Analyzing the 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 eventually led the country to become the richest and most prosperous nation on earth. Realizing that no Forever after, the Gulf Kingdom is plotting to pivot as much as possible from its dependence on the oil and gas sector, trying to break its financial dependence on fossil resources. A key aspect of this strategy is public investment funding. In 2021, the fund came to greater public awareness after leading a consortium that was purchased Newcastle United, Premier League Football Club.

The Public Investment Fund, known as the “Saudi Fund”, represents the sovereign wealth fund of Saudi Arabia. This article is only going to cover its US-based public equity holdings, but it’s important to note that the fund represents the world’s largest sovereign wealth fund, with total estimated assets of $620 billion, an almost unprecedented global figure. Access, beyond most US equities. The chairman of the fund is none other than Crown Prince Mohammed bin Salman himself, undoubtedly a controversial figure in the West.

The information from this article is based on 13F filings by public investment funds that are required to disclose their US-based equity positions no later than 45 days after the end of the quarter. We scrape SEC 13-F filings to find recently reported holdings by institutional investors as well as newly disclosed portfolio position changes. Large institutional investors buy and exit positions for a variety of reasons that are not consistent with the average investor, but entering into the same position is not a reason in itself. New openings represent a useful resource for investment ideas and potential due-diligence targets. This is especially true when combining information from these disclosures with information from 13D filings, which sometimes tell a much clearer story.

Geographical map of investments by PIF

Investment map (Public Investment Fund)

Fund overview

While it remains true that the fund’s US-based assets under management shrank to $40.81 billion from the $43.57 billion reported last quarter, the public investment fund was actually a steady buyer in the second quarter of 2022. The fund established 17 new positions during this time, many of them focused on “oversold” sectors such as the technology sector. PIF also used the opportunity to expand into the 4 locations it already had, largely with the same mindset. PIF has reduced only one position in the same timeframe and has not closed any of its positions. The sovereign wealth fund’s concentration has long been notorious, but it eased this quarter as many of its top 10 holdings reallocated their funds. For example, Lucid Group ( LCID ) accounts for “only” 42.68% of the fund’s portfolio today, compared to last quarter when it represented 59.18%. As a reminder, the fund has a 60.87% controlling stake in the EV maker. Combined with the Utilities Select Sector SPDR ETF ( XLU ) and Activision Blizzard ( ATVI ), those three positions are the only concentrated positions with 5% or more weight of the portfolio. The Saudi sovereign wealth fund is notorious for holding major ownership stakes in its core investments, as was the case with seven of its holdings this quarter.

Overview of PIF Q2 activity from 13F

PIF Overview Q2 2022 (Author spreadsheet 13F data)

New positions

Zoom video communication (ZM): The fund represents the largest new position added this quarter to the portfolio. The recent ~$507.20 million acquisition now represents approximately ~1.24% of the fund’s portfolio. PIF bought 4.69 million shares of the technology company between $84.00 and $124.00, a far cry from the stratospheric value it was trading at in late 2020 and early 2021. On a year-to-date basis down -46.00% and over -82.57% from its all-time high. The sovereign wealth fund has established an estimated ~1.86% ownership of ZM.

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

NextEra Energy (NEE): This is the third largest addition to sovereign wealth funds for the quarter. PIF purchased 6.36 million shares of the renewable energy company’s stock for ~$493.81 million, with shares priced between $68 and $87. This elevated NextEra to the 11th largest holding within the fund, currently accounting for ~1.21% of the portfolio. The company is trading at around $88 per share.

American Tower Corporation (AMT): It is the only REIT added to the fund in the second quarter. The sovereign wealth fund bought 1.89 million shares of the company, spending ~$483.83 million in the process. The fund is expected to enter the position at a price between $224 and $281 per share. The REIT, dealing almost entirely in communication infrastructure, currently accounts for ~1.19% of the portfolio. However, PIF only holds a relatively insignificant ownership stake of 0.41%.

Starbucks Corporation (SBUX): This quarter represents the fifth largest new position in the portfolio. PIF purchased 6.31 million shares of the coffeehouse chain valued at ~$482.27 million. Starbucks is the 18th largest position within the fund, taking up ~1.18% of the fund’s portfolio. PIF bought the company’s shares for between $69 and $91 a share, following a recent sell-off. It appears to have slowed down as the stock price finally saw some positive movement recently trading at $85 per share.

Microsoft Corporation (MSFT): This is the sixth major addition of sovereign funds to the portfolio in the quarter. As explained earlier, the fund scooped up several high-flying technology stocks that were selling at a significant discount to their 2020 and 2021 opening prices. The position currently accounts for 1.16% of the portfolio and represents its 16th largest holding. The Saudis spent $473.98 million to buy 1.84 million shares of Microsoft between the price of $214 and $342.

Alphabet Inc (GOOGL): This is another example of the process. After trading in the $140-150 per share range for a few years, the company’s stock recently experienced a significant decline. The public investment fund managed to buy Lock between $105 and $142, as it acquired 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): The sovereign wealth fund bought 0.74 million shares of the well-known investment management company valued at ~$451.72 million in a major portfolio addition for the quarter. The position took up 1.11% of the portfolio at the end of the second quarter. The fund is estimated to have entered the 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 quantitative)

The public investment fund owns 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).

Expanded Verses

Electronic Arts (EA): The sovereign wealth fund is the fourth-largest holding within the fund, representing 4.77% of the portfolio, compared to 4.13% of the portfolio it reported last quarter. The fund decided to extend the position it had taken 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 grew its position by 12% in the quarter. They spent $236.04 million to buy 1.80 million shares of EA. For the past year and a half, shares of the video game giant have traded largely flat and outperformed the S&P 500 ( SPY ).

Air Products and Chemicals (APD): Another large holding within the portfolio is currently ranked as the 8th largest position at 1.58% of the portfolio, up from 0.42% reported last quarter. PIF currently owns 2.86 million shares of the company, and looks to double down on the position. This quarter, the public investment fund added another 1.95 million shares of the company worth ~$469.91 million, a 269% change in position. Shares were purchased between $199 and $238 during the quarter.

PayPal Holdings (PYPL): It represented a relatively insignificant position within the fund but management decided to actually double down on this position by expanding it by 674%. PIF purchased 6.14 million shares of the online payment systems company at purchase prices between $69 and $121. It is currently the 12th largest position within their portfolio, accounting for 1.21% of the sovereign wealth fund.

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

Reduced positions

Visa Inc. (V): The only PIF holding trimmed in the second quarter. The payment card company currently represents the fund’s 33rd largest holding, accounting for just 0.53% of the portfolio. This is a 22% decrease compared to Q1 2022 when the company took 0.73% of the portfolio. The sovereign wealth fund currently holds just 11.11 million shares, shedding 0.32 million shares during the quarter at a slight loss.

A final observation

Saudi PIF Top Holdings Using 13F Data

PIF Holdings Q2 2022 (Author spreadsheet 13F data)

We can conclude that the Saudi sovereign wealth fund has been an aggressive buyer in the second quarter, using the full extent of the liquidity crisis to double down on its beaten-down holdings, particularly in the high-end tech space. Having invested over $7 billion during the quarter, according to its 13F filing, PIF used the opportune moment and favorable macroeconomic environment to find space in its funds for household tech names like Amazon, Google, Microsoft, AMD, etc. At the same time, it greatly expanded already established holdings such as Meta, PayPal, and EA. As far as the PIF is concerned, while there are willing sellers for these high-quality companies, the long-term orientation of the fund’s goals has placed them in an excellent position to be suitable buyers.

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