Top 10 Stock Picks of Alexander Captain’s Cat Rock Capital

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In this article, we discuss the top 10 stock picks of Alexander Captain’s Cat Rock Capital. If you want to skip our detailed analysis of Captain’s investment philosophy and performance, go directly to Top 5 Stock Picks of Alexander Captain’s Cat Rock Capital.

Alexander Captain is the founder and managing partner at Cat Rock Capital. He founded the hedge fund in the first quarter of 2015. Captain earned a Bachelor’s degree in Economics from Harvard College and a Master of Arts in Statistics from the Harvard Graduate School of Sciences and Arts. He began his career with The Blackstone Group as a private equity analyst. Captain then became a partner at Tiger Global Management.

Cat Rock Capital is a Connecticut-based activist investor and has a 6.9% stake comprising 14.8 million shares in the Amsterdam-listed company Just Eat Takeaway (JET). The hedge fund strives to create returns for investors via focused value investing in high-quality, publicly listed companies over the long term, using rigorous fundamental research. It typically has 10-15 core holdings, borrows little or nothing, and holds investments for several years. Cat Rock Capital’s investing criteria has a clear focus on stability, business, people, and pricing. Using these guidelines, the hedge fund returned 16.8% in 2016.

Cat Rock Capital’s 13F portfolio showed $961.80 million invested in 10 equities at the end of the first quarter of 2022. Captain likes to diversify his portfolio. His hedge fund focuses on small and large firms with good fundamentals and future development possibilities. He generally invests in information technology, industrials, consumer discretionary, and communication sectors. Some of these companies include Meta Platforms, Inc. (NASDAQ:META), TransDigm Group Incorporated (NYSE:TDG), and Microsoft Corporation (NASDAQ:MSFT).

Top 10 Stock Picks of Alexander Captain’s Cat Rock Capital

Photo by AlphaTradeZone

Our Methodology

We used Alexander Captain’s Cat Rock Capital Q1 2022 portfolio for this analysis, concentrating on the hedge fund’s top 10 positions. All hedge fund data is based on Insider Monkey’s exclusive group of 900+ funds that filed 13Fs for the first quarter of 2022.

Top Stock Picks of Alexander Captain’s Cat Rock Capital

10. DocuSign, Inc. (NASDAQ:DOCU)

Cat Rock Capital’s Stake Value: $23,566,000

Percentage of Cat Rock Capital’s 13F Portfolio: 2.45%

Number of Hedge Fund Holders: 45

DocuSign, Inc. (NASDAQ:DOCU) specializes in providing cloud-based options for electronic signatures. Alexander Captain’s Cat Rock Capital boosted its stake in DocuSign, Inc. (NASDAQ:DOCU) by 58% in Q1 2022, holding about 220,000 shares worth $23.57 million, representing 2.45% of the total securities.

On July 21, Piper Sandler analyst Rob Owens downgraded DocuSign, Inc. (NASDAQ:DOCU) from ‘Neutral’ to ‘Underweight’ and lowered his price objective from $65 to $54. The analyst claimed that DocuSign’s risk profile increased due to the recent CEO transition, ongoing execution issues, substantial personnel turnover, and the waning macroeconomic environment. On June 21, DocuSign, Inc. (NASDAQ:DOCU) disclosed the resignation of its CEO, Dan Springer.

Overall, 45 hedge funds in the database of Insider Monkey owned positions in DocuSign, Inc. (NASDAQ:DOCU) at the end of March, with a collective stake value of $2.13 billion. This was a decrease of 4 hedge funds from the previous quarter when 49 hedge funds owned stakes in DocuSign, Inc. (NASDAQ:DOCU).

In addition to Meta Platforms, Inc. (NASDAQ:META), TransDigm Group Incorporated (NYSE:TDG), and Microsoft Corporation (NASDAQ:MSFT), DocuSign, Inc. (NASDAQ:DOCU) is one of the stocks gaining the attention of Alexander Captain’s Cat Rock Capital.

