SRS Investment Management’s 13F Stock Holdings & Strategy

Updated on December 18th, 2020 by Nikos Sismanis

SRS Investment Management, LLC was founded in 2007 by a group of partners, including Edwin M. Stanton, Nicholas J. Rhodes, Danial K. Carr, and Richard D. Baier, who are all still with the company today.

The firm is an employee-owned with Karthk Sarma currently having the majority ownership. Mr. Sarma’s current title is Managing Partner of SRS Investment Management. The firm operates six private funds.

Mr. Sarma earned a bachelor’s degree in mechanical engineering from the Indian Institute of Technology in 1996. He later earned a Master’s degree in operations research from Princeton University. He first was a consultant at McKinsey & Company for almost three years. He then found another position as a managing sirector for Tiger Global Management. He worked there for five years. At that point, he found SRS Investment Management.

He now oversees $2.4 billion in total Assets under Management (AUM) and $1.5 billion that are invested in public equities.

Investors following the company’s 13F filings over the last three years (from mid-November 2017 through mid-November 2020) would have generated excellent annualized total returns of 29.1%. For comparison, the S&P 500 ETF (SPY) made annualized total returns of 12.2% over the same period.

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

Click the link below to download an Excel spreadsheet with metrics that matter of SRS Investment Management’s current 13F equity holdings:


Table Of Contents

SRS’s Investing Strategy

SRS Investment strategy is to achieve high rates of return by investing in securities likely to generate long-term capital appreciation. The firm hopes to accomplish this by buying low, investing conservatively, and generating value through fundamental investment enhancements where possible.

The firm focuses on a bottom-up strategy, which means looking at each company fundamentally—making sure that earnings are growing at a substantial rate. For example, the firm recently increased its position in Avis Budget Group, (CAR) by over $24 million.

The company has faced significant struggles as a result of COVID-19 restricting traveling, hence plummeting the demand for car rentals. As a result, the company’s shares have been greatly depressed over the past few months.

These are the type of companies that SRS is looking for and investing into. This strategy has brought significant growth to the firm.

SRS’s Top Holdings

The fund’s largest holding, by far, is Netflix. The streaming giant accounts for around 23% of SRS’s public-equity holdings despite management trimming the position by around 8%, selling around 270,000 shares. Netflix has been the fund’s top holding for several quarters, with SRS apparently loving its long-term growth story. So far, they have been right, as Netflix’s stock is currently trading near all-time highs, beyond $500/share.

The company has achieved consecutive quarter-over-quarter revenue growth since 2012, with its global subscriber base continuously expanding. As a result, the company has been able to leverage its economies of scale and has increasingly been reporting more solid profitability levels. In FY2016, the company booked $186 million in net income. In just four years, that figure grew to $2.6 billion.

With COVID-19’s new daily cases remaining strong, companies operating in the staying-at-home economy like Netflix are likely to continue flourishing. Coupled with its ever-expanding net income margins, Netflix is likely to remain investable, even near all-time highs.

Zillow Group (Z):

While some real estate sub-sectors like malls and retail locations have struggled due to the pandemic, the demand for residential properties has remained robust. As a result, revenues for Zillow Group, which operates a leading marketplace for residential real estate, have remained solid. The fund sold 1.2 million shares during the quarter likely to book some profits. Still, it’s SRS’s second-largest holding.

While Zillow has been growing quite rapidly, the company has not managed to turn the business profitable. However, being a high-margins service, Zillow should eventually turn its bottom line positive. In the meantime, its -quite massive for its size- cash position of around $3.5 billion should easily sustain its short-term losses, as the company keeps reinvesting everything back into the business.

Avis Budget Group (CAR), Planet Fitness (PLNT), MGM resorts (MGM), Booking Holdings (BKNG):

These for stocks collectively account for just under 25% of the fund’s holdings, in what we may call its high conviction distressed investment opportunities. These are companies in different sectors that have been adversely affected due to the pandemic. It seems that the fund has selected what it believes to be the highest quality companies in sectors such as gambling, traveling, and gyms in hopes of a post-COVID resumption to normality.

These are some risky investments. For example, Avis was on the brink of bankruptcy just a few months ago. The company has taken massive amounts of debt to stay solvent, which should hurt its long-term profitability prospects. Simultaneously, because SRS has managed to scoop-up shares on the cheap, these investments could pay big time, upon reversing their current negative sentiment.

Booking Holdings has been one of the fastest to recover. Unlike Avis, whose business model is capital intensive, requiring tons of physical assets, Booking managed to report a profitable Q2 and Q3, despite the massively decreased revenues. The company surely has a long way to go before its operations return to normality. Its room, car, and dining booking services should remain below optimal levels due to the pandemic. However, due to the company’s frictionless business model and cash-rich financials have caused shares to massively recover, doubling from its March’s lows.

It’s likely that Planet Fitness and MGM will continue struggling in the short term as both people are more likely to avoid crowded places, while authorities themselves should continue with restricting the number of visitors. Therefore, these companies may require a few years before a potential resumption to normality. However, the market is forward-looking, with shares having already started to advance. MGM, for example, has gained significantly over the past, having made SRS’s $232M stake increase already quite profitable.

Facebook (FB) and Twitter (TWTR): 

The two social media giants account for just over 6% of SRS’s holdings. The fund trimmed almost its entire Facebook position during the quarter, possibly to book some profits amid its rally, while its Twitter position is relatively new. Facebook’s financial qualities are well-known, though amid the recent regulatory concerns, we can see why SRS decided to almost exit its position.

While Twitter’s investment case is more volatile and less clear, as the company has been struggling to properly monetize its user base, let alone deliver some profits, SRS increased its position by a massive 137%, clearly showing its preference on which social media giant is rooting for going forward.

Microsoft (MSFT):

If you have read any other of our articles, you know why this stock is found amongst the top holdings of every fund consistently. The tech giant is an unstoppable juggernaut with no signs of slowing down. Considering the stock’s prolonged rally, it’s one of SRS’s most profitable investments over the past couple of years. It’s SRS 6th largest holding, accounting for 4.6% of its total portfolio.

Citrix Systems (CTXS):        

SRS decreased its position in Citrix by around 69%, yet the stock remains its 10th largest holding. The company’s virtual apps include cloud-based file sharing and storage solutions, which provide enterprise-class data services on various corporate and personal mobile devices. Providing an essential tool for many businesses and entrepreneurs, Citrix’s top and bottom line remained solid during the pandemic, despite the overall hurdles.

Further, the company’s transition towards a subscription-based service has caused excitement amongst investors, as a growing ARR is likely to attach a higher valuation multiple to shares moving forward.

Final Thoughts

SRS Investment Management focuses on fundamental growth. Even during adverse economic times, SRS has been performing very well. Based on the firm’s 13F filings, the fund has been outperforming the market considerably.

If history is any indication, SRS Investment Management’s 13F filings make for compelling investment selections for investors looking for capital appreciation.