In this article, we discuss the top 10 stock picks of David Thomas’s Atalan Capital. If you want to skip our detailed analysis of Thomas’s history, investment philosophy, and hedge fund performance, go directly to the 5 Stocks to Invest In Now According to David Thomas’s Atalan Capital.

David Thomas founded Atalan Capital Partners LP in 2014 and currently serves as its Managing Partner and Chief Investment Officer. Prior to founding Atalan, Thomas worked at Soroban Capital Partners, along with previous stints at Highside Capital Management, and Perry Capital.

Atalan Capital Partners LP is based in New York and invests primarily in global equity, debt securities, and equity-related securities. The hedge fund has $1.60 billion in assets under management (AUM) as of September 2021, which is up from $1.64 billion in June 2021. Atalan Capital Partners LP has holdings diversified in Technology, Healthcare, Industrial Goods, Services, and other sectors. The fund’s top 10 holdings constitute roughly 83% of its total portfolio. According to 13F filings for the third quarter, Atalan Capital Partners LP bought new positions in 2 stocks, made additional purchases in 9 stocks, and completely sold out of 3 stocks, whilst reducing its stake in only 1 stock.

Some of the top stocks in David Thomas’s Atalan Capital include Booking Holdings Inc. (NASDAQ:BKNG), Uber Technologies, Inc. (NYSE:UBER), and Adobe Inc. (NASDAQ:ADBE), among others mentioned in detail below.

In this article, we’ll focus on the top 10 holdings of David Thomas’s Atalan Capital.

Our Methodology

To compile this list, 13F filings for Q3 2021 were used. Hedge fund sentiment around each stock was derived using Insider Monkey’s database of 867 elite hedge funds.

10 Stocks to Invest In Now According to David Thomas’s Atalan Capital

10. PagSeguro Digital Ltd. (NYSE:PAGS)

Atalan Capital’s Stake Value: $99.30 million

Percentage of Atalan Capital’s 13F Portfolio: 6.19%

Number of Hedge Fund Holders: 41

Starting off the list of 10 stocks to buy according to David Thomas’s Atalan Capital is PagSeguro Digital Ltd. (NYSE:PAGS), a fin-tech company based in Brazil providing a range of financial services. According to regulatory data for the third quarter, Atalan Capital owns 1.92 million shares in PagSeguro Digital Ltd. (NYSE:PAGS), worth $99.3 million which accounts for 6.19% of the fund’s overall portfolio. This is an increase of 13% over the last quarter where Atalan Capital held 1.7 million shares in the firm.

On February 2, Deutsche Bank analyst Bryan Keane maintained a ‘Buy’ rating on PagSeguro Digital Ltd. (NYSE:PAGS) shares, whilst lowering the price target to $40 from $58. Keane noted that the company will likely face headwinds in the near term as it works to pass on higher pricing to merchants, but he still expects the firm to post robust sales in the fourth quarter.

Ivestors were bullish on PagSeguro Digital Ltd. (NYSE:PAGS) in the third quarter of 2021, with 41 hedge funds holding stakes in the company worth $2.44 billion, in comparison to 40 hedge funds in the previous quarter. PagSeguro Digital Ltd. (NYSE:PAGS) reported an EPS of $0.23 for the third quarter, which was in line with consensus estimates. Quarterly revenue stood at $508.84 million, outperforming estimates by $17.99 million.

Investment firm Artisan Partners mentioned PagSeguro Digital Ltd. (NYSE:PAGS) in its Q1 2021 investor letter. Here’s what the fund said:

“We also reduced our position in PagSeguro. PagSeguro is making good progress establishing a fast-growing digital bank and expanding its Brazilian payments business despite the pandemic. However, the company’s growth initiatives will require another year of heavy investment spending in 2021. This comes as Brazil’s progress combatting COVID-19 trails many major economies’, casting a cloud over the broader economic outlook. Given these potential headwinds, we trimmed our position to fund higher conviction holdings.”

Along with Booking Holdings Inc. (NASDAQ:BKNG), Uber Technologies, Inc. (NYSE:UBER) and Adobe Inc. (NASDAQ:ADBE), PagSeguro Digital Ltd. (NYSE:PAGS) is an exciting stock option for investors in 2022.

