10 Stocks to Buy According to Gavin Baker’s Atreides Management

·9 min read

In this article, we presented the 10 stocks to buy according to Gavin Baker's Atreides Management. You can skip our detailed analysis of Baker's investment strategy and history, and go directly to the 5 Stocks to Buy According to Gavin Baker's Atreides Management.

Gavin Baker is a Boston-based investor who is currently the managing partner and CIO at Atreides Management. He studied History and Economics at Dartmouth College in 1999. Before Atreides Management, Gavin Baker worked at Fidelity Investments for eighteen years. Under his management, the $17 billion Fidelity fund bested its competitors by 99%. He was also the "Fund Manager of the Year" for Boston Globe in 2014.

Atreides Management fund was established in 2019. It is a cross-over fund that invests in technology and consumer companies across public and private sectors. Baker's investment strategy includes investing in small and large companies that have high growth potential. As of the second quarter of 2021, he manages $5.6 billion in assets under Atreides Management. Some of the prominent names in his portfolio are DICK'S Sporting Goods, Inc. (NYSE:DKS), Twitter, Inc. (NYSE:TWTR), and The Walt Disney Company (NYSE:DIS).

Photo by Austin Distel on Unsplash

Why should we care about Gavin Baker's portfolio moves? Insider Monkey's research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 86 percentage points since March 2017. Between March 2017 and July 2021, our monthly newsletter's stock picks returned 186.1%, vs. 100.1% for the SPY. Our stock picks outperformed the market by more than 86 percentage points (see the details here). That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.

With this context in mind, let's now discuss our list of the 10 stocks to buy according to Gavin Baker's Atreides Management. We used Baker's Q2 portfolio for this analysis.

10 Stocks to Buy According to Gavin Baker's Atreides Management

10. Square, Inc. (NYSE:SQ)

Baker's Stake Value: $127.1 million

Percentage of Gavin Baker's 13F Portfolio: 2.27%

Number of Hedge Fund Holders: 94

Square, Inc. (NYSE:SQ) is a California-based company that provides financial services and mobile payments. It was established in 2009, and currently has a market cap of $110.14 billion.

Gavin Baker's hedge fund has 521,501 shares in Square, Inc. (NYSE:SQ) worth $127.1 million, as of the second quarter. The hedge fund started investing in Square, Inc. (NYSE:SQ) in the fourth quarter of 2019. Our data shows that the company's number of hedge funds with stakes was 94 as of the end of the second quarter of 2021 compared to 92 in the first quarter.

RiverPark Funds mention Square, Inc. (NYSE:SQ) in its first-quarter 2021 investor letter. Here is what the fund said:

"We established a position in leading Financial Technology provider Square during the quarter. Through one integrated system, SQ is a hybrid of two businesses: its Seller Business (charging small and medium-sized businesses about 3% for transaction payment processing, plus other services such as instant funds access, and software for everything from customer engagement to payroll), and its Cash App (originally for person-to-person cash transfers and now a growing digital financial services provider for consumers).

The combined business has grown gross profit at a 37% CAGR over the past five years to $2.7 billion (due to pass through costs, gross profit is more reflective of top-line growth) and we believe that the company has an enormous long-term runway, as it has less than a 2% share of a more than $160 billion market. It is our view that the company's Cash App (which has grown from nothing in 2015 to $1.2 billion gross profit last year) has a particularly large opportunity with its powerful ecosystem of digital financial services including digital wallets, direct deposits, stock trading, bitcoin trading, and business and tax services, which are all relatively new. The vast majority of Cash App's more than 36 million users are younger and, importantly, are willing to replace their bank and other financial services accounts with the app.

We estimate that the company can grow its gross profit more than 30% and EBITDA more than 50% annually for the foreseeable future, and while most of the company's current profit is from its Seller Business, we believe most of Square's future value will be from its Cash App business."

9. Electronic Arts Inc. (NASDAQ:EA)

Baker's Stake Value: $133.3 million

Percentage of Gavin Baker's 13F Portfolio: 2.38%

Number of Hedge Fund Holders: 56

Electronic Arts Inc. (NASDAQ:EA) is the second-largest gaming company in Europe and America, founded in 1982.

As of Q2, Gavin in Electronic Arts Inc. (NASDAQ:EA) owns 927,311 shares of the company, worth $133.3 million. The fund first invested in the company in the first quarter of 2021 and later increased its shares in the company by 153% in the second quarter of 2021. According to Insider Monkey's data, the number of hedge funds with stakes in the company was 56 at the end of the second quarter of 2021 compared to 44 in the first quarter.