Here is what Rowan Street Capital LLC has to say about DocuSign, Inc. (NASDAQ:DOCU) in its Q1 2022 investor letter:

“The beauty of the public markets is that if you can be patient, there is a good chance the volatility of the marketplace will give you the chance to own companies on your watch list. The stock prices of our 3 new positions (please refer to charts below) have fluctuated from 100-350% over the past 12 months (when comparing 52-week high by 52-week low). Certainly, the underlying value of a business doesn’t fluctuate that much on an annual basis, so the public markets are a fantastic arena to buy businesses if you can sit still without growing tired of sitting still.

We have been following Docusign (NASDAQ:DOCU) since its IPO in 2018. It’s stratospheric valuations over the past few years have kept us admiring this company from the sidelines. We took advantage of the recent drastic drop in stock price to build a core position for the fund.”

9. Zoom Video Communications, Inc. (NASDAQ:ZM)

Cat Rock Capital’s Stake Value: $39,193,000

Percentage of Cat Rock Capital’s 13F Portfolio: 4.07%

Number of Hedge Fund Holders: 43

Zoom Video Communications, Inc. (NASDAQ:ZM) provides a platform for video-first communications. Bernstein analyst Peter Weed commenced coverage of Zoom Video Communications, Inc. (NASDAQ:ZM) on July 19, rating the stock as ‘Market Perform’ with a price objective of $122. He felt Zoom is less vulnerable to the recession than other suppliers.

Alexander Captain’s Cat Rock Capital purchased 334,323 Zoom Video Communications, Inc. (NASDAQ:ZM) shares in the first quarter of 2022, worth $39.19 million, representing 4.07% of the total 13F holdings.

Among the hedge funds tracked by Insider Monkey, 43 were bullish on Zoom Video Communications, Inc. (NASDAQ:ZM) at the end of March 2022, compared to 48 funds in the preceding quarter. Catherine D. Wood’s ARK Investment Management is a prominent shareholder of Zoom Video Communications, Inc. (NASDAQ:ZM) as of Q2 2022, with 9.58 million shares worth $1.03 billion.

In its Q1 2022 investor letter, Horos Asset Management highlighted a few stocks, and Zoom Video Communications, Inc. (NASDAQ:ZM) was one of them. Here is what the fund said:

“What about the other asset class that has attracted the most attention from the investment community in recent times? Here we can distinguish three major groups. First, those companies without earnings that had convinced investors of their great future growth prospects, pushing up their valuations to irrational levels. A clear example of this, which we mentioned almost two years ago (see here) is Zoom Video Communications, Inc. (NASDAQ:ZM) (“Zoom”), whose market cap exceeded that of companies such as IBM or came close to that of Cisco Systems. Well, from the time we wrote about this odd situation until today, Zoom shares have collapsed nearly 80%.

Therefore, if interest rates rise (or are expected to rise), company valuations are negatively impacted. This is especially true for those businesses that generate little cash today and the market expects them to generate a lot of cash in the future. Hence the severe losses in companies that promised a lot of cash generation in the future (such as Zoom).”

8. eXp World Holdings, Inc. (NASDAQ:EXPI)

Cat Rock Capital’s Stake Value: $54,449,000

Percentage of Cat Rock Capital’s 13F Portfolio: 5.66%

Number of Hedge Fund Holders: 18

eXp World Holdings, Inc. (NASDAQ:EXPI) and its affiliates provide cloud-based real estate brokerage services for residential property owners and purchasers. At the end of March, a total of 18 hedge funds tracked by Insider Monkey held long positions in eXp World Holdings, Inc. (NASDAQ:EXPI). By comparison, 13 hedge funds held shares in eXp World Holdings, Inc. (NASDAQ:EXPI) a quarter ago.

On May 5, DA Davidson analyst Tom White maintained a ‘Buy’ recommendation on eXp World Holdings, Inc. (NASDAQ:EXPI), reducing his price objective from $45 to $34 due to broader multiple reductions in the group.

Cat Rock Capital has owned a stake in eXp World Holdings, Inc. (NASDAQ:EXPI) since the fourth quarter of 2021. The hedge fund increased its stake in eXp World Holdings, Inc. (NASDAQ:EXPI) by 64% in the first quarter of 2022. The fund held 2.57 million shares worth $54.45 million as of March 31, making eXp World Holdings, Inc. (NASDAQ:EXPI) the eighth-largest stock in its 13F portfolio.

