Athanor Capital’s Stock Holdings & Investment Strategy

Updated Setpember 16th, 2020 by Nikolaos Sismanis

Athanaor Capital is a macro focused focused hedge fund founded in 2017 by Parvinder Thiara.

The firm is growing quickly – more than doubling its assets under management in 2019.  Athanor Capital currently manages more than $4 billion in discretionary funds according to its most recent form ADV.

Investors following the company’s 13F filings over the last few quarters (starting with the February 14th, 2018 filing through the May 14th, 2020 filing) would have generated annual total returns of 206%.  This compares very favorably to the S&P 500 ETF’s (SPY) annual total returns of 11.9% over the same period.

Note:  13F filing performance is different than fund performance.  See how we calculate 13F filing performance here.

You can download an Excel spreadsheet of Athanor Capital’s performance and current and historical common stock 13F holdings below:
 

Keep reading this article to learn more about Athanor Capital.

Table Of Contents

Athanor Capital’s Approach To Investing

Athanor Capital’s investment strategy is top-down.  This means the firm starts with macro-economic factors to build its investment theses.

Athanor Capital does not stop at high-level macro analysis.  The firm then ‘dives deeper’, performing relative valuation analysis between individual securities.  This combination of ‘Top-down’ and ‘Bottom-up’ investing helps Athanor Capital to find compelling investments in compelling macro sectors.  The image below gives a breakdown of the firm’s strategy.

Athanor Capital Investment Strategy

Source:  Athanor Capital

The company’s investment strategy is also succinctly stated in its ADV brochure:

“The Investment Manager’s process usually starts with macroeconomic observations including market dislocations, capital flows, regulatory changes, secular shifts and other major macroeconomic events.  The Investment Manager seeks to determine whether these events have caused relative value mispricings.  Once a hypothesis that a macro event is causing a mispricing has been established, the Investment Manager seeks to validate or disprove it.  The Investment Manager will generally take significant positions if it can understand both the mispricing and its cause.  The Investment Manager may also exploit opportunities outside of this process and protocol.”

Of note is that Athanor Capital looks for ‘builders’ when hiring its investment research team.  Over 75% of the company’s investment and risk teams actively code.  And 70% of the company’s staff are either minorities and/or women as the firm values a variety of perspectives.

Culture is set initially by a company’s founder.  Athanor Capital’s founder is Parvinder Thiara.

About Parvinder Thiara

Parvinder Thiara was born in August of 1985; he is 34.  Thiara is a Harvard graduate and Rhodes Scholar.  He worked for DE Shaw for 8 years before setting up Athanor Capital.

A disagreement over trades in late 2015 is what caused Thiara to leave DE Shaw.  According to FT.com, executives at DE Shaw concluded that Thiara was not adhering to the funds risk guidelines:

“Executives concluded that he had not adhered to the hedge fund’s intraday risk guidelines and that he had not shared sufficient details of his trading with executives, according to the people, though Thiara ended most days with positions that were within DE Shaw’s protocols.

The firm confronted Thiara about his trading, and Thiara’s explanation was not sufficient for the DE Shaw executives, the people said. The parties could not resolve their differences, leading to his exit. Thiara has not been accused of violating any laws or regulations.”

Thiara likely has a different interpretation of events.  The emphasis on risk controls at Athanor Capital speaks to Thiara’s clear focus and understanding of risk.

The legal battle and ‘bad blood’ surrounding another talented employee at DE Shaw – Daniel Michalow – unexpectedly leaving the company shows that this is not an isolated incident.  Commenting on the Michalow situation, Parvender said:

“This seems like DE Shaw’s playbook when a talented former employee leaves and chooses to compete.”

Setting aside Thiara’s past with DE Shaw, it’s clear that investors are flocking to Athanor Capital based on the firm’s rapid asset growth.

Athanor’s Top 10 Holdings

Athanor’s portfolio of equities is massively diversified, currently invested in nearly 500 different companies, with no sector occupying more than 22% of its total holdings. However, the fund’s highest conviction picks still manage to stand out, with its top 10 holdings making around 35% of the total portfolio.