9. Builders FirstSource, Inc. (NYSE:BLDR)

Atalan Capital’s Stake Value: $99.85 million

Atalan Capital’s 13F Portfolio: 6.22%

Number of Hedge Fund Holders: 53

Builders FirstSource, Inc. (NYSE:BLDR) deals in the provision of construction materials and services to consumers in the United States. The company is the biggest supplier of home construction materials in the United States. David Thomas owns 1.93 million shares in Builders FirstSource, Inc. (NYSE:BLDR) at the close of the third quarter, representing a 6.22% slice of his overall portfolio.

On January 6, DA Davidson analyst Kurt Yinger maintained a ‘Buy’ rating on Builders FirstSource, Inc. (NYSE:BLDR) shares, and raised the price target to $100 from $93, owing to the firm’s acquisition of New England building material firm National Lumber, which he says would add to its “already leading national scale”.

Out of the 867 elite hedge funds tracked by Insider Monkey, 53 were long Builders FirstSource, Inc. (NYSE:BLDR) at the close of the third quarter, in contrast to 60 hedge funds with bullish bets on the company in Q2 2021.

Investment firm Merion Road Capital Management talked about Builders FirstSource, Inc. (NYSE:BLDR) in its Q3 2021 investor letter. Here’s what the fund said:

“I added to our position in Builder’s FirstSource (“BLDR”) during the quarter. BLDR is the largest national supplier of structural building products and value-added components to the residential construction market. They have been active in consolidating the industry, most notably with the merger of BMC earlier this year. Like other distributors, BLDR benefits from scale advantages that afford them a robust product offering, enhanced purchasing power, and fixed cost leverage. They will continue to acquire smaller competitors and have announced 5 new deals so far this year.

I view the strategic benefit of these acquisitions in three different buckets. There are the core tuck-in acquisitions of facilities and customer lists that increase scale and geographic reach. An example would be the company’s May acquisition of John’s Lumber, a lumber and specialty product distributor serving the Detroit MSA, at 0.5x revenue. There are product acquisitions that leverage their platform to increase distribution and improve the product offering. For instance, last month BLDR announced the acquisition of California TrusFrame, a designer and manufacturer of prefabricated components like trusses and wall panels, at 1.3x revenue. And lastly BLDR has begun investing in software and services. In June they spent $450mm on the purchase of WTS Paradigm, a software company that addresses the complexity around building configuration, estimating, and manufacturing, at 9.0x revenue. By utilizing software to in the planning process, WTS Paradigm cuts down on material and labor waste, ensures an optimal fit of product and design, and eases the contractor’s workload. BLDR has followed this up with a much smaller software acquisition in September.

BLDR is in the very early innings of their software investment, so it is difficult to pinpoint exactly how it will impact the company in the coming years. Management believes that there is a lot of low hanging fruit, pointing to a McKinsey study ranking the construction industry as second to last on overall digitization. If anyone has had any work done to their house, I am sure they can anecdotally attest to this. BLDR plans to leverage WTS Paradigm to increase internal productivity (i.e. improved estimating leading to fewer visits to the job site), cross-sell the software to existing clients, and drive greater adoption of value-added products. So thinking a few years out I think the goal would be to have higher margins on their commodity business, a greater mix of revenue coming from value added products, a stronger relationship with their customer, and an enhanced competitive advantage…” (Click here to see the full text)

8. VeriSign, Inc. (NASDAQ:VRSN)

Atalan Capital’s Stake Value: $108.65 million

Percentage of Atalan Capital’s 13F Portfolio: 6.77%

Number of Hedge Fund Holders: 40

VeriSign, Inc. (NASDAQ:VRSN) is up next on the list of top stocks to buy according to David Thomas’s Atalan Capital. The firm deals in the provision of internet domain name registry services and internet infrastructure services around the globe. In the third quarter of 2021, 40 hedge funds reported holding VeriSign, Inc. (NASDAQ:VRSN) shares in their portfolio, with a combined value of $5.39 billion. In comparison, 41 hedge funds held stakes in VeriSign, Inc. (NASDAQ:VRSN) at the end of Q2 2021. According to filings for Q3, David Thomas’s Atalan Capital owns 530,000 shares in the firm valued at $108.65 million, amounting to 6.77% of its total holdings.

In the third quarter, VeriSign, Inc. (NASDAQ:VRSN) posted earnings per share of $1.50, beating consensus expectations by $0.10. The revenue figure of $334.24 million also beats analyst forecasts by $2.23 million.

