You may not realize it, but what’s arguably the most important data release of the entire second quarter occurred just a few weeks ago — and it has nothing to do with inflation or economic growth.
May 16 represented the Form 13F filing deadline for money managers with at least $100 million in assets under management. Put simply, a 13F is a once-quarterly look under the hood at what the brightest minds on Wall Street have been buying, selling, and holding. Even though there are drawbacks to 13Fs (e.g., they’re 45 days old when filed), they can provide valuable insight into what stocks and trends are captivating successful money managers.
If there was one trend that clearly stood out during the first quarter, it’s that growth stocks were on the menu for many billionaire money managers. After perusing a veritable sea of 13Fs, it’s clear that billionaires can’t stop buying these four supercharged growth stocks.
First up is electric vehicle (EV) manufacturer Tesla (TSLA 0.52%), which was an especially popular buy for Jim Simons’ Renaissance Technologies. In the three months between the end of 2021 and March 31, 2022, Simons increased his fund’s stake in Tesla by 109%, or 811,900 shares.
The primary lure for Tesla bulls is the company’s competitive edge. For years, Tesla batteries have possessed superior power, capacity, and range. Tesla also sports a clear-cut production edge, with the company appearing to be on pace for more than 1 million EVs produced this year. This boost in output coincides with the company’s Austin, Texas, and German gigafactories coming online.
Simons may also be encouraged by Tesla’s bottom-line improvements. Even though regulatory credits continue to provide a boost to profits — regulatory emissions credits are viewed as an unsustainable source of long-term profits — Tesla was able to generate a record $3.74 billion in adjusted income during the first quarter on a nearly 33% automotive gross margin.
But Tesla’s success is far from a guarantee. The company’s battery advantages have narrowed considerably, and CEO Elon Musk has turned into a distraction as he attempts to acquire social media platform Twitter.
Furthermore, auto stocks are traditionally valued at low earnings multiples to account for the cyclical nature of the industry. Tesla’s multiple of 58 to Wall Street’s forecast earnings for 2022 is worrisome.
Another rapidly growing stock that found itself in the shopping cart of a highly successful billionaire fund manager is gaming company Skillz (SKLZ 0.28%). Israel Englander of Millennium Management gobbled up more than 3.1 million shares during the first quarter, which increased his fund’s stake by 376% from three months prior.
What makes Skillz such an intriguing company is its role within the fast-growing mobile-gaming industry. Rather than developing mobile games in a highly competitive and capital-intensive space, Skillz operates a platform that allows gamers to compete against each other for cash prizes. Portions of this cash are kept by Skillz and the developer of the game being played. It’s a relatively low-cost way to take advantage of growth in esports and casual gaming.
Something else to note is that Skillz forged a multiyear agreement with the National Football League (NFL) in February 2021. Football is the undisputed most popular sport in the U.S. This agreement will see NFL-themed games developed, with participants competing on Skillz’s mobile-gaming platform.
Yet, there are also concerns about the company’s longevity. Losses have come in substantially higher than anticipated, which has caused the company’s cash pile to shrink. Even with a…
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