In this article, we discuss the 8 stocks that Japanese billionaire Masayoshi Son is dumping. If you want to skip our discussion on the recent losses incurred by Mr. Son, go to Japanese Billionaire Masayoshi Son is Dumping These 4 Stocks.
Masayoshi Son’s SoftBank Group Corp. (OTC:SFTBY) reported its highest-ever quarterly loss of over $23 billion during Q2 2022. To resurrect investor confidence and stabilize its finances to weather the global economic downturn, SoftBank Group Corp. (OTC:SFTBY) sold significant stakes in notable companies. During the presentation following the Q2 2022 earnings release, Mr. Son revealed that he had shifted to a “defensive mode” and highlighted the importance of retaining cash by liquidating his positions. The move has been made to ensure that Softbank can fulfill the payments due at the maturity of its debts. At the end of the quarterly presentation, Mr. Son said:
“It’s definitely heavy rain. How deeply will the rain damage our asset value? We don’t know. Therefore, we cannot take too much risk.”
The billionaire’s stance reflects that he has adopted a risk aversion strategy to ensure survival during the economic downturn. However, this does not mean that Mr. Son has taken a backseat. He reassured investors that his vision was still focused and could swiftly switch to attack mode.
Mr. Son displayed showmanship during the quarterly presentation for the second quarter. He started the presentation by putting forward a painting of Tokugawa Ieyasu, a feudal shogun, who had to face significant losses in a battle due to his pride. Observers take it as a sign that Mr. Son will take a more pragmatic approach to investments in the future. The defensive stance is a complete contrast to the confident and bullish outlook presented by the founder of the Vision Fund over the years. Mr. Son has always taken an aggressive stance on his investments and has used the instrument of leverage creatively. He has often highlighted the importance of looking at the big picture in the market.
Investment Philosophy
Mr. Son observed his wealth fall by around $70 billion after the dot-com bubble crash in 2001. However, he was able to turn his fortune around after taking an early bet on Alibaba Group Holding Limited (NYSE:BABA). Experts believe that Mr. Son has a knack for converting a vision into an asset class. For instance, he placed his bet on the disruptive and visionary ride-hailing and autonomous driving industry through his stake in Uber Technologies, Inc. (NYSE:UBER). However, his mantra has come under serious attack as the technology sector has plummeted amidst rising inflation and interest rates. This has made experts question whether the investment philosophy of Masayoshi Son can only work well in a bull market with ample cash available. It must be noted that Saudi Prince Mohammad bin Salman is a key investor in the Vision Fund through Public Investment Fund (PIF), the Saudi sovereign wealth fund (SWF). When Mr. Son was touring the Middle East to pitch the Vision Fund, he increased the proposed fund size from $30 billion to $100 billion to make the fund look impressive in the eyes of prospective investors. The fund has a positive view of technology innovation and believes that the companies in its portfolio can help create synergies. It might be too early to question the philosophy of the veteran billionaire.
Significant Losses Incurred
Softbank is focused on investing in corporations belonging to different sectors ranging from energy, healthcare, financials, and technology through its Vision Fund, valued at around $100 billion as of Q2 2022. The investment arm of Softbank accumulated a loss of over $36 billion during the first half of 2022. As a result of these losses, the gains recorded by the firm during the post-pandemic period in 2021 have been wiped out. This has also caused SoftBank to cut a minimum of 20% of the employee headcount to reduce costs. Furthermore, one of the top executives of Softbank, Rajeev Misra, stepped down from his posts as the executive vice president and corporate officer. Mr. Misra was a driving force behind the rise of the Vision Fund after it was founded in 2017 and made Softbank one of the biggest tech investors globally.
With the macroeconomic conditions worsening and Softbank looking to boost its cash position, billionaire Masayoshi Son reduced the group’s stakes in several popular companies like Uber Technologies, Inc. (NYSE:UBER), Alibaba Group Holding Limited (NYSE:BABA), and Opendoor Technologies Inc. (NASDAQ:OPEN) during the second quarter of the year.
Masayoshi Son of SB Management
Our Methodology
Let’s begin our list of the eight stocks that Chairman & CEO of Softbank Group Corp, Masayoshi Son, was dumping during Q2 2022. The Japanese billionaire liquidated 100% of his stake in six of the following stocks. The companies have been ranked from the lowest to the highest in terms of the number of hedge fund holders as of the second quarter of 2022.
8. UiPath Inc. (NYSE:PATH)
Number of Hedge Fund Holders: 24
UiPath Inc. (NYSE:PATH) is a New York-based company that went public in April 2021. The company is working on bringing into use the power of automation by creating robotic process automation (RPA) software.
According to the regulatory filing on August 15, Softbank liquidated its 100% stake in UiPath Inc. (NYSE:PATH) during Q2 2022. The diversified investment management firm held just over 63,000 shares in the company. UiPath Inc. (NYSE:PATH), considered a direct competitor of Microsoft Corporation (NASDAQ:MSFT) in the field of RPA, became a part of the Softbank portfolio initially in Q3 2021.
