In this piece, we will take a look at the 10 tech stock picks of Cristan Black's Empirical Capital. If you want to skip ahead to the top five stocks in the piece, then head over to 5 Tech Stock Picks of Cristan Black's Empirical Capital.
Empirical Capital Management, LLC is a small hedge fund located in the United States. It was founded by Mr. Cristan Blackman in 2000. The fund is located in Mr. Blackman's hometown of Hendersonville, Tennessee.
The hedge fund is known for buying shares of companies that it believes are worth investing in. Unlike some other funds, which limit themselves to specific sectors, such as real estate, biotechnology, or general technology, Empirical Capital has a more diverse portfolio.
It is one of the more smaller hedge funds, with a portfolio worth a modest $95 million.
Little is known about Mr. Blackman himself, who keeps a low profile. He has decades of experience in the financial sector and prior to his time at Empirical, he worked at the Nashville office of Morgan Keegan & Company. He also gained fame last year, when he and his wife, Tina Blackman, purchased a house owned by the legendary American artist Johnny Cash. The Blackmans paid a cool $3.2 million for the house in which Cash and his wife spent 20 years. In an interview given to the Hendersonville Standard, Blackman outlined that the house held a special place in his heart as he used to look at it in awe as a child.
Empirical Capital's largest investments are in retailers and transportation companies, but he also expands his focus to others. Some of the famous companies in his portfolio are Amazon.com, Inc. (NASDAQ:AMZN) and Twitter, Inc. (NYSE:TWTR), while the largest holding of the $95 million portfolio is in Walmart Inc. (NYSE:WMT).
In order to work out Mr. Blackman's investment thought process, we sifted through Empirical Capital's 13-F filings for the third quarter of 2021. From these, we extracted his top ten technology investments, and for the companies, we analyzed their earnings reports, analyst ratings, other large shareholders, and hedge fund investor letters mentioning them. Finally, we also surveyed 867 hedge funds for Q3 2021 to see how many others had invested in the technology firms.
10. Amazon.com, Inc. (NASDAQ:AMZN)
Empirical Capital's Holdings: $329,000
Percentage of Empirical Capital's Portfolio: 0.34%
Number of Hedge Fund Holders: 242
Amazon.com, Inc. (NASDAQ:AMZN) is one of the biggest online retailers in the world that is known for its digital marketplace. The company has also ventured into other areas such as datacenter and cloud computing and it has its own satellite internet arm, Kuiper. It is headquartered in Seattle, Washington, United States.
Amazon.com, Inc. (NASDAQ:AMZN) missed both revenue and GAAP EPS analyst estimates during its Q3, by posting $110 billion in revenue and $6.12 in earnings per share. Credit Suisse reduced the company’s price target to $4,200 in an October 2021 note, as it was worried about higher costs.
As Q3 2021 came to an end, Mr. Black's Empirical Capital held 100 Amazon.com, Inc. (NASDAQ:AMZN) shares, in a stake worth $329,000 and representing 0.34% of its portfolio. During the same time period, 242 of the 867 hedge funds polled by Insider Monkey had holdings in the retailer.
Amazon.com, Inc. (NASDAQ:AMZN) largest shareholder is Ken Fisher's Fisher Asset Management who owns 1.9 million shares worth $6.3 billion.
In its Q3 2021 investor letter, investment management firm Madison Funds mentioned Amazon.com, Inc. (NASDAQ:AMZN) and outlined that:
“We did add a modest new position weight to the portfolio in the quarter in Amazon.com, Inc. stock (AMZN). We acknowledge that many aspects of Amazon’s merit as an investment are well appreciated. However, our work leads us to conclude that shares are attractive. Leadership positions in both e-commerce and cloud computing provide the company with significant durable competitive advantages in industries that we think can produce above average growth over the next decade. Over the past year, AMZN shares have trailed the market as investors debate near-term growth prospects following the pandemic-induced e-commerce demand. Additionally, margins have been depressed due to Amazon’s unprecedented increases in spending to build out fulfillment and in-house logistics capabilities – Amazon will build out more square footage this year and last than it did cumulatively over the previous 10 years, more than doubling its in-house delivery capacity. We like the investments Amazon is making and believe they will further advantage the company relative to other retailers, making it nearly impossible for competitors to match the same level of delivery speed and convenience. With its large and frequently engaged customer base, Amazon has multiple mechanisms to make money, including selling advertising and enhanced subscription services. Within the cloud business, we forecast Amazon Web Services (AWS) leveraging its strengths in Infrastructure-as-a-service (IaaS) to move into higher value segments of cloud computing (such as platform-as-a-service: PaaS), allowing the company to continue outgrowing the overall IT sector with strong profitability. While Amazon shares have performed extremely well over the long-term, we think near-term concerns about whether Amazon will earn a return on its accelerated investments provide an opportunity now for investors willing to look through the investment period. Our view is that the investments likely earn strong returns and extend Amazon’s competitive advantages and above average growth.”
