Sands Capital Management recently disclosed its 13F portfolio updates for the fourth quarter of 2022, which ended on Dec. 31.
Founded in 1992 by Frank M. Sands Sr., Sands Capital Management is an independent investment management firm that invests in high-quality growth business. Frank Sands (Trades, Portfolio) Jr. joined the firm in 2000 and currently serves as CEO and chief investment officer. The Arlington, Virginia-based firm has two main concentrated growth strategies: Select Growth, which chooses innovative businesses, and Global Growth, which diversifies holdings in countries outside of the U.S. Sands Capital focuses on six investment criteria: sustainable above-average earnings growth, leadership position in a promising business space, a clear mission with a focus on value, good financial strength, rational valuation and significant competitive advantages.
According to the firm’s latest 13F portfolio, its top new buy of the quarter was Coupang Inc. (CPNG, Financial). Its other notable trades included an addition to Okta Inc. (OKTA, Financial), a reduction to Sea Ltd. (SE, Financial) and the sale of its Meta Platforms Inc. (META, Financial) stake.
Investors should be aware that 13F reports do not provide a complete picture of a guru’s holdings. They include only a snapshot of long equity positions in U.S.-listed stocks and American depository receipts as of the quarter’s end. They do not include short positions, non-ADR international holdings or other types of securities. However, even this limited filing can provide valuable information.
Coupang
Sands Capital Management initiated a new stake worth 10,803,846 shares in Coupang (CPNG, Financial), giving it a weight of 0.60% in the equity portfolio. During the quarter, shares traded for an average price of $17.65.
Coupang is a South Korean e-commerce company. Founded in 2010, it has grown to become the largest online marketplace in South Korea, with its Rocket Delivery service offering same-day or next-day delivery for millions of items.
The company only recently went public in March 2021, so there is not much historical data to go off of yet. However, it did reach a major milestone by reporting positive net income in the third quarter of 2022, which it attributed to payoff from its heavy investments in technology, fulfilment and last-mile logistics.
Okta
The firm increased its Okta (OKTA, Financial) holding by 158.02% for a total of 6,313,967 shares, adding 1.00% to the equity portfolio at the quarter’s average share price of $57.10.
Okta is an identity and access management software company based in San Francisco. It provides cloud software that helps companies manage and secure user authentication and build identity controls into apps, websites, web services and devices.
Okta specializes in identity management; no other product currently on the market can match its flexibility on policies and automation. As identity theft cases continue to rise, high-level identity management solutions will remain an essential part of cybersecurity. While its pricey acquisition of Auth0 has not been well-received by investors due to the cost, and the company has not yet achieved profitability, it does have a solid balance sheet with a cash-debt ratio of 1.05 and a Piotroski F-Score of 4 out of 9.
Sea
The firm reduced its Sea (SE, Financial) investment by 23.11% for a remaining stake of 15,035,522 shares, slimming the equity portfolio by 0.95%. Shares averaged $53.89 during the quarter.
Singapore-based Sea is a global consumer internet company that operates through three main segments: digital entertainment (Garena), e-commerce (Shopee) and digital payments and financial services (SeaMoney).
Sea has carved out a dominant e-commerce position in Southeast Asia by leveraging the synergy of its business segments. However, it encountered strong headwinds in 2022 with India’s ban of its popular gaming app Free Fire and having to shut down its expansion efforts in Latin America amid the difficult economic environment. As we can see in the chart below, the company’s earnings per share continue in a general downtrend, and even revenue flatlined last year.
Meta Platforms
Sands’ firm exited its 1,503,462-share stake in Meta Platforms (META, Financial), which previously took up 0.77% of the equity portfolio. During the quarter, shares changed hands for an average price of $117.43.
Meta Platforms is the parent company of several social media juggernauts, including Facebook, Instagram and WhatsApp. It rebranded to its current name in late 2021 to represent that it is pinning its hopes for future growth on the Metaverse, a 3D interactive version of the internet.
The fact that Meta is relying on its Metaverse segment, Reality Labs, for its long-term growth means the story for investors has fundamentally changed, requiring careful reassessment. The company still gets the vast majority of its revenue from ads on its family of apps, with Reality Labs contributing only a small sliver to the top line.
See also
Sands Capital Management’s other notable trades in the quarter included reductions to Edwards Lifesciences Corp. (EW, Financial) and DexCom Inc. (DXCM, Financial) and additions to Shopify Inc. (SHOP, Financial) and Align Technology Inc. (ALGN, Financial).
At the end of the quarter, the firm had holdings in 67 stocks in a 13F equity portfolio valued at $26.47 billion. The top holdings were Visa Inc. (V, Financial) with 8.13% of the equity portfolio, DexCom with 6.64% and Amazon.com Inc. (AMZN, Financial) with 5.11%.
In terms of sector weighting, the firm was most invested in technology, consumer cyclical and health care stocks.
