Alkeon Capital's115 Stock Portfolio List | Updated Daily

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Alkeon Capital’s 115 Stock Portfolio List | Updated Daily


Updated on December 21st, 2021 by Nikolaos Sismanis

Alkeon Capital Management is a privately-owned registered investment adviser out of New York. The company was formed in 2002 as a spin-off from CIBC Oppenheimer.

Two key individuals govern the firm: Takis Sparaggis, President and CIO, and Alex Tahsili, who performs the Managing Director role.

They both oversee Alkeon Capital Management’s portfolio, currently valued at approximately $59.2 billion, of which around $21.8 billion is allocated in public equities.

Investors following the company’s 13F filings over the last 3 years (from mid-November 2018 through mid-November 2021) would have generated annualized total returns of 34.3%. For comparison, the S&P 500 ETF (SPY) generated annualized total returns of 18.51% over the same time period.

Note: 13F filing performance is different than fund performance. See how we calculate 13F filing performance here.

You can download an Excel spreadsheet with metrics that matter of Alkeon Capital Management’s current 13F equity holdings below:

 

Keep reading this article to learn more about Alkeon Capital Management.

Table Of Contents

Alkeon’s Approach To Investing

Alkeon has stayed away from the spotlight for decades, publishing limited information regarding its operations and investment philosophy. An interview with management from its early days, however, reveals essential info which seems to hold up in the present day.

Its research process is a 100% bottom-up, fundamentally-driven, research-concentrated procedure to investing. Their flagship strategy involves identifying significant potential returns in Technology, Media, Telecom (“TMT”) in the broadest of scope. Applying a bottom-up strategy implies that Alkeon focuses on individual securities rather than on the overall movements in the securities market.

Mr. Sparaggis, who holds the final word for any investment, aims for a 12 to 24-month time horizon for Alkeon’s holdings and discourages short-term trading. Alkeon avoids timing the direction of the market and aims to generate alpha based on its exceptional stock-picking skills. It also has an elaborate network of industry contacts, with whom it is in continuous talks in order to identify industry trends before they become apparent to Wall Street.

Alkeon is primarily focused on investing in stocks with impressive growth rates. Many investors hesitate to invest in this type of stock due to their excessive price-to-earnings ratios but Alkeon has proved competent in identifying high-growth stocks that produce outsized returns. Notably, the average price-to-earnings ratio of the stock portfolio of Alkeon currently stands at 57.43.

In terms of risk management, the company’s in-house risk manager is responsible for periodic checks to ensure diversification among individual securities and sectors, liquidity, and overall fund exposures.

Finally, Alkeon manages its clients on a pari passu basis. In other words, clients are treated in an equal-footing manner, managed without preference. By comparison, some hedge funds may differentiate among multiple classes of clients, based on their available capital and reputation.

Alkeon’s Portfolio & Top Holdings

Around 1/3 of Alkeon’s portfolio consists of public equities, while the rest embodies several options, as hedge funds often do to alleviate their risk profile. The picks reflect management’s tech and consumer discretionary-oriented strategy. These two sectors occupy more than 60% of Alkeon’s portfolio collectively.

Source: 13F filings, Author

Out of Alkeon’s 115 individual stocks, the top 10 holdings account for around 33% of its public-equities part of the portfolio. That figure reaches about 49.7% when it comes to its 20 larger picks, which indicates a relatively concentrated allocation of funds.

However, no holding accounts for more than 4.5% of the total portfolio, which is quite unique among the various funds we have covered. That being said, the fund’s sector diversification may be a bit weak due to the almost exclusive focus of Alkeon on tech and consumer discretionary stocks.

During the period covering Alkeon’s latest 13F filing, the fund initiated and sold the following entries:

New Buys:

New Sells:

As of the fund’s latest 13F filing, the following are the top 10 holdings of Alkeon:

Source: 13F filings, Author

Alphabet (GOOGL)(GOOG)

Alphabet offers several well-known products, such as Google, Android, Chrome, Google Cloud, Google Maps, Google Play, YouTube, as well as technical infrastructure. While the company’s expansion has lasted for more than a decade and a half, it is still a high-growth stock.

Revenue growth has re-accelerated, with its most recent quarter posting growth of nearly 41%, despite the deceleration caused during the first couple of quarters during the initial pandemic outbreak. The company is one of the most attractively priced stocks in the sector as well, trading at around 27.3 times its forward earnings, despite its consistent growth, massive moat, and strong balance sheet.

With its robust profitability, Alphabet has accumulated a cash and equivalents position of $142 billion. As a result, the company can comfortably afford to invest in its long-term bets such as Waymo, and in the meantime return cash to its shareholders through buybacks. Alphabet has repurchased nearly $44.7 billion worth of stock over the past year, retiring shares at an all-time high rate.