Since the start of 2022, UiPath Inc. (NYSE:PATH) stock has lost over 62% of its value as the exuberant valuations of tech stocks have come under the limelight amidst a rising interest rate and inflationary environment. UiPath Inc. (NYSE:PATH) reported its Q2 2022 results on September 6. The company posted a non-GAAP operating loss of $11.2 million and recorded a 34% quarterly increase in operating expenses. Furthermore, UiPath Inc. (NYSE:PATH) recorded an EPS of -$0.02, beating the analysts’ estimate by 9 cents.
7. Guardant Health, Inc. (NASDAQ:GH)
Number of Hedge Fund Holders: 35
Guardant Health, Inc. (NASDAQ:GH) is a Palo Alto, California-based biotech company focused on treating cancer through advanced analytics, a diverse range of data sets, and patented blood tests that intend to bring cancer detection from labs to clinics.
Softbank used a creative way to gain exposure to the operations of the company by forming Guardant Health AMEA, Inc., a joint venture created in May 2018 to commercialize the liquid biopsy testing mechanism across Asia, the Middle East, and Africa (AMEA). The subsidiary had operations in 41 countries in the region. However, in June 2022, Guardant Health, Inc. (NASDAQ:GH) announced that Softbank had decided to offload its complete stake in the subsidiary for $177.8 million. The deal was beneficial for both parties as Softbank gained access to cash, and Guardant Health managed to develop a platform to launch its products and services across the globe and improve the outcome for cancer patients.
Here’s what ClearBridge Investments said about Guardant Health, Inc. (NASDAQ:GH) in its Q3 2021 investor letter:
“Innovation within the health care sector has long been an area of focus in the Strategy and we plan to continue to maintain a meaningful overweight to the sector. That said, we expect this will be reflected in more diversified exposures beyond therapeutics companies. Some of the emerging areas of interest include diagnostics, life science tools, labs and other related services, where we own liquid biopsy leader Guardant Health and are working to build new holdings.”
6. KE Holdings Inc. (NYSE:BEKE)
Number of Hedge Fund Holders: 37
KE Holdings Inc. (NYSE:BEKE) is a Beijing, China-based holding company representing various offline and online platforms related to real estate transactions in the Chinese market.
The Q2 2022 earnings presentation revealed that Softbank offloaded its entire $1.35 billion stake in KE Holdings Inc. (NYSE:BEKE). The update revealed that Mr. Son sold his stake at a discount to protect his shareholders. However, this is being seen as a negative development for the companies in which Softbank is heavily invested as the investment firm is putting the interest of its shareholders first without taking into consideration the impact on the companies.
KE Holdings Inc. (NYSE:BEKE) raised $2.12 billion through its IPO in August 2020. Chinese real estate is facing a downturn as the government has cracked down on speculative activity to control real estate prices. The demand for housing is dwindling in the Chinese economy. During the first half of 2022, the trading volume in the housing sector of the top 15 Chinese cities fell by over 50% YoY.
KE Holdings Inc. (NYSE:BEKE) was discussed in the Q3 2021 investor letter of Tao Value. Here’s what the firm said:
“As witnessed in the past quarter, the government intervention in Chinese private sector is elevated to an unprecedented level. Given this background, I thoroughly reviewed all our Chinese holdings and made a few changes. We exited KE holdings (ticker: BEKE), for high potential regulatory risk and the passing of the visionary founder & CEO Zuo Hui (who was a core tenet of our original thesis).”
Of the 895 hedge funds in Insider Monkey’s database, KE Holdings Inc. (NYSE:BEKE) was held by 37 funds during Q2 2022.
5. Procore Technologies, Inc. (NYSE:PCOR)
Number of Hedge Fund Holders: 33
Procore Technologies, Inc. (NYSE:PCOR) is a Carpinteria, California-based developer of construction management software.
Procore Technologies, Inc. (NYSE:PCOR) went public in May 2021 and raised $635 million. Softbank initiated its holding in the company in Q3 2021 and completely offloaded its stake in Q2 2022. Procore Technologies, Inc. (NYSE:PCOR) offers construction and project management software solutions globally following a software-as-a-service (SaaS) revenue model.
Although the company is experiencing significant growth in revenue and gross profit, operating losses are rising due to higher expenses. With a recession looming around the corner, there is a strong likelihood of operating losses rising in the future. In a rising interest rate environment, loss-incurring companies like Procore Technologies, Inc. (NYSE:PCOR) are often forced to fund their operations by raising debt and financing it at a high-interest rate.
D1 Capital Partners also reduced its stake in Procore Technologies, Inc. (NYSE:PCOR) by 60% during Q2 2022.
In addition to Procore Technologies, Inc. (NYSE:PCOR), billionaire Masayoshi Son has also reduced his stake in popular companies like Uber Technologies, Inc. (NYSE:UBER), Alibaba Group Holding Limited (NYSE:BABA), and Opendoor Technologies Inc. (NASDAQ:OPEN) during Q2 2022.
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Disclose. None. “Defensive Mode”: Japanese Billionaire Masayoshi Son is Dumping These 8 Stocks is originally published on Insider Monkey.