Caesars Entertainment (CZR):

Athanor’s most substantial stock is currently Caesars Entertainment. The gaming giant operates resorts primarily under the iconic Caesars, Harrah’s, and Horseshoe brand names, as well as various casinos. The industry has been hit hard, with casinos and hotels in regions like Las Vegas, Nevada, much suffering from the adverse environment caused by COVID-19. Despite the challenges, Althorn’s significant stake in the company is most likely the reason behind Caesars merging with Eldorado Resorts (ERI). Shareholders of both companies have approved an $8.58B cash-and-stock merger that is expected to formulate the biggest casino operator in the U.S.

The deal comes after legendary activist investor Carl Icahn acquired a stake in Caesars earlier this year and pushed for the sale. Last month both the Indiana Gaming Commission and the Indiana Horse Racing Commission approved the deal, with Athanor greatly benefiting amid initiating a position post the stock’s earlier selloff.

Microsoft (MSFT):

Similarly to most of the non-specialized hedge funds we have covered, Microsoft is at the top of Athanor’s holdings, occupying around 5% of its total holdings. It hardly comes as a surprise these days, as Microsoft currently operates arguably the most diversified and well-rounded portfolio of enterprise and cloud services in the tech sector.

Supported by the company’s strong profitability, management has been consistently raising buybacks over the past decade, fruitfully rewarding its shareholders. The amount allocated to stock repurchases has reached new all-time highs over the past four quarters, at nearly $23B. Despite that, Microsoft’s cash position has been growing continually, with the company currently sitting on top of a massive $136B cash pile.

Further, while many companies have chosen to utilize the current ultra-low interest rates to raise cheap debt and buy back stock, Microsoft’s approach has been prudent and thoughtful. Not only are current earnings extensively covering buybacks (52% buyback “payout ratio”), but also the company’s long-term debt position has been substantially dropping over the past few years from $76B in mid-2017 to around $60B, as of its last report.

Boasting some of the most attractive financials on Wall St., along with little to no signs of a slowdown in its operations, it’s quite easy to see why Athanor, alongside numerous other funds, can’t get enough of the company’s stock. The fund increased its position by a tremendous 46% compared to its last f13 filing.

Visa & MasterCard (V) (MA):

Similarly to Microsoft, it’s hard not to find Visa and MasterCard amongst various hedge funds’ top positions. Intuitions love the payment processing duo, as the two companies have effectively monopolized the sector, with every bank utilizing their networks for consumers across the globe to complete their everyday transactions.

While both companies were hit hard by COVID-19, as consumer spending drastically fell during the early months of the pandemic, their latest operating metrics during the months of summer indicate complete recovery, with signs of growth resuming, due to a massive shift towards e-commerce transactions.

This shift should also have substantial positive effects in their long-term cash flows, as both Visa and MasterCard charge merchants double the rates for CNP (Card-Not-Present) transactions, as online sales have higher risks involved. While cross-border volumes remain depressed due to strict traveling restrictions, we believe that the long-term shift of consumer spending in e-commerce will more than compensate for the current challenges. Therefore, the duo’s long-term growth story remains intact.

Facebook (FB): 

Facebook is a polarizing stock. Some love it; others hate it. But as much one can disagree with the company’s operations, privacy policies, and continuous scrutiny, the numbers never lie. The company has been adding about 100 million users in each one of its past few quarters, currently counting 2.7 billion monthly active users. What’s more impressive, though, is that MAUs growth shows no slowdown signs, currently growing by around 12% year-over-year, despite 1/3 of the globe hooked on its platforms.

Further, Facebook’s financials are excellent with nearly $60B in cash and no long-term debt, while its valuation has remained relatively low due to its anti-ESG business model. Consequently, the company presents one of the most investable opportunities in the tech sector, towards hedge funds like Athanor, which are willing to hold its “vice-status” shares. The fund recently cut its position by around 24%, which probably constitutes some profit-taking post the stock’s prolonged rally.