Alkeon held its position constant during the quarter. The stock accounts for around 4.5% of its portfolio.

Meta Platforms (FB)

The social media giant is Alkeon’s second-largest holding, accounting for 4.2% of its portfolio. The fund’s long-term commitment to Facebook dates back to Q3-2014. Since then, Alkeon has built its position gradually, showing great commitment to the investment. The company is one of the most reasonably valued in the tech/communications sector while still growing rapidly, with more than 2.89 billion people using its services monthly.

Meta is a tremendous cash cow, but with a problem. With strong financials, a healthy balance sheet, and the best social media platform for advertisers, Meta has been dominating the social media industry. The company has reported an all-time high bottom line of $40.3 billion over the past four quarters, amid great user growth, notwithstanding now decelerating to the single digits.

For these reasons, it would not be a complete surprise if Meta paid a dividend at some point in the future.

On the other hand, the stock has failed to attract a higher multiple, as the steep scrutiny it has faced over the past few years have had an impact on the valuation. The stock is only trading at around 22.6 times its underlying earnings, despite its rapid growth.

With its ARPU (average revenue per user) still very strong, Meta’s financials are more than likely to continue expanding rapidly. Meta’s investment case today does not only include the potential for a significant upside but also comes with a great margin of safety.

If such a valuation expansion never appears, and Meta continues to trade at a forward P/E of around 22.6, at an EPS growth rate of 20%-30% in the medium term (which the current user and APRU growth trajectory could easily sustain), investors should still achieve equally satisfactory returns with a constant valuation multiple.

Shopify (SHOP)

Shopify is Alkeon’s third-largest holding, comprising 4.0% of the total value of its portfolio. Shopify provides a cloud-based commerce platform, which enables merchants to adapt to the e-commerce era. The company clearly benefits from a secular trend, which has decades to run, namely the shift from brick-and-mortar purchases to online purchases. The pandemic has caused this long-term trend to accelerate at an enormous pace.

As a result, Shopify saw its revenues grow by 85.6% last year. Due to the company’s recurring revenues, accelerated growth, and positive catalysts surrounding e-commerce, the stock is currently trading a forward price/sales of 31.7 which is one of the highest valuation multiples in the industry.

Thanks to the tremendous growth potential of its business, Shopify is expected to keep growing its revenues and its earnings at a rapid pace for several more years. Nonetheless, the market has already priced in a large portion of future growth in the stock price. To provide a perspective, the stock is currently trading at 31.5 times its expected earnings in 2025.

Synopsys, Inc. (SNPS):

Synopsys develops electronic design automation software products used to compose and test integrated circuits. Both the company’s top & bottom lines have expanded rapidly over the past few years, as Synopsys benefited greatly from the growing global demand for chips.

Analysts are currently expecting annualized earnings growth of around 15% in the medium term. However, trading at a forward P/E of over 45 while still not paying a dividend, current investors face a very thin margin of safety.

The position was boosted by 23% during Alkeon’s latest quarter. It is the fund’s fourth-largest position.

RingCentral (RNG)

RingCentral is the fifth-largest holding of Alkeon’s portfolio, comprising 3.2% of its total value. The company offers software solutions that enable businesses to communicate and connect. Its products include RingCentral Office, which facilitates communication across various modes, including high-definition voice, video, SMS, and conferencing.

RingCentral greatly benefited from the coronavirus crisis, which led numerous companies to adopt a work-from-anywhere model. Companies now require communications solutions in which the employees can work efficiently with their colleagues and their customers from any location. RingCentral initiated cloud migration of business communications more than a decade ago and is now ideally positioned to benefit from the transformation of the business landscape.

The company has grown its revenue every single year in the past 11 years, with a greater than 15-fold increase over this period. It has also exceeded the analysts’ earnings-per-share estimates for 26 consecutive quarters. Furthermore, revenue growth remains robust, with the 3-year revenue CAGR at an impressive 36.6%.

The stock trades at a hefty forward P/E ratio of around 116. However, with gross margins north of 70% the company should be able to rapidly accelerate its earnings growth. Therefore, valuing it based on its current (or next year’s) profitability needs context.

RingCentral still has ample room to grow further. This was clear in the latest quarter, in which RingCentral enjoyed double-digit growth in messaging and triple-digit growth in video and mobile voice minutes on its Message Video Platform. Revenue grew 36.5% over the prior year’s quarter.

Alkeon held its position stable during the quarter.

Microsoft (MSFT)

Found amongst the top holdings of the majority of the funds we have covered, Microsoft is Alkeon’s sixth-largest holding, occupying ~3.1% of its portfolio. The fund left its position unchanged during the quarter.

Microsoft is a mega-cap stock with a market capitalization of $2.4 trillion.

