Investing

Billionaire Investor Sold These 5 Stocks And Loaded Up On These Companies Instead

Will Ashworth

Published: January 29, 2025 9:42 am

Last Updated: January 29, 2025 9:43 am

According to LCH Investments, over 200 hedge funds are Tiger Cubs, funds started by former employees of Tiger Management, the iconic hedge fund founded by Julian Robertson in 1980.

After 20 mostly successful years, Robertson closed the hedge fund in 2000 and went on to mentor many of these hedge funds that sprouted up after its closure. 

Second-generation Tiger Cub hedge fund managers include Chase Coleman, Andreas Halvorsen, Steve Mandel and Phillipe Laffont. Third-generation hedge fund managers worked for the Tiger Cubs. They’re called Tiger Grand Cubs. 

One such hedge fund manager is Karthik Sarma, who worked for Chase Coleman’s Tiger Global between 2001 and 2006 before leaving to create SRS Investment Management.

Forbes estimates Sarma’s net worth at $2.9 billion. As of Sept. 30, 2024, his firm managed $12.14 billion for seven large clients. The billionaire’s Q3 2024 assets under management were $6.72 billion in a focused portfolio of 20 stocks. 

Key Points About This Article:

• Hedge fund SRS Investment Management has 48% of its $6.72 billion portfolio invested in one stock. 
• In 2024’s third quarter, it sold out of or reduced its position in nine of its 20 stocks. 
• The hedge fund sold one airline stock and used some of the proceeds to invest in another.
• If you’re looking for some stocks with huge potential, make sure to grab a free copy of our brand-new “The Next NVIDIA” report. It features a software stock we’re confident has 10X potential.

The Main Moves

I prefer studying hedge fund managers like Sarma, Ackman, and Chris Hohn, whose portfolios are less diversified. A hedge fund is about delivering alpha without sophisticated algorithms but with Warren Buffett-like skills. Admittedly, passive investors will tell you that it’s elusive. 

In the third quarter, SRS closed out five positions, reduced its holdings in four more stocks, added to four existing positions, and bought into three names.

Of the five positions the billionaire closed out, American Airlines Group (NASDAQ:AAL)  was the most significant, selling all 13.06 million shares of its stock for proceeds over $100 million. At the end of June, it was the hedge fund’s 11th-largest position. 

Nvidia (NASDAQ:NVDA) was in the news this week for its 17% drop on Monday, the hedge fund’s most significant reduction in the third quarter. SRS sold 68.17% of its NVDA stock for prices between $100 and $135. 

Of the three new stocks purchased in the third quarter, Elevance Health (NYSE:ELV) was easily the hedge fund’s top purchase. The hedge fund bought 193,569 shares of the healthcare company, making it its 13th-largest position.

Lastly, in Q3 2024, SRS added four positions. The largest by dollar value was Atlassian (NASDAQ:TEAM), which purchased 422,533 shares, a 31.33% increase from the second quarter. 

In addition, it added 1.38 million shares of United Airlines Holdings (NASDAQ:UAL) in the quarter, increasing the airline stock’s weight to 1.59% of its portfolio from 0.32% in the second quarter. 

Why Sarma Closed Out AAL and Upped UAL

As of June 30, the hedge fund owned several travel-related stocks, including American Airlines and United Airlines. Most notably, its largest holding, Avis Budget Group (NASDAQ:CAR), accounts for 24.37% of its $6.72 billion portfolio. 

Clearly, the hedge fund sees travel doing well in 2025

Sarma first acquired American Airlines stock in Q1 2024, paying an estimated $14.36 a share. However, the share price never traded above $11.79 in the third quarter, so SRS chose to cut its losses.

WhaleWisdom estimates the average price paid for UAL stock is $47.73. Since the end of September, its shares have increased by 5%, which is a decent, if not spectacular, return. Sarma will have to be patient if he wants to claw back some of the gains lost by closing out the AAL position. 

Analysts believe UAL is the better buy.

Of the 26 analysts covering UAL, 24 rate it a Buy (86%), with a median target price of $131, well above its current trading price. By comparison, only 54% of the 26 analysts covering AAL rate it a Buy. 

The Rationale Behind Elevance and Atlassian Buys

As mentioned earlier, Elevance was one of three new positions acquired in Q3 2024. The health insurer formerly known as Anthem, is one of the country’s largest. 

While the murder of UnitedHealthcare CEO Brian Thompson brought attention to the downside of the American health insurance industry, it’s unlikely that the federal government will ever be able to get out of its way long enough to implement a universal healthcare system, so ELV shareholders don’t have to worry about their investments falling to $0.

Analysts estimate that Elevance will earn $34.76 a share in 2024 and $39.42 in 2025. The stock trades at 10.3 times the 2026 estimate, which is lower than it has been at almost any time in the past decade. 

Atlassian sells Confluence project management and Jira collaboration software. It has over 300,000 customers worldwide and is growing its revenue by 33% a quarter. In Q1 2025, its gross and operating margins were 84.1% and 22.6%, respectively, which are incredibly healthy. 

It’s no wonder 73% of analysts rate it a Buy. It’s also not surprising that SRS has owned its stock since Q2 2023, and keeps adding to its position. Not only is TEAM the eighth-largest holding, it owns 1.3% of the company. 

Only five of the hedge fund’s 20 positions have an ownership stake over 1%. The others being Avis Budget Group, Planet Fitness (NYSE:PLNT), SNAP (NYSE:SNAP), and Burlington Stores (NYSE:BURL).

Sarma first acquired Avis Budget stock in Q4 2010, adding to its stake in 2016-using cash-settled equity swaps-when it launched an activist campaign against the car rental business. SRS now owns 48% of the company. 

A well-played move.