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- This 5 billion dollar fund holds only 9 stocks
This 5 billion dollar fund holds only 9 stocks
Altarock Partners and the art of concentrated bets
Altarock Partners is an investment firm specializing in concentrated, long-term investments in high-quality public companies. I like to study holdings of funds with concentrated bets because they are forcing themselves to make the hard trade offs. Only the fittest companies would survive to stay here. Altarock now manages over $5 billion in assets.
Company | Ticker | % of portfolio |
|---|---|---|
TransDigm Group Inc. | TDG | 29.46 |
Amazon.com Inc. | AMZN | 19.83 |
Microsoft Corp. | MSFT | 16.40 |
Alphabet Inc. | GOOGL | 10.89 |
Moody’s Corp. | MCO | 9.97 |
Visa | V | 6.06 |
Mastercard Inc. | MA | 6.03 |
Fair Isaac Corp. | FICO | 1.33 |
Charter Communications | CHTR | 0.04 |
The nine companies they hold now represent the highest conviction bets and you should study these companies and add to your investable universe. In fact the top 5 bets make up 86% of the portfolio.
Fund Manager Mark Massey has built a reputation with high Sharpe ratio and significant returns over time, with his concentrated growth focused investing.
Strong revenue growth is common across these holdings. Companies who can’t grow revenues over long periods of time can rarely make good investments in my opinion. That indicates that it can’t even keep up with inflation. Such companies often use financial mechanics like share purchase (or sometimes even shady things like changing the depreciation rates for assets) to boost their EPS growth. In my opinion, they are fundamentally doomed.
Company | Annualized 10-Year Revenue Growth Rate |
|---|---|
TransDigm Group Inc. (TDG) | 25.39% |
Amazon.com Inc. (AMZN) | 20.19% |
Microsoft Corp. (MSFT) | 10.55% |
Alphabet Inc. (GOOGL) | 15.83% |
Moody's Corp. (MCO) | 7.27% |
Visa (V) | 9.18% |
Mastercard Inc. (MA) | 8.87% |
Fair Isaac Corp. (FICO) | 5.23% |
All these companies also have a very strong moat. You will observe that all the good investors look for moats. Moats are what can protect companies’ profits over long periods of time. For long-term investors, this is central to their investment thesis.
Company | Moat Type | Details |
|---|---|---|
TransDigm Group Inc. (TDG) | Switching Costs, Specialized Market | Highly engineered parts with regulatory requirements create high customer switching costs. |
Amazon.com Inc. (AMZN) | Network Effects, Economies of Scale, Cost Advantage | Dominates e-commerce and cloud computing through vast infrastructure and customer base. |
Microsoft Corp. (MSFT) | Network Effects, High Switching Costs, Brand Strength | Integrated ecosystem and enterprise dependency on products like Azure and Office 365. |
Alphabet Inc. (GOOGL) | Network Effects, Data Advantage, Brand | Search engine dominance with targeted advertising leveraging data and user network effects. |
Moody's Corp. (MCO) | Regulatory Barriers, Brand, Switching Costs | Embedded in financial systems with NRSRO status limiting competition. |
Visa (V) | Network Effects, Brand Strength | Global payment network benefits from more merchants and consumers using Visa cards. |
Mastercard Inc. (MA) | Network Effects, Brand Strength | Extensive global payment system reinforces consumer and merchant trust. |
Fair Isaac Corp. (FICO) | Data Advantage, Brand, Switching Costs | Industry-standard credit scoring deeply integrated into financial systems. |
Charter Communications (CHTR) | High Switching Costs, Economies of Scale | Broadband infrastructure limits alternatives and provides cost efficiencies at scale. |
Companies with moats also tend to generate higher profits and return on investments compared to others.
While these companies today appear to be fully valued, their sustained competitive advantage and moat could continue to justify higher valuations. These all easily make it to my investible universe of stocks.