Amazon.com, Inc. (NASDAQ:AMZN) is one of Mr. Blackman's favorite investments, just like Twitter, Inc. (NYSE:TWTR) and Walmart Inc. (NYSE:WMT).
9. Roku, Inc. (NASDAQ:ROKU)
Empirical Capital's Holdings: $1.5 million
Percentage of Empirical Capital's Portfolio: 1.64%
Number of Hedge Fund Holders: 57
Roku, Inc. (NASDAQ:ROKU) is an American television streaming company headquartered in San Jose, California. It provides a streaming platform, advertising, content distribution, and licenses its own smart televisions.
For its third quarter, Roku, Inc. (NASDAQ:ROKU) reported $680 million in revenue and $0.48 in GAAP EPS, beating analyst estimates for EPS only. Truist lowered the streaming provider's price target to $360 in a November 2021 note, outlining that short term supply chain effects on advertisement revenues are headwinds for the company.
Mr. Black's Empirical Capital held 5,000 Roku, Inc. (NASDAQ:ROKU) shares as the third quarter of this year came to an end. These were worth $1.5 million and represented 1.64% of the investment firm's portfolio. 57 of the 867 hedge funds profiled by Insider Monkey for Q3 2021 also had stakes in the company.
Roku, Inc.'s (NASDAQ:ROKU) biggest shareholder is Catherine D. Wood's ARK Investment Management with 4.7 million shares worth $1.4 billion.
Investment firm Alger mentioned Roku, Inc. (NASDAQ:ROKU) in its Q3 2021 investor letter and outlined that:
“Long position Roku, Inc., was among top detractors from performance. Roku is a leading connected TV streaming platform company whose technology has helped change the way consumers consume entertainment. The coronavirus pandemic accelerated adoption of streaming content and we believe the company’s market share gain has been durable. Advertising buyers are reallocating spending toward Roku to reach this growing segment of customers who no longer watch TV via traditional cable to broadcast services. Roku’s high unit volume growth is supported by distribution agreements with major media companies that are organizing content distribution strategies around streaming. In our view, the agreements are strong evidence that Roku is now understood to be an increasingly important part of the connected TV ecosystem. Roku’s revenues grew over 100% in the recently reported quarter, but the shares reacted negatively to lower-than-expected active account additions and hours of content streamed as Roku lacked the positive benefit of last year’s COVID-19 lockdowns. With the widescale administration of COVID-19 vaccines and the end of lockdowns, many individuals have increased their traveling and outdoor activity, which has created a headwind for indoor viewing of connected TV offerings.”
8. Sonos, Inc. (NASDAQ:SONO)
Empirical Capital's Holdings: $1.6 million
Percentage of Empirical Capital's Portfolio: 1.7%
Number of Hedge Fund Holders: 49
Sonos, Inc. (NASDAQ:SONO) develops and sells speakers, home theater systems, and their accessories in North America and globally. The company is headquartered in Santa Barbara, California.
Empirical Capital held 50,000 Sonos, Inc (NASDAQ:SONO) shares by Q3 2021 end, in a stake that was worth $1.6 million and represented 1.7% of its portfolio. Similarly, by the third quarter of 2021 end, 49 of the 867 hedge funds polled by Insider Monkey had investments in the company.
Sonos, Inc. (NASDAQ:SONO) brought in $359 million revenue and -$0.07 in GAAP EPS for its fourth fiscal quarter, beating analyst estimates for EPS only. Its price target was raised to $53 by Morgan Stanley in November 2021, with the bank impressed by the company's strong guidance.