Supported by the company’s strong profitability, management has been consistently raising buybacks over the past decade to further reward its shareholders. The amount allocated to stock repurchases has reached new all-time highs over the past four quarters, at nearly $28.3 billion.

Revenue growth remains in the double-digits, so it’s likely to see capital returns accelerating moving forward. The company is also growing the dividend at a double-digit rate, though at the current yield, which stands below 1%, investors should expect the majority of their future returns in the form of capital gains.

Despite that, Microsoft’s cash position has been growing continually, with the company currently sitting on top of a massive $130.5 billion cash pile.

Further, while many companies have chosen to utilize the current ultra-low interest rates to raise cheap debt and buy back stock, Microsoft’s approach has been prudent and thoughtful. Not only are current earnings extensively covering buybacks (59% buyback “payout ratio”), but long-term debt has been substantially reduced from $76 billion in mid-2017 to around $50 billion as of its last report.

It is impressive that a stock with a market capitalization of $2.2 trillion still has such a strong growth momentum. Shares are also trading a P/E ratio of around 34.6, which may be rich. However, due to Microsoft’s robust growth and financials, it’s likely that investors will continue pricing shares at a premium going forward.

Cadence Design Systems (CDNS)

Cadence Design Systems provides software, hardware, services, and reusable integrated circuit design blocks worldwide. The company benefits from some generational growth drivers, such as 5G, artificial intelligence, and hyper-scale computing. Cadence Design Systems enjoys strong growth in the demand for its relevant software and hardware solutions as well as its Intelligent System Design.

It is thus not surprising that the company has more than doubled its earnings per share in the last two years. The company has also not missed the analysts’ earnings-per-share estimates for 26 consecutive quarters. This impressive performance helps explain the fact that the stock has more than doubled in the last two years. The stock has undergone a valuation expansion during this period as well, currently trading at 53 times its forward net income.

The company continued its consistent growth trajectory last quarter, delivering revenue growth of 12.6% to $750.8 million. Alkeon has been accumulating shares since 2014, but it held its position steady during the previous quarter. The stock is currently Alkeon’s seventh-largest holding.

Atlassian Corporation Plc (TEAM)

Atlassian Corporation Plc is a Sydney-based company that designs, develops, licenses, and supports various software products internationally. The company’s products comprise JIRA, a workflow administration system for teams to design, track, collaborate, and supervise work and projects, Jira Service Management, a service desk product for developing and operating service experiences for diverse service team providers, and Jira Align for business agile planning.

Atlassian has been growing its top line for years consistently, though it remains unprofitable due to reinvesting the majority of its operating cash flows back into the business.

Alkeon has been holding a position in Atlassian since Q4-2020. The fund boosted its position by 31% during the last quarter.

Amazon.com Inc. (AMZN)

Amazon is Alkeon’s ninth-largest holding, comprising 2.7% of its total portfolio. The fund boosted its position by 3% during the last quarter.

Amazon delivered another solid quarter recently, with Q3 AWS net sales up 38.7% YoY to $16.1 billion, topping the $15.4 billion consensus estimate. Revenues grew to $110.8 billion, a 15.2% increase YoY, contributing to all-time high LTM (last twelve months) sales of $457.6 billion.

Due to scaling its operations, the company’s net income margins reached 5.73% during the past twelve months, turning Amazon into an increasingly profitable company. The stock is currently trading at a P/E of 84.1 based on this year’s projected net income, but considering its EPS growth, the company will likely grow into its valuation.

The stock has had a place in Alkeon’s portfolio since Q2-2016.

MercadoLibre, Inc. (MELI)

MercadoLibre runs online commerce platforms in Latin America. The company runs Mercado Libre Marketplace, an automated online commerce platform that allows businesses, merchants, and individuals to list goods and conduct sales online. It also runs Mercado Pago FinTech, a fin-tech solution platform, which enables transactions on and off its marketplaces by offering a mechanism that enables its users to send and receive payments online. The company also enables its users to transfer money seamlessly.

The “Amazon of Latin America”, as it is often referred to amongst investors has been growing rapidly, and has even started reporting its first profitable quarters. However, investors should be wary of the risks related to investing in overseas companies as well as the FX risks involved.

Alkeon has been holding Mercadolibre shares since Q1-2020. The fund boosted its position by 19% during the last quarter. Mercadolibre is now Alkeon’s tenth-largest holding.

Final Thoughts

Despite Alkeon’s low profile and preference to not attract media attention, the company is a silent achiever. Displaying market-beating returns by unlocking the alpha potential on multiple stocks, management has delivered for clients with excellent investment returns.

You can download an Excel spreadsheet with metrics that matter of Alkeon Capital Management current 13F equity holdings below:

 

Additional Resources

See the articles below for analysis on other major investment firms/asset managers:

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