Slate Path Capital’s 13F Stock Holdings & Strategy

Updated on December 4th, 2020 by Nikos Sismanis

Founded by David Greenspan in 2012, Slate Path Capital is a New York-based hedge fund counting 7 clients and $3.2 billion of assets under management (AUMs). The fund maintains a low profile, sharing no information about how it is run, the strategies it employs, and the philosophies it stands by. Yet, Slate Path has been able to generate spectacular returns over the past few years. Thankfully, around half of the company’s assets are allocated in public equities, which should help us get a glimpse of the fund’s investing style, despite missing much of the secret sauce.

Investors following the company’s 13F filings over the last 3 years (from mid-November 2017 through mid-November 2020) would have generated annualized total returns of 33.9%. For comparison, the S&P 500 ETF (SPY) generated annualized total returns of 12.2% over the same time period.

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

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

 

Keep reading this article to learn more about Slate Path Capital.

Table Of Contents

Slate Path Capital’s portfolio & 10 largest holdings

According to the company’s latest 13F filing, Slate Path’s public portfolio consists of 20 individual stocks, with the 10 largest holdings accounting for around 89% of its total weight.

Source: Company Filings, Author

As expected, due to its limited number of investments, Slate Path faces overweight exposure in some sectors. As a result, Basic Materials, Communications, and Healthcare collectively  account for more than 86% of its total holdings.

Source: Company Filings, Author

However, what’s the most impressive and unique feature of the fund’s portfolio is that it has 0% exposure to technology. In fact, Slate Path has not touched a single tech stock for 11 consecutive quarters. This is utterly striking.

Tech’s prolonged rally has fueled most of the overall market’s gains both post-COVID-19 as well as those of the past few years. The pandemic boosted this trend, as the staying-at-home economy has further integrated technology in our lives, accelerating the sector’s growth.

Meanwhile, the fund has been able to deliver market-beating returns by a wide margin by completely avoiding the sector. Let’s break down the fund’s 10 largest investments and hopefully get a better insight on Slate Path’s investing style.

Charter Communications (CHTR)

Charter Communications is Slate Path’s largest holding and one of the two to surpass the 10% threshold in terms of its weight. Shares have more than doubled over the past 2 years, as the company’s cable and internet services have been delivering robust financials while they are also pandemic-proof. The company is highly committed to delivering solid shareholder returns, executing massive stock buybacks.

Over the past three years alone, the company has repurchased and retired around 24% of its total shares outstanding, delivering massive tangible capital returns. Slate Path held its position steady during the quarter, retaining its high conviction position for the stock.

Considering that the funds hold shares since early 2013, it’s likely that Charter will continue to be a significant holding in the future and a high-conviction pick for the fund.

Zillow Group (ZG)

The pandemic may have adversely affected some of the real estate sub-sectors like mall-REITs, retail locations, and partially commercial properties. However, demand for residential housing has remained robust, as the pandemic’s work-from-home push has boosted the sector.

Zillow has greatly benefited as increased interest in buying and selling properties has grown its online traffic. With the pandemic remaining active, it’s more than likely that the company’s performance should continue improving in the medium term. Still, investors need to be aware, as the company does not expect to report any profits until 2022. The fund trimmed its stake by around 61% since its latest filing, possibly to risk-adjust its portfolio after Zillow’s shares more than quadrupled since last March’s market lows.

Barrick Gold (GOLD), Pan American Silver Corp. (PAAS), and Freeport-McMoRan Inc. (FCX)

Gold has been trading higher over the past few years, as the Fed’s non-stop expansionary policy and recent money-printing stimuli to sustain the economy have flooded the market with cash, increasing gold’s value as an anti-inflationary hard asset. Goldminers such as Barrick Gold have shared this rally, booking record profits. During the past 4 quarters, the company has reported a nearly all-time net income of $3.0 billion, sending shares near a 7-year high.

While the stock’s valuation at around 13.8X its earnings may be seemingly attractive, investors must be wary, as gold miners can be extremely volatile, incur huge losses during rainy days, and are overall almost entirely dependent on a single commodity’s price range.