Here is what East 72, an investment management firm, has to say about eXp World Holdings, Inc. (NASDAQ:EXPI) in its Q1 2022 investor letter:

“Investors don’t like listed real estate brokers – at all. There are three significant US listed residential real estate brokers or franchisors (which includes) eXp World Holdings (EXPI: market capitalisation US$3.03billion less $108m in cash) with 72,000 agents connected via the eXp World and Virbela platforms; EXPI earned ~$41million in operating profit in 2021, after $144million in stock based compensation!”

7. ACV Auctions Inc. (NASDAQ:ACVA)

Cat Rock Capital’s Stake Value: $62,943,000

Percentage of Cat Rock Capital’s 13F Portfolio: 6.54%

Number of Hedge Fund Holders: 34

ACV Auctions Inc. (NASDAQ:ACVA) is a company that designs pricing applications for franchise dealers. According to Insider Monkey’s database, ACV Auctions Inc. (NASDAQ:ACVA) was found in the public stock portfolios of 34 hedge funds at the end of March 2022, compared to 27 funds in the earlier quarter.

Regulatory filings revealed that Cat Rock Capital owned 4.25 million shares of ACV Auctions Inc. (NASDAQ:ACVA) at the end of the first quarter of 2022, valued at $62.94 million, representing 6.54% of the portfolio. ACV Auctions Inc. (NASDAQ:ACVA) has been in Cat Rock Capital’s portfolio since the fourth quarter of 2021.

On June 30, Nicholas Jones of JMP Securities trimmed his price objective on ACV Auctions Inc. (NASDAQ:ACVA) from $20 to $10 while maintaining an ‘Outperform’ rating. Jones claimed that the rapid growth of ACV Auctions Inc. (NASDAQ:ACVA) allowed the wholesale auction space to expand its market share.

In its Q4 2021 investor letter, Baron Funds mentioned ACV Auctions Inc. (NASDAQ:ACVA). Here is what the fund said:

“Many of our portfolio companies have been impacted by the well publicized problems in the global supply chain. It is our belief that as we move through 2022, we will see many of these issues be resolved. As a result, we expect the companies that were negatively impacted to restore their normalized growth trajectories. Portfolio companies that will benefit include ACV Auctions Inc., an online

platform that allows car dealers to purchase used car inventory, where a return to more normalized new car production will help stabilize the volume of used cars being sold in the market (which in turn will benefit ACV).”

6. SEMrush Holdings, Inc. (NYSE:SEMR)

Cat Rock Capital’s Stake Value: $65,887,000

Percentage of Cat Rock Capital’s 13F Portfolio: 6.85%

Number of Hedge Fund Holders: 12

SEMrush Holdings, Inc. (NYSE:SEMR) provides a software-as-a-service platform for managing online visibility. Morgan Stanley analyst Elizabeth Porter commenced coverage of SEMrush Holdings, Inc. (NYSE:SEMR) on June 6, assigning it an ‘Equal Weight’ rating and a price objective of $13.

In Q1 2022, 12 hedge funds owned positions worth $116.34 million in the company, compared to 14 funds with stakes valued at nearly $194.26 million a quarter earlier. Insider monkey data shows that Cat Rock Capital owned 5.52 million shares of SEMrush Holdings, Inc. (NYSE:SEMR) at the end of the first quarter of 2022, worth more than $65.89 million, representing 6.85% of the portfolio. Cat Rock Capital is SEMrush Holdings, Inc. (NYSE:SEMR)’s most significant stakeholder.

Like Meta Platforms, Inc. (NASDAQ:META), TransDigm Group Incorporated (NYSE:TDG), and Microsoft Corporation (NASDAQ:MSFT), SEMrush Holdings, Inc. (NYSE:SEMR) is one of the top stock picks of Alexander Captain’s Cat Rock Capital.

Here is what ClearBridge Investments has to say about SEMrush Holdings, Inc. in its Q1 2021 investor letter:

“We established seven new positions during the quarter, (including SEMrush) largely financed through trims in existing holdings whose market values have risen. Four of the additions play roles in the accelerating digital transformation of the sales, marketing and customer development processes. SEMrush, in the IT sector, is a software provider that help clients optimize their marketing spend across digital search and social media platforms.”

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Disclosure: None. Top 10 Stock Picks of Alexander Captain’s Cat Rock Capital is originally published on Insider Monkey.