Amazon (AMZN):

Being one of the four companies in the trillion-dollar-club, Jeff Bezos’s company is currently the second-largest in the world, worth around $1.6T. As the company’s continuous advancements keep on taking over the world both in terms of its commerce and digital infrastructure, Amazon has become an unstoppable force, causing its stock to maintain substantial investor demand consistently.

While the company recently lost the Pentagon’s $10B decade-long JEDI contract to Microsoft, its AWS segment growth remains robust. At the same time, COVID-19 has further boosted the need for the company’s rapid delivery services. The company posted record profits of $5.24 billion in its latest quarter, surprising investors and analysts alike.

Alphabet (GOOGL):

Alphabet, Google’s parent company, occupies around 2.5% of Athanor’s holdings, after a minor 10% position trim during the last quarter. The company has become increasingly more attractive to investors, amid fantastic financials and robust growth retention. Gross margins are robust at nearly 54%, while revenue growth has seen consistent growth despite its many “moonshot” ventures, which bring in no sales. As a result of consistent net margins in the low 20s%, robust organic growth, and recent kindling of stock buybacks, the company currently displays a 10-year EPS CAGR of 14.7%, which is quite impressive, considering its sheer size.

Additionally, by Holding $121B of cash in its balance sheet, the company should never face any sort of liquidity problems. At the same time, the rapidly growing segments such as Google Cloud (Q2 growth of ~50% YoY) should keep investors excited on top of its robust cash-cow core “search” business.

Fastly (FLSY):

Fastly is currently one of the hottest stocks in the cloud industry, operating an edge cloud platform for processing customers’ applications. In simpler terms, Fastly specializes in content delivery network (CDN) services, which helps users view digital content more quickly. The company is currently enjoying annualized revenue growth of around 45%, implying a $300M+ sales run rate. However, at a valuation of $8.5, investors have been recently arguing whether the revolutionary Infrastructure-as-a-Service company comes out at an unreasonable price.

While the stock’s future remains highly speculative going forward, trading in the public markets for only around a year and a half, it’s noteworthy that Athanor increased its stake by a huge 275% compared to last quarter, currently owning a little over 0.5% of the company’s total float.

Alibaba (BABA):

Athanor has been growing more and more fond of the Chinese giant, gradually increasing its stake in Alibaba, which currently accounts for nearly 2.5% of its total holdings. While fears have been surrounding Chinese equities lately due to various scandals, including the delisting of Luckin Coffee from the NASDAQ, Alibaba is currently trading near all-time-high levels since the company remains one of the most profitable in the world. Net profit margins currently stand at an unbelievable 32%, which has resulted in the company adding $24.8B in the bank over the past four quarters.

Due to China’s unbeatable economies of scale and Alibaba’s reach at every edge of the country’s tech sector, the company is undeniably a long-term winner. Athanor’s current stake increases at a reasonable valuation around 30X earnings could be proven to be incredibly profitable, assuming no scandals arise concerning the company’s accounting standards.

NextEra (NEE):

Athanor’s portfolio has little to no exposure to utility companies. Judging by the company’s pursuit of growth, it makes sense that the more conservatives cash flows derived from the sector are not enough to excite the fund’s management. Amongst its few holdings on the sector, though, NextEra has made it to its ten most substantial, since the fund increased its position by 761% from its previous f13 filing stake.

NextEra’s revenues are pandemic-proof, offering great stability. Simultaneously, by being the largest wind farm operator in the world, the stock possesses the growth characteristics growth funds like Athanor find attractive. As a result, shares trade at a significant valuation multiple relative to the sector, currently at 38 times its underlying earnings.

Considering that Athanor lacks diversification in its utility holdings, coupled with the lack of growth in the sector, we can easily see the fund increasing its position in NextEra, as it did in the previous quarter, by a similarly massive 317% stake expansion.

Final Thoughts

Based on Athanor’s most recent 13F filing and form ADV, the firm has ~40% of its portfolio in individual equity securities.  This shows that the firm invests a serious amount of time and talent into picking individual stocks because they account for around one fifth of the entire firm’s value.

You can download an Excel spreadsheet with metrics that matter of Athanor Capital’s current 13F holdings below: