San Francisco-based HMI Capital filed a 13G this morning disclosing a 6.11% position in SailPoint Technologies Holdings (SAIL). The software company was HMI’s #12 holding as of the second quarter’s close. But after HMI Capital increased its SailPoint stake by 162%, purchasing 3.4 million additional shares as of October 22, SAIL becomes HMI’s top position.
SailPoint Technologies provides security software products and services. The company enables customers to govern the digital identities of employees, contractors, business partners and other users, and manage their constantly changing access rights to enterprise applications and data. The company boasts a 29.64% annual growth over the last three years. In August, HMI reported Q2 revenue of $92.5 million, a 47% increase over Q2 2019.
On Oct. 1, Morgan Stanley increased its rating on SAIL from Equal-weight to Overweight and raised the price target for the stock from $23 to $50. SAIL closed at $41.51 on Oct. 30. Analyst Hamza Fodderwala said an “increasingly cloud-based and remote workforce is driving a shift in security demand towards Identity Management,” an area where SAIL is a “key beneficiary.”
Morgan Stanley upgraded SAIL on Oct. 1 from Equal-weight to Overweight, with a target of $50.
The analyst thinks an aggressive SaaS push from management “could drive more significant upside.” Fodderwala said that the Q2 report in August “showed early innings of demand inflection,” which should continue into the second half of the fiscal year.
HMI Capital, founded by Managing Partner and co-CIO Mick Hellman in 2008, has shown a knack for picking tech stocks. The hedge fund carries a WhaleScore of 98, meaning HMI’s 13F portfolio returns are in the top 2% of all funds in the hedge fund universe over the last several years. Since HMI began filing 13Fs in 2013, a portfolio that held equal-weight positions in the fund’s top 10 long positions, rebalanced quarterly, has averaged a 24.80% annual return. That’s nearly double the total return of the S&P 500.
HMI Capital increased its SailPoint stake after SAIL pulled back from an all-time high of $48.13 hit on Oct. 13.
Here’s how HMI describes its “Investment Objectives and Strategies” in the fund’s most recent ADV part II filed with the SEC.
Established during the 2008 – 2009 global financial crisis, HMI Capital, LLC seeks to invest in the highest quality businesses when capital markets put pressure on their valuations. Taking a long-term perspective with a strong value orientation, HMI seeks the best opportunities globally, primarily in public equities and at times distressed credit. The firm holds a concentrated portfolio of approximately 10 – 12 deeply researched names in three distinct industry sectors: Software, Internet and Media, and Financial Services. Through this approach, HMI strives to deliver high risk-adjusted real returns over long timeframes with low probability of permanent loss of capital.
HMI’s Q2 13F portfolio, now reflecting the recent increase in SAIL and another 13G filing from Aug. 5, New Relic (NEWR).
| Stock | Sector | Shares Held | Market Value | % of Port | Rank | Change in shares | % Ownership | Qtr 1st | Recent Price | Source | Source Date |
| SAIL | INFORMATION TECHNOLOGY | 5,543,273 | $250,445,074 | 11.23 | 1 | 3,433,718 | 6.11% | – | 41.51 | 13G | 10/22/20 |
| CRM | INFORMATION TECHNOLOGY | 1,323,244 | $247,883,000 | 11.12 | 2 | 11,300 | 0.15% | Q3 2019 | 232.27 | 13F | 6/30/20 |
| GOOG | COMMUNICATIONS | 161,345 | $228,079,000 | 10.23 | 3 | 1,500 | 0.02% | Q4 2018 | 1,621.01 | 13F | 6/30/20 |
| NEWR | INFORMATION TECHNOLOGY | 3,989,021 | $222,467,701 | 9.98 | 4 | 750,000 | 6.62% | – | 60.66 | 13G | 8/5/20 |
| SQ | FINANCE | 2,048,827 | $215,004,000 | 9.64 | 5 | 554,223 | 0.46% | Q4 2019 | 154.88 | 13F | 6/30/20 |
| BX | FINANCE | 3,319,935 | $188,108,000 | 8.44 | 6 | No Change | 0.48% | Q1 2016 | 50.42 | 13F | 6/30/20 |
| ARES | FINANCE | 4,672,855 | $185,512,000 | 8.32 | 7 | 2,464,551 | 3.26% | Q1 2020 | 42.3 | 13F | 6/30/20 |
| FB | COMMUNICATIONS | 710,784 | $161,398,000 | 7.24 | 8 | 340,876 | 0.03% | Q1 2020 | 263.11 | 13F | 6/30/20 |
| ADSK | INFORMATION TECHNOLOGY | 600,000 | $143,514,000 | 6.44 | 9 | 129,145 | 0.27% | Q4 2012 | 235.54 | 13F | 6/30/20 |
| MA | FINANCE | 468,000 | $138,388,000 | 6.21 | 10 | 42,000 | 0.05% | Q2 2019 | 288.64 | 13F | 6/30/20 |
| CARG | CONSUMER DISCRETIONARY | 4,823,551 | $103,609,875 | 4.65 | 11 | 1,661,449 | 4.27% | – | 19.93 | 13G | 10/14/20 |
| DT | INFORMATION TECHNOLOGY | 2,321,093 | $94,236,000 | 4.23 | 12 | 1,758,805 | 0.83% | Q1 2020 | 35.31 | 13F | 6/30/20 |
| PLAN | INFORMATION TECHNOLOGY | 1,121,903 | $50,833,000 | 2.28 | 13 | 2,060,000 | 0.80% | Q4 2018 | 55.35 | 13F | 6/30/20 |
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