Analyzing 13Fs: Public Investment Fund (Saudi Sovereign Wealth Fund)

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The discovery of oil in the 1930s completely revolutionized all aspects of life in Saudi Arabia and ultimately set the country on the path to becoming one of the richest and most prosperous nations on earth. Realizing that there is not be forever, the Gulf Kingdom plans to move away from its dependence on the oil and gas sector as much as possible, trying to break its financial dependence on fossil resources. One of the key aspects of this strategy is the Public Investment Fund. The fund became the subject of huge public attention in 2021 after leading a consortium this purchased Newcastle United, a Premier League football club.

The Public Investment Fund, commonly known as the “Saudi Fund”, is the sovereign wealth fund of Saudi Arabia. This article will only cover its US-based public equity holdings, but it is important to note that the fund represents one of the largest sovereign wealth funds in the world, with total estimated assets of $620 billion with an almost unprecedented global reach, far beyond US stocks. The chairman of the fund is not just anyone, but Crown Prince Mohammed bin Salman himself, an undoubtedly controversial figure in the West.

This information from this article is based on a 13F filing by the Public Investment Fund, in which it is required to disclose its US-based equity positions no more than 45 days after the end of the quarter. We analyze SEC 13-F filings to find newly disclosed portfolio position changes by institutional investors, along with their most recently reported holdings. Although it is not a reason in itself to enter the same positions, given that large institutional investors buy and exit positions for different reasons that are not necessarily aligned with the average investor. Newly discovered positions are a useful source of investment ideas and potential due diligence targets. This is especially true when combining the information from these disclosures with the information from the 13D documents, which sometimes tell a much clearer story.

Geographic map of PIF investments

Map of investments (Public Investment Fund)

Fund overview

While it remains true that the US-based fund’s assets under management shrank to $40.81 billion from the $43.57 billion they reported last quarter, the Public Investment Fund was actually a staunch buyer in the second quarter of 2022. The fund created 17 new positions during that time, many of them focused on “oversold” sectors such as the technology sector. PIF also took the opportunity to expand 4 already existing positions, with a largely similar mindset. PIF reduced only one position during the same time period and did not close any of its positions. The sovereign wealth fund’s concentration has long been known, but several of its top 10 concentrations of holdings fell this quarter as they reallocated their funds. For example, Lucid Group ( LCID ) today accounts for “only” 42.68% of the fund’s portfolio, compared to last quarter when it represented 59.18%. We remind you that the fund owns a 60.87% controlling stake in the electric car manufacturer. Combined with the Utilities Select Sector SPDR ETF ( XLU ) and Activision Blizzard ( ATVI ), these three holdings are the only concentrated holdings that weigh 5% or more of the portfolio. The Saudi sovereign wealth fund is known for holding large stakes in its core investments, which was the case with seven of its holdings this quarter.

Overview of PIF Q2 activity from 13F

PIF Q2 2022 Overview (Author’s Spreadsheet 13F data)

New positions

Zoom Video Communications (ZM): represents the largest new position added this quarter to the fund’s portfolio. The recent acquisition worth ~$507.20 million now represents almost ~1.24% of the fund’s portfolio. PIF bought 4.69 million shares of the tech company at prices between $84.00 and $124.00, far from the stratospheric price Zoom traded at in late 2020 and early 2021. The company has had a rough year of trading , as the company’s stock is down -46.00% on a YTD basis and more than -82.57% off its all-time high. The sovereign wealth fund has established approximately ~1.86% ownership of ZM.

Costco Wholesale Corporation (COST): represents the second largest addition to the portfolio this quarter. The sovereign wealth fund bought 1.3M shares of the membership-only convenience store chain, valued at ~$496.81M. This position now accounts for ~1.24% of the fund’s portfolio. PIF bought shares of favorite Charlie Munger between $416 and $608, a range the company has maintained for most of the year. The sovereign wealth fund has established a relatively minor ~0.23% ownership in the $245.67B market cap retail giant.

NextEra Energy (NEE): is the third major addition to the sovereign wealth fund this quarter. PIF purchased 6.36M shares of the renewable energy company for ~$493.81M, shares were bought between $68 and $87. This shot Next Era up to the 11th largest holding in the fund, currently accounting for ~1.21% of the portfolio. The company is trading at about $88 per share.

American Tower Corporation (AMT): was the only REIT added to the fund in the second quarter. The sovereign wealth fund bought 1.89M shares of the company, spending ~$483.83M in the process. The fund is assumed to have entered a position between prices of $224 and $281 per share. The REIT, which deals almost exclusively in communications infrastructure, currently holds ~1.19% of the portfolio. However, PIF only maintains a relatively minor ownership stake of 0.41%.

