnb, Inc. (NASDAQ:ABNB) in its Q3 2021 investor letter:

“We believe Airbnb has substantial competitive advantages in a large, fast-growing, and global market. Airbnb acts as a “System of Trust” in the private rental accommodations market, removing a considerable amount of friction so hosts can trust unknown guests and guests can trust unknown hosts/properties.

We believe Airbnb has an attractive growth runway given its unique inventory, powerful platform, and system enhancements that further reduce user friction.

We see Airbnb as well-positioned to benefit from secular growth in travel, the increasingly mainstream nature of private rentals, and as hybrid work/travel can lead to more frequent and longer stays. Unlike traditional online travel agencies like Booking.com and Expedia, Airbnb’s user traffic comes almost entirely directly, which speaks to the brand’s strength. This also means that Airbnb does not need to pay Google or other meta-search engines nearly as much money for generating booking leads, which is a favorable structural business model advantage in our view. We expect the company’s bookings and revenue to compound at a high-teens rate or better over the next five years and margins to expand by thousands of basis points as it scales its fixed costs base, leading to 40%+ earnings per share growth over that period.”

9. Olaplex Holdings, Inc. (NASDAQ:OLPX)

Atika Capital’s Stake Value: $27,195,000

Percentage of Atika Capital’s 13F Portfolio: 1.61%

Number of Hedge Fund Holders: N/A

Brad Farber’s Atika Capital holds 1.11 million shares in Olaplex Holdings, Inc. (NASDAQ:OLPX), worth $27.1 million as of September, representing 1.61% of the firm’s Q3 portfolio. Olaplex Holdings, Inc. (NASDAQ:OLPX) is a hair care brand, offering products which nurture, maintain, and protect hair. Its patented formulas also claim hair growth and rejuvenation.

Olaplex Holdings, Inc. (NASDAQ:OLPX) on November 10 posted its Q3 results. EPS for the period came in at $0.11, beating estimates by $0.02. Revenue for Q3 totaled $161.62 million, surpassing estimated revenue by $16.46 million.

Morgan Stanley analyst Dara Mohsenian upgraded Olaplex Holdings, Inc. (NASDAQ:OLPX) to Overweight from Equal Weight with a $31 price target. The analyst stated that the brand’s valuation is compelling, and it is growing steadily with market competitive margins. Consumers are also taking a heightened interest in Olaplex Holdings, Inc. (NASDAQ:OLPX), according to Mohsenian’s research.

In addition to Microsoft Corporation (NASDAQ:MSFT), Alphabet Inc. (NASDAQ:GOOG), Amazon.com, Inc. (NASDAQ:AMZN), and Airbnb, Inc. (NASDAQ:ABNB), Olaplex Holdings, Inc. (NASDAQ:OLPX) is a notable stock in Farber’s Q3 portfolio.

8. Jacobs Engineering Group Inc. (NYSE:J)

Atika Capital’s Stake Value: $28,759,000

Percentage of Atika Capital’s 13F Portfolio: 1.71%

Number of Hedge Fund Holders: 29

Jacobs Engineering Group Inc. (NYSE:J) is an American professional services company that offers technical engineering, architectural, and construction expertise to customers. Its clientele includes corporate and government clients from around the world. Atika Capital holds a $28.75 million stake in Jacobs Engineering Group Inc. (NYSE:J) as of September 2021, which accounts for 1.71% of the firm’s 13F portfolio.

Jacobs Engineering Group Inc. (NYSE:J) is a leading engineering corporation, which recently secured contracts with the US Department of State Bureau of Overseas Buildings Operations, NASA, the US Department of Energy, and the Department of Defense, to name a few.

As of the second quarter of 2021, 29 hedge funds in the database of Insider Monkey were bullish on Jacobs Engineering Group Inc. (NYSE:J), with stakes worth over $1 billion.