Quite similarly, Pan American Silver Corp. is suggesting a similar investment thesis, only this time the precious metal the company extracts and processes is silver. The fund’s position is probably for diversification purposes, increasing the portfolio’s margin of safety against a potential correction in gold itself.

Finally, Slate Path’s stake in Freeport-McMoRan, another precious metals mining company, is probably due to its non-American operations, adding another layer of geographical diversification in its basic materials exposure.

The three companies account for around 26% of Slate Path’s public-equity portfolio.

The New York Times Company (NYT)

The New York Times has been having a blast over the past decade, gradually expanding its gross margins, and subsequently, profitability, with shares on track to hit new all-time highs since 2003.

Slate Path has been holding share since early 2018 and boasts an average purchase below $26, marking >76% capital gains in just around 2 years’ time. The fund slashed retained its current position with no changes made, occupying nearly 9% of its holdings.

Warner Music Group Corp. (WMG)                       

Around 9.6% of Slate Path’s funds are allocated to Warner Music, the well-known and easily recognizable company that operates through its recorded music and music publishing segments.

The company completed its IPO this past summer, with the fund shortly after adding shares to its portfolio from early on.

With platforms like Spotify and Apple Music consistently increasing their user bases, artists and labels have been able to extract larger royalties. Consequently, Warner Music’s revenues had been increasing annually over the past few years, as the company’s IPO documents revealed.

The company recently reported its Q3 results, which is the first full quarter it has been a publicly-traded company. Results came in mixed, lacking any growth while essentially breaking even, reporting $1 million in net losses. Hopefully, the company will be able to leverage its IPO proceeds to grow its financials in the medium term, capitalizing on the rise of digital music platforms. Still, considering that the company’s IPO remains quite fresh, investors should be aware of the potential risks attached.

The Mosaic Company (MOS)

Slate Path has been building its stake in the Mosaic Company since Q1-2018. During the past quarter, management increased its position once again by around 5% despite shares failing to reward investors over the past 5 years. The company has been struggling to produce sustainable profits as its agricultural operations remain an extremely low margin business. However, considering that shares are currently trading at around 1X sales, the fund’s double down could end up being quite fruitful amid a potential margin expansion in the future.

Snap Inc. (SNAP)

Snap had a rough IPO in 2017, with shares gradually declining as much as 81% over the next couple of years. While few could have expected it, the shares have made a massive rebound, recently crossing their IPO price as the company has been delivering outstanding results. Average Revenue per User (ARPU) has skyrocketed since 2017 from $4.65 to $9.24 over the past year, which has helped the company to grow its revenues rapidly.

Simultaneously, Snap’s cost of revenue per user has remained steady, resulting in considerably expanding operating margins over time.

Investors looking to buy into the stock now should note that the company is not expected to report profitability for at least the next two years, which remains a risk, as it may need to seek additional funding, which could involve issuing more shares, diluting existing shareholders.

Stitch Fix, Inc. (SFIX)

Stitch Fix entered the Slate Path’s top 10 holdings, as the fund initiated a massive position during the quarter, purchasing nearly $70 million worth of shares. The stock had been struggling over the past few years, as the company has remained unprofitable, while lacking any exciting explosive growth.

However, with management’s plans to expand Stich Fix’s margins to deliver profitability and hopefully create some shareholder value going forward, the stock has started climbing higher over the past few months, currently trading above its IPO price. Slate Path conviction must be quite strong, as the company currently owns around 2.5% of the company’s total shares, which could potentially be developed into an active-influence stake in the future.

Final Thoughts

Slate Path Capital is a truly unique fund. The company has apparently no interest in being in the spotlight, sharing nothing about its operations to outsiders. At the same time, its returns have been astounding while lacking any tech sector exposure, despite the sector being the overall market’s primary growth driver.

While the fund’s portfolio is quite concentrated among a limited number of equities, Slate Path’s strategy seems to be revolving around equities with the potential to expand their margins, coupled with a strong hedge towards the precious metals industry. Despite lacking further information on how the fund hand-selects its picks, we can get a good feeling from the company’s f13 filings, which should hopefully generate some unique opportunities for us, retail investors, to consider carefully replicating.