Chase Coleman’s Top 5 Buys

Chase Coleman (Trades, Portfolio), founder of Tiger Global Management and one of Julian Robertson (Trades, Portfolio)’s former “tiger cubs,” disclosed his third-quarter portfolio earlier this week.

As an early investor in Facebook Inc.

FB
(NASDAQ:FB) and Spotify Technology SA (NYSE:SPOT), the guru’s New York-based hedge fund is known for focusing on small-cap stocks and technology startups. He also searches for value opportunities among early-stage venture, late-stage venture, post-initial public offering and secondary market equities.

Keeping these considerations in mind, Coleman entered 20 new positions during the quarter, sold out of three stocks and added to or reduced a slew of other holdings. His five largest trades for the quarter included increased bets on Pinduoduo Inc. (NASDAQ:PDD), ServiceNow Inc. (NYSE:NOW) and CrowdStrike Holdings Inc. (NASDAQ:CRWD) as well as new holdings in Snowflake Inc. (NYSE:SNOW) and GSX Techedu Inc. (NYSE:GSX).

Pinduoduo

Impacting the equity portfolio by 1.7%, Coleman expanded the Pinduoduo stake by 133.13%, buying 8.15 million shares. The stock traded for an average price of $85.82 per share during the quarter.

He now holds 14.3 million shares total, representing 2.97% of the equity portfolio. It is now his 10th-largest holding. GuruFocus estimates he has gained 114.67% on the investment since establishing it in the third quarter of 2018.

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The Chinese company, which operates an online marketplace, has a $162.95 billion market cap; its shares were trading around $138.02 on Tuesday with a price-book ratio of 39.03 and a price-sales ratio of 25.62.

The price chart shows the stock is trading above both its median price-book ratio and its median price-sales value, suggesting it is overpriced.

GuruFocus rated Pinduoduo’s financial strength 6 out of 10 on the back of a high cash-to-debt ratio of 5.15 and a high Altman Z-Score of 9.96 that indicates it is in good standing.

The company’s profitability did not fare nearly as well, scoring a 1 out of 10 rating. Despite being weighed down by negative margins and returns that underperform a majority of competitors, however, Pinduoduo has a moderate Piotroski F-Score of 6, which implies business conditions are stable.

Coleman is the company’s largest guru shareholder with a 1.19% stake. Other gurus who own the stock include Jim Simons (Trades, Portfolio)’ Renaissance Technologies, Ken Fisher (Trades, Portfolio), Ray Dalio (Trades, Portfolio), Ron Baron (Trades, Portfolio) and Caxton Associates (Trades, Portfolio).

ServiceNow

With an impact of 1.04% on the equity portfolio, the guru upped his stake in ServiceNow by 105.93%, buying 765,900 shares. Shares traded for an average price of $446.12 each during the quarter.

Coleman now holds 1.48 million shares total, accounting for 2.03% of the equity portfolio. GuruFocus data shows he has gained approximately 46.05% on the investment since establishing it in the third quarter of 2017.

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The Santa Clara, California-based software company has a market cap of $98.93 billion; its shares were trading around $507.42 on Tuesday with a price-earnings ratio of 143.66, a price-book ratio of 37 and a price-sales ratio of 24.09.

According to the Peter Lynch chart, the stock is overvalued.

ServiceNow’s financial strength was rated 6 out of 10 by GuruFocus, driven by adequate interest coverage and a robust Altman Z-Score of 12.45. As a result of assets building up at a faster rate than revenue is growing, however, the company may be becoming less efficient. The return on invested capital surpasses the weighted average cost of capital, indicating good value creation.

The company’s profitability scored a 4 out of 10 rating on the back of margins and returns that outperform over half of its industry peers. ServiceNow also has a moderate Piotrsoki F-Score of 6.

Of the gurus invested in ServiceNow, Frank Sands (Trades, Portfolio) has the largest positon with 1.64% of outstanding shares. Other top guru shareholders include Steve Mandel (Trades, Portfolio), Spiros Segalas (Trades, Portfolio), Pioneer Investments (Trades, Portfolio), Fisher, David Carlson (Trades, Portfolio), Baron, Joel Greenblatt (Trades, Portfolio), Dalio, Mario Gabelli (Trades, Portfolio), Paul Tudor Jones (Trades, Portfolio), Louis Moore Bacon (Trades, Portfolio), First Pacific Advisors (Trades, Portfolio), Caxton Associates (Trades, Portfolio) and Lee Ainslie (Trades, Portfolio).

