Philippe Laffont Block: Technology is advancing at such a rapid rate that established businesses can barely keep up. The startups launched by entrepreneurs and innovators are disrupting entire industries, from financial services to marketing, and investors are excited to be a part of the emerging digital world.
E-commerce is in its third decade, and Amazon is the clear leader in the US market. Apple continues to develop smart devices that increase connectivity – both for the people who use them and the items that belong to the Internet of Things (IoT).
Google (under parent company Alphabet) is the undisputed winner in digital advertising, and Facebook (a subsidiary of Meta) remains the go-to social media platform for billions of users.
The gig economy has made sharing resources easy. Technology from Uber, Lyft, DoorDash, Instacart, Airbnb, and dozens of other platforms directly connects consumers with drivers, real estate, and other services – no middleman required.
On the fintech side, a long list of companies has upended traditional banks and brokerage firms.
Many experienced investors are still focused on their favorite blue chips and Dividend Aristocrats. Companies like 3M, AbbVie, Cardinal Health, ConEd, and Johnson & Johnson perform reliably, despite volatile economic conditions. However, they don’t offer the same opportunities for growth that come with the best tech stocks.
Billionaire Philippe Laffont is willing to take calculated risks when it comes to tech stocks because he is enthusiastic about the above-average returns that follow smart choices. One of his current favorites is Block, even though Block is down nearly 75 percent in the past year. Does that mean Block stock is a smart buy for retail investors?
Who Is Philippe Laffont?
Philippe Laffont, net worth of $6.5 billion, wasn’t born to a wealthy family. He built his fortune through his passion for technology. After earning Bachelor’s and Master’s degrees from Boston’s elite Massachusetts Institute of Technology (MIT), Laffont spent a few years working as a management consultant for the prestigious McKinsey & Co. firm.
That opened doors to some of the world’s top tech and financial services companies, and in the 1990s, Laffont began to dabble in tech stocks. His skill caught the attention of famed hedge fund manager Julian Robertson, and Laffont was hired into Robertson’s firm, Tiger Management.
There, Laffont had the benefit of world-class mentors, which gave him the confidence to set out on his own. In 1999, Laffont and his brother launched their own hedge fund, Coatue Management, which is almost entirely devoted to tech investing.
Coatue has its headquarters in New York City and offices in Hong Kong, Shanghai, and San Francisco. The firm recently opened a new office in London to ensure it is in the right place at the right time to capitalize on Europe’s growing technology industry.
Among other investments, Coatue Management has put money into Snapchat’s parent company, Snap, and TikTok’s parent company, Bytedance. Now Coatue Management is expanding its position in Block, signaling that Laffont expects great things from this fintech leader.
Why Is Philippe Laffont’s Coatue Management Buying Block?
In the first quarter of 2022, Philippe Laffont’s Coatue Management more than doubled its stake in Block by adding nearly 3.2 million shares. Though Block stock has been down since its November 2021 highs, there is every reason to believe this is a temporary situation.
Block’s total gross payment volume (GPV) totaled $6.5 billion in 2012, and when Block held its IPO in November 2015, the company was valued at just $2.9 billion. Those figures have changed dramatically in the years since. Block’s first quarter 2022 GPV came in at $39.5 billion, and its June 2022 market cap is $35.21 billion.
Block started as a merchant services platform that made it easy and inexpensive for sellers to accept credit card payments electronically and at the point of sale. The company expanded into analytics and lending in an effort to deepen and strengthen relationships with its users.
Over time, Block’s client list has evolved. It’s no longer entirely made up of individuals and microbusinesses. Many large merchants now use the Block platform, which drives revenue as these transactions deliver more in fees.
Not to be outdone by peer-to-peer payment services like Venmo and PayPal, Block launched its own version, which it calls CashApp. From late 2017 to late 2021, the number of CashApp monthly active users increased from seven million to 44 million.
Now, Block is diving into the growing Buy Now, Pay Later (BNPL) industry with the purchase of BNPL provider Afterpay. The combination of Square merchant services, CashApp, and Afterpay creates a closed-loop ecosystem, ensuring users don’t need to go elsewhere for their fintech.
With Block stock trading significantly lower than it was at this time last year, Coatue Management is making the most of this chance to buy shares at a discounted price.
What Are Coatue Management Top Investments?
Including Coatue Management’s first-quarter purchases, Block stock is now the firm’s fourth-largest holding. It makes up nearly six percent of Coatue’s portfolio. The remaining companies in Coatue’s top ten list include:
Tesla – 12 percent of total portfolio
Rivian Automotive – 11 percent of total portfolio
Moderna – 8.7 percent of total portfolio
Meta Platforms (Facebook) – 4.6 percent of total portfolio
DoorDash – 4.5 percent of total portfolio
Snowflake – 4.4 percent of total portfolio
Microsoft – 4.3 percent of total portfolio
Netflix – 3.9 percent of total portfolio
Visa – 3.8 percent of total portfolio
Best Tech Stocks To Buy in 2022
Most of the tech stocks that made it into Philippe Laffont’s Coatue Management portfolio are in a solid position to deliver above-average long-term growth. However, these aren’t the only tech stocks that show promise.
Cathie Wood’s ARK Invest has shown great interest in robotic process automation software developer UiPath, and Warren Buffett’s Berkshire Hathaway is wholly committed to Apple. International tech companies like Taiwan Semiconductor Manufacturing Company, Alibaba Group, and Tencent Holdings are also expected to generate substantial long-term returns.
Investors who prefer diversity in their portfolios can choose from a variety of tech-focused exchange-traded funds (ETFs). These funds expose shareholders to dozens of tech stocks without charging excessive administration fees.
Popular tech ETFs include:
ETFs are generally available for purchase through any standard brokerage firm or online brokerage platform.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.