Starbucks Corp (SBUX): represents the fifth largest new position in the portfolio this quarter. PIF bought 6.31M shares of the coffee shop chain, valued at ~$482.27M. Starbucks is the fund’s 18th largest position, accounting for ~1.18% of the fund’s portfolio. PIF bought shares of the company between $69 and $91 per share following the recent selloff. That seems to have slowed as the stock price has finally seen some positive movement, trading at around $85 per share recently.

Microsoft Corp (MSFT): is the sixth largest addition to the sovereign wealth fund’s portfolio this quarter. As explained earlier, the fund snapped up many of the high-flying technology stocks that were selling at a significant discount to their prices in 2020 and early 2021. The position currently accounts for 1.16% of the portfolio and represents 16 – the largest participation. Saudis spent $473.98 million to buy 1.84 million Microsoft shares between prices of $214 and $342.

Alphabet Inc (GOOGL): is another example of this process. After trading in the $140-150 per share range for several years, the company’s stock has experienced a significant decline recently. The public investment fund was able to lock in purchases between $105 and $142, acquiring 4.26 million shares of the tech giant. The position represents 1.14% of the fund’s portfolio and is its 17th largest holding.

BlackRock Inc. (BLK): was also one of the big additions to the portfolio in the quarter, as the sovereign wealth fund bought 0.74M shares of the well-known investment management company, valued at ~$451.72 million. The position held 1.11% of the portfolio at the end of the second quarter. The fund is believed to have entered a position between prices of $582 and $782 per share, making it the 18th largest holding within the portfolio.

Saudi Fund Holdings according to Quiver Quant

PIF movements (quiver quantitatively)

The public investment fund also opened a position in Home Depot ( HD ), Salesforce ( CRM ), JPMorgan Chase ( JPM ), Amazon ( AMZN ), Datadog ( DDOG ), Adobe Systems ( ADBE ), Freeport-McMoRan Copper & Gold ( FCX and Advanced Micro Devices (AMD).

Advanced positions

Electronic Arts (EA): is the fourth largest holding within the sovereign wealth fund, accounting for 4.77% of the portfolio, compared to 4.13% of the portfolio as reported last quarter. The fund had decided to extend the position it had held since Q4 2020, buying shares between $111 and $141 in Q2. Electronic Arts is a major holding of the sovereign wealth fund, which now controls 5.72% of the company and has expanded its position by 12% this quarter. They have spent ~$236.04 million to buy 1.80 million EA shares. Over the past year and a half, the video game veteran’s stock has largely traded flat and managed to outperform the S&P 500 ( SPY ).

Air Products and Chemicals (APD): is another large holding within the portfolio, currently ranked as its 8th largest position, accounting for 1.58% of the portfolio, up from 0.42% as reported last quarter. PIF currently owns 2.86 million shares of the company and looks to double its position. This quarter the Public Investment Fund spent ~$469.91 million to add another 1.95 million shares of the company, representing a 269% change in position. Shares this quarter were bought between prices of $199 and $238.

PayPal Holdings (PYPL): represented a relatively small position in the fund, but management decided to really double that position, expanding it by 674%. PIF bought 6.14 million shares of the online payment systems company with a purchase price between $69 and $121. It is currently the 12th largest position in their portfolio, accounting for 1.21% of the sovereign wealth fund.

Meta Platforms (META): is another example of PIF doubling down on high-end tech stocks and using the recent selloff to their advantage. It’s a holding that was expanded by 602% this quarter, with the fund buying an additional 2.52 million shares at $155-$233 per share. Still, even after the recent purchase, Meta only represents PIF’s 15th largest holding, accounting for a relatively paltry 1.16% of the portfolio. The public investment fund currently owns 2.94 million shares of Meta at an average price paid of $207.38 per share. The company is currently trading for $167.96 per share.

Reduced positions

Visa Inc. (V): was the only PIF holding that was reduced in the second quarter. The payment card company is currently the fund’s 33rd largest holding, accounting for just 0.53% of the portfolio. That’s a 22% decrease from Q1 2022, when the company held 0.73% of the portfolio. The public investment fund currently owns just 1.11 million shares after selling 0.32 million shares during the quarter with a slight loss.

Final review

Saudi PIF largest holdings using 13F data

PIF Holdings Q2 2022 (Author’s Spreadsheet 13F data)

We can conclude that the Saudi sovereign wealth fund was an aggressive buyer in the second quarter, making the most of the liquidity crunch to double its thin holdings, especially those in the high-tech space. Having invested more than $7 billion in the quarter according to their 13F filing, PIF is taking advantage of the opportune moment and favorable macroeconomic environment to find room in its fund for household tech names like Amazon, Google, Microsoft, AMD, and more. At the same time, it has greatly expanded its already established holdings such as Meta, PayPal and EA. As for the PIF, as long as there are willing sellers for these high-quality companies, the long-term orientation of the fund’s objectives positions them brilliantly as a suitable buyer.

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