CrowdStrike

The investor increased his holding of CrowdStrike by 49.48%, buying 2.5 million shares. The transaction had an impact of 0.96% on the equity portfolio. During the quarter, the stock traded for an average per-share price of $116.52.

Coleman now holds 7.5 million shares total, which make up _ of the equity portfolio. According to GuruFocus, he has gained approximately 46.19% on the investment since establishing it in the second quarter of 2019.

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The cybersecurity company, which is headquartered in Sunnyvale, California, has a $29.41 billion market cap; its shares were trading around $133.96 on Tuesday with a price-book ratio of 37.13 and a price-sales ratio of 43.26.

Based on the price chart, the stock appears to be overvalued since it is trading above both the median price-book and price-sales ratios.

GuruFocus rated CrowdStrike’s financial strength 7 out of 10. In addition to a high cash-to-debt ratio, the company is supported by a robust Altman Z-Score of 21.12. The Sloan ratio, however, indicates it has poor earnings quality.

The company is also being weighed down by negative margins and returns that underperform a majority of competitors.

With 3.43% of outstanding shares, Coleman is CrowdStrike’s largest guru shareholder. Philippe Laffont (Trades, Portfolio), Segalas, Simons’ firm, Pioneer, Baron, Bacon, Steven Cohen (Trades, Portfolio), PRIMECAP Management (Trades, Portfolio), Robertson, Jones, Greenblatt and First Pacific also have positions in the stock.

Snowflake

Coleman invested in 1.25 million shares of Snowflake, allocating 0.88% of the equity portfolio to the stake. The stock traded for an average price of $238.10 per share during the quarter.

The San Mateo, California-based company, which operates a cloud-based data warehousing platform, has a market cap of $68.49 billion; its shares were trading around $245.93 on Tuesday with a price-book ratio of 90.37 and a price-sales ratio of 200.43.

Since its initial public offering in September, the stock has fallen nearly 5%.

Snowflake’s financial strength was rated 5 out of 10 by GuruFocus. While the company has a comfortable level of interest coverage, its Sloan ratio indicates it has poor earnings quality.

Warren Buffett (Trades, Portfolio) is Snowflake’s largest guru shareholder with a 2.21% stake. Other top guru investors are Laffont, Sands, Mandel, Andreas Halvorsen (Trades, Portfolio), Baron, Pioneer, Jones, Cohen, Robert Karr (Trades, Portfolio) and Bacon.

GSX Techedu

The guru picked up 3.02 million shares of GSX Techedu, dedicating 0.77% of the equity portfolio to the holding. During the quarter, shares traded for an average price of $88.55 each.

The Chinese company, which provides technology-driven education services, has a $16.93 billion market cap; its shares were trading around $70.85 on Tuesday with a price-earnings ratio of 364.32, a price-book ratio of 77.3 and a price-sales ratio of 27.88.

The Peter Lynch chart suggests the stock is overvalued.

GuruFocus rated GSX Techedu’s financial strength 6 out of 10. While it has a comfortable level of interest coverage and robust Altman Z-Score of 22.68, the Sloan ratio suggests poor earnings quality.

The company’s profitability did not fare as well, scoring a 3 out of 10 rating. While its operating margin is underperforming compared to its peers, the returns are strong and outperforming competitors.

Coleman is the company’s largest guru shareholder with a 1.27% stake. Dalio, David Swenson and Caxton Associates (Trades, Portfolio) also have positions in the stock.

Additional trades and portfolio composition

Other new positions Coleman established during the quarter included KE Holdings Inc. (BEKE), Sumo Logic Inc. (SUMO), BigCommerce Holdings Inc. (BIGC), Jamf Holding Corp. (JAMF) and JFrog Ltd. (FROG).

Over half of the guru’s $35.53 billion equity portfolio, which is composed of 90 stocks, is invested in the technology and consumer cyclical sectors.

As of the three months ended Sept. 30, Coleman’s five largest holdings were JD.com Inc. (NASDAQ:JD), Microsoft Corp. (NASDAQ:MSFT), Sunrun Inc. (NASDAQ:RUN), Facebook and Amazon.com Inc. (NASDAQ:AMZN).

Disclosure: No positions.

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