7. DocuSign, Inc. (NASDAQ:DOCU)

Atika Capital’s Stake Value: $29,141,000

Percentage of Atika Capital’s 13F Portfolio: 1.73%

Number of Hedge Fund Holders: 58

DocuSign, Inc. (NASDAQ:DOCU) is a California-based company that facilitates electronic agreements via e-signatures. DocuSign Agreement Cloud is used by millions of users across more than 180 countries. DocuSign, Inc. (NASDAQ:DOCU) has partnered with salesforce.com, inc. (NYSE:CRM) to facilitate electronic agreements globally. Organizations who use Slack can now increase collaboration, drive quicker ROI, and manage contracts with the AI-based, smart solutions that the two companies are developing using Salesforce Customer 360.

Farber’s Atika Capital owns 113,200 shares in DocuSign, Inc. (NASDAQ:DOCU), worth $29.1 million, representing 1.73% of the firm’s Q3 portfolio.

As of June this year, 58 hedge funds tracked by Insider Monkey’s database of elite funds were long DocuSign, Inc. (NASDAQ:DOCU), down from 60 in the preceding quarter. Aubrey Capital Management holds the largest stake in DocuSign, Inc. (NASDAQ:DOCU) as of the third quarter, valued at $8.34 billion.

Here is what Carillon Tower Advisers has to say about DocuSign, Inc. (NASDAQ:DOCU) in its Q2 2021 investor letter:

“DocuSign provides electronic signature solutions. The firm reported an excellent quarter and investors have appreciated the strong growth combined with the excellent margins the company has posted. DocuSign has a long runway of growth ahead and we believe that it remains in a favorable position to continue gaining market share from traditional manual and paper-based signature solutions.”

6. Zai Lab Limited (NASDAQ:ZLAB)

Atika Capital’s Stake Value: $30,258,000

Percentage of Atika Capital’s 13F Portfolio: 1.80%

Number of Hedge Fund Holders: 36

Zai Lab Limited (NASDAQ:ZLAB) is a Chinese pharmaceutical company that uses its extensive research capabilities to create effective and transformative medication for autoimmune diseases, cancer, and other infectious illnesses. Brad Farber, via Atika Capital, owns 287,100 shares in Zai Lab Limited (NASDAQ:ZLAB), worth $30.25 million at the end of September, representing 1.8% of the firm’s Q3 portfolio.

As of the second quarter of 2021, 36 hedge funds monitored by the database of Insider Monkey reported owning stakes in Zai Lab Limited (NASDAQ:ZLAB) worth $1.02 billion. This is an increase from the preceding quarter, when 32 funds held stakes valued at $666 million in Zai Lab Limited (NASDAQ:ZLAB).

Zai Lab Limited (NASDAQ:ZLAB) posted its Q3 results on November 9. EPS in the quarter totaled -$1.01, beating estimates by $0.26. Revenue for Q3 amounted to $43.1 million, missing estimated revenue by -$0.67 million.

In addition to Microsoft Corporation (NASDAQ:MSFT), Alphabet Inc. (NASDAQ:GOOG), Amazon.com, Inc. (NASDAQ:AMZN), and Airbnb, Inc. (NASDAQ:ABNB), Zai Lab Limited (NASDAQ:ZLAB) is a notable stock in Farber’s Q3 portfolio.

Here is what Baron Funds has to say about Zai Lab Limited (NASDAQ:ZLAB) in its Q3 2021 investor letter:

“Zai Lab Limited is a leading biotechnology company helping to modernize the Chinese health care industry. Zai’s initial focus centered around in-licensing western medicines for commercialization in China; this has expanded into internal pipeline efforts. Shares fell alongside the broader Chinese equity markets given concerns around regulations the government has enacted in education, technology, and real estate. While we are paying attention to these developments, so far, we think health care will not be subject to any draconian rulings.”

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Disclosure: None. Top 10 Stock Picks of Brad Farber’s Atika Capital is originally published on Insider Monkey.