Sonos, Inc.'s (NASDAQ:SONO) largest shareholder is D. E. Shaw's similarly named firm D E Shaw who holds 2.3 million shares worth $74 million.
“We expanded what was a small position in Sonos (SONO) to a size that makes it worthwhile to discuss. We’ve owned SONO, which manufactures multi-room wireless smart home sound systems, for about a year. We were initially attracted by the strength of the brand and IP, SONO’s ecosystem dynamics, and signs that the company was under-earning. We’ve been impressed with management’s ability to consistently outperform both guidance and expectations amidst a rapidly changing macro environment. We think that there is a long-term household penetration story here: SONO products are currently in approximately 11 million homes globally, a number that has grown by at least 20% in each of the last 4 years and stands to grow further as SONO adds more accessible price points, expands into new verticals, and introduces new products and services. While we acknowledge that there are near-term headwinds in the form of supply chain disruptions and a cyclical normalization in consumer electronics demand, we think these will prove to be temporary distractions in an otherwise bright growth story. Between an elevated backlog of orders that will support demand well into the next year and strong pricing power, we see earnings growing close to 25% annually for the next few years. The stock currently trades at just over 15x FY2021 adjusted earnings net of the $5 cash per share on the balance sheet today. We purchased our stake at an average price of $28.45 per share. SONO shares ended the quarter at $32.36.”
7. Palantir Technologies Inc. (NYSE:PLTR)
Empirical Capital's Holdings: $2.4 million
Percentage of Empirical Capital's Portfolio: 2.52%
Number of Hedge Fund Holders: 35
Palantir Technologies Inc. (NYSE:PLTR) is an American national security service software platform provider. Its products allow its users to effectively manage large data sets to generate insights from intelligence.
Palantir Technologies Inc. (NYSE:PLTR) reported $392 million in revenue and -$0.05 in GAAP EPS for its Q3 earlier this month, beating analyst estimates for both. Credit Suisse set a $25 price target for the company in November, outlining that a limited customer base can introduce financial uncertainty.
As the third quarter of this year came to an end, Mr. Black's Empirical Capital held 100,000 Palantir Technologies Inc. (NYSE:PLTR) shares. These were worth $2.4 million and represented 2.52% of its investment portfolio. During the same time period, 35 of the 867 hedge funds polled by Insider Monkey had holdings in the software firm.
Catherine D. Wood's ARK Investment Management is Palantir Technologies Inc.'s (NYSE:PLTR) largest shareholder through holding 37 million shares worth $895 million.
6. comScore, Inc. (NASDAQ:SCOR)
Empirical Capital's Holdings: $2.6 million
Percentage of Empirical Capital's Portfolio: 2.74%
Number of Hedge Fund Holders: 19
comScore, Inc. (NASDAQ:SCOR) is a media analytics provider based in Reston, Virginia, United States. It provides ratings and planning products alongside services that allow its customers to measure advertising and customer behavior.
Empirical Capital owned 669,646 comScore, Inc. (NASDAQ:SCOR) shares by Q3 2021 end. The shares were worth $2.6 million and represented 2.75% of the firm's overall holdings. During the same time period, 19 of the 867 funds polled by Insider Monkey had stakes in the company.
In its Q3, comScore, Inc. (NASDAQ:SCOR) earned $92 million in revenue and -$0.02 in GAAP EPS, beating analyst estimates for both. Craig-Hallum set a $7 price target for the company in June, highlighting that pandemic challenges present a unique opportunity for the company.
comScore, Inc.'s (NASDAQ:SCOR) largest shareholder is Chuck Royce's Royce & Associates who owns 3.3 million shares worth $13 million.
comScore, Inc.'s (NASDAQ:SCOR) joins Mr. Blackman's hot stocks, alongside Twitter, Inc. (NYSE:TWTR) and Walmart Inc. (NYSE:WMT).
To see the rest of the stocks in this list click to read 5 Tech Stock Picks of Cristan Black's Empirical Capital.
Disclosure. None. 10 Tech Stock Picks of Cristan Black's Empirical Capital is originally published on Insider Monkey.