Electronic Arts Inc. (NASDAQ:EA) was mentioned by Artisan Partners in their investor letter in the first quarter of 2021. Here is what it said:

"Video game publisher Electronic Arts (EA) has recently experienced muted performance relative to peers. The company is expanding its moat as COVID-19 pulled forward gamer engagement in 2020 and early 2021. While we expect current growth rates will slow, the long-term value of the company's user community has increased. EA's net cash balance sheet and industry leadership fit well with our philosophy and process, and while the recently acquired Codemasters and GLUU Mobile will draw down cash, the balance sheet remains strong and the deals further EA's mobile growth strategy. We believe our stake in EA represents how we can think opportunistically to build an eclectic, idiosyncratic portfolio to deliver value over the long term."

8. Amazon.com, Inc. (NASDAQ:AMZN)

Baker's Stake Value: $163.7 million

Percentage of Gavin Baker's 13F Portfolio: 2.92%

Number of Hedge Fund Holders: 271

Amazon.com, Inc. (NASDAQ:AMZN) is a multinational, multi-industry American company founded in 1994 as Cadabra, Inc. It is headquartered in Seattle, Washington, and focuses primarily on e-commerce, digital streaming, and artificial intelligence. It is considered the world's most valuable brand currently. According to the Q2 filings, Atreides Management owned 47,594 shares in the company worth $163.7 million, making up 2.92% of its portfolio.

L1 Capital, an investment management firm, mentioned Amazon.com, Inc. (NASDAQ:AMZN) in its investor letter. Here is what the firm said:

"Amazon flipped from being the largest detractor from portfolio performance in the March 2021 quarter, to one of the leading contributors in the June 2021 quarter. We took advantage of negative near-term sentiment in the March 2021 quarter to add to our Amazon investment. We continue to view Amazon as one of the best positioned businesses globally, with its share price still not reflecting fair value."

7. The Boston Beer Company, Inc. (NYSE:SAM)

Baker's Stake Value: $176.2 million

Percentage of Gavin Baker's 13F Portfolio: 3.14%

Number of Hedge Fund Holders: 42

The Boston Beer Company, Inc. (NYSE:SAM) is the fourth-largest brewer in the United States. It was founded in 1984 and is currently headquartered in Boston, Massachusetts.

Artisan Partners remained confident in the performance of The Boston Beer Company, Inc. (NYSE:SAM) and mentioned them in their investor letter in the second quarter of 2021. Here is what the letter said:

"The Boston Beer Company sells a focused portfolio of alcoholic beverage brands, and in recent years has emerged as one of the leaders in the fast-growing hard seltzer category. It continues to enhance the Truly seltzer brand—launching new flavors (iced tea, fruit punch) and gaining market share despite multiple new entrants. However, the growth of the hard seltzer category has been slowing in recent months, falling short of high investor expectations, which limits the company's earnings upside and increases the risk of continued deceleration. While we remain confident in the management team, brand name, and the company's distribution capabilities/advantages, we have trimmed our position in favor of other opportunities as we monitor hard seltzer category trends for signs of reacceleration."

6. The Walt Disney Company (NYSE:DIS)

Baker's Stake Value: $176.6 million

Percentage of Gavin Baker's 13F Portfolio: 3.15%

Number of Hedge Fund Holders: 112

The Walt Disney Company (NYSE:DIS) was founded in 1923 and is the leading company in animation and mass media enterprise worldwide. The Walt Disney Company (NYSE:DIS) is currently headquartered in Burbank, California.

In the second quarter, Gavin Baker's Atreides Management increased its stakes in the company by 152% and owned around 1 million shares of The Walt Disney Company (NYSE:DIS) worth $176.6 million, which makes up about 3.15% of their portfolio.

RiverPark Funds mentioned The Walt Disney Company (NYSE:DIS) in its investor letter in the second quarter of 2021. Here is what the letter said:

"DIS shares declined for the quarter, taking a pause after a big fourth quarter and first quarter stock price advance, as Disney+ subscriber numbers were disappointing to investors. Disney+, the company's DTC streaming business, had blown past previous subscriber projections, having gone from zero to 104 million in 17 months, but investors were now expecting 109 million subscribers. Management still expects significant continued growth to 230-260 million subscribers in 2024.

DIS is blessed with a deep library of unique content that includes both live sports (providing large, non-time shifted audiences) and incomparable brands including Disney, Marvel, Pixar and Lucasfilm, as well as the ABC network. The company also has a wealth of upcoming new content, expecting over 100 original titles per year, including two new Star Wars spin-off series, 10 Star Wars films, 10 Marvel films, 15 Disney and Pixar films and 15 Disney and Pixar series.

Now that the disruption in its theme park, cruise and theatrical businesses appears to be coming to an end, we believe that Disney is among the best-positioned media companies in the new landscape to combine multi-channel and DTC distribution. We also note that DIS has an extremely strong balance sheet and a growing pool of free cash flow to be used both to return to shareholders and to invest in future opportunities."

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Disclosure. None. 10 Stocks to Buy According to Gavin Baker's Atreides Management is originally published on Insider Monkey.

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