Investment firm Baron Funds talked about many stocks in its Q4 2021 investor letter, and VeriSign, Inc. (NASDAQ:VRSN) was one of them. Here’s what the fund said:

Verisign, Inc. provides internet infrastructure services worldwide and is best known for its exclusive role managing the .com and .net domains, for which it receives annual fees from all those domain owners. Shares of Verisign gained after reporting strong revenue growth and operating margins that exceeded Wall Street forecasts. We continue to be positive on Verisign’s business, based on its strong competitive position, capacity for global growth in domain names, and its ongoing ability to generate substantial free cash flow.”

7. Booking Holdings Inc. (NASDAQ:BKNG)

Atalan Capital’s Stake Value: $109.19 million

Percentage of Atalan Capital’s 13F Portfolio: 6.8%

Number of Hedge Fund Holders: 96

Booking Holdings Inc. (NASDAQ:BKNG) is an online travel company that operates Booking.com, RentalCars.com, and OpenTable. David Thomas’s Atalan Capital added Booking Holdings Inc. (NASDAQ:BKNG) stock to its portfolio over the third quarter, with 46,000 shares valued at $109.19 million, representing 6.8% of the fund’s overall holdings.

On January 7,  Jefferies analyst John Colantuoni assumed coverage of Booking Holdings Inc. (NASDAQ:BKNG) with a ‘Buy’ rating and $3,100 price target, noting that the company’s exposure to growing travel markets will afford it around seven years of 15%+ growth in EPS.

Wedgewood Partners, an investment management firm, talked about Booking Holdings Inc. (NASDAQ:BKNG) in its Q4 2021 investor letter. Here’s what the fund said:

Booking Holdings also contributed to performance, though less so compared to most portfolio holdings. The Company reported substantial room-night growth compared to the year ago period, which was heavily affected by COVID. Intra-quarter, Booking Holdings consolidated room-nights approached almost 90% of pre-COVID levels because both domestic and international travelers have had to endure a few years of pent-up travel aspirations and are being eased back into the market with various governments relaxing some of their most stringent, COVID-related travel restrictions. Although infection rates related to new COVID variants (particularly Omicron) have risen subsequent to last quarter, we think populations around the world are coming to grips with the risk of infection and will inevitably return to spending on travel. Booking Holdings represents a key source of demand for the small and medium sized hospitality industry and has the second largest global booking volume for alternative accommodations. The latter observation is significantly misunderstood by investors and represents substantial upside to the stock, regardless of the timing of the recovery of traditional hospitality spending; hence, we added to our position in Booking Holdings.”

6. MSCI Inc. (NYSE:MSCI)

Atalan Capital’s Stake Value: $112.54 million

Percentage of Atalan Capital’s 13F Portfolio: 7.01%

Number of Hedge Fund Holders: 43

MSCI Inc. (NYSE:MSCI) is one of the top stock picks of David Thomas’s Atalan Capital, with the fund owning 185,000 shares in MSCI Inc. (NYSE:MSCI) worth $112.54 million, amounting to 7.01% of the fund’s overall portfolio as of September 2021. MSCI Inc. (NYSE:MSCI) is a US-based finance company that offers investment decision support tools and products, including equity, fixed income, stock market indices and ESG products.

On January 28, Oppenheimer analyst Owen Lau kept an ‘Outperform’ rating on MSCI Inc. (NYSE:MSCI) shares and revised the price target to $602 from $724. Lau noted that the stock has been under pressure along with the broader market since the start of 2022, but current valuations present an excellent buying opportunity for a solid business.

New York-based Baron Growth Fund mentioned MSCI Inc. (NYSE:MSCI) in its Q3 2021 investor letter. Here’s what the fund said:

MSCI, Inc., a leading provider of investment decision support tools, contributed to performance. The company reported strong second quarter earnings results and management continued to express optimism regarding the economic and market backdrop moving forward. MSCI also enhanced its private markets capabilities with the acquisition of Real Capital Analytics. We retain long-term conviction as the company owns strong, “all weather” franchises and remains positioned to benefit from numerous secular tailwinds in the investment community.”

Just like MSCI Inc. (NYSE:MSCI), Booking Holdings Inc. (NASDAQ:BKNG), Uber Technologies, Inc. (NYSE:UBER) and Adobe Inc. (NASDAQ:ADBE) are top stock picks in the portfolio of David Thomas’s Atalan Capital.

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Disclosure: None. 10 Stocks to Invest In Now According to David Thomas’s Atalan Capital is originally published on Insider Monkey.

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