Updated on September 1st, 2021 by Nikolaos Sismanis
Athanor Capital is a macro-focused hedge fund founded in 2017 by Parvinder Thiara.
The firm is growing quickly – more than doubling its assets under management in 2019. Athanor Capital currently manages around $5.7 billion in discretionary funds according to its most recent form ADV.
Investors following the company’s 13F filings over the last few quarters (starting with the mid-August, 2018 filing through the mid-August, 2021 filing) would have generated annual total returns of 19.62%. This compares very favorably to the S&P 500 ETF’s (SPY) annual total returns of 18.08% over the same period.
Note: 13F filing performance is different than fund performance. See how we calculate 13F filing performance here.
You can download an Excel spreadsheet of Athanor Capital’s performance and current and historical common stock 13F holdings below:
Keep reading this article to learn more about Athanor Capital.
Table Of Contents
Athanor Capital’s Approach To Investing
Athanor Capital’s investment strategy is top-down. This means the firm starts with macro-economic factors to build its investment theses.
Athanor Capital does not stop at high-level macro analysis. The firm then ‘dives deeper’, performing relative valuation analysis between individual securities. This combination of ‘Top-down’ and ‘Bottom-up’ investing helps Athanor Capital to find compelling investments in compelling macro sectors. The image below gives a breakdown of the firm’s strategy.
Source: Athanor Capital
The company’s investment strategy is also succinctly stated in its ADV brochure:
“The Investment Manager’s process usually starts with macroeconomic observations including market dislocations, capital flows, regulatory changes, secular shifts and other major macroeconomic events. The Investment Manager seeks to determine whether these events have caused relative value mispricings. Once a hypothesis that a macro event is causing a mispricing has been established, the Investment Manager seeks to validate or disprove it. The Investment Manager will generally take significant positions if it can understand both the mispricing and its cause. The Investment Manager may also exploit opportunities outside of this process and protocol.”
Of note is that Athanor Capital looks for ‘builders’ when hiring its investment research team. Over 75% of the company’s investment and risk teams actively code. And 70% of the company’s staff are either minorities and/or women as the firm values a variety of perspectives.
Culture is set initially by a company’s founder. Athanor Capital’s founder is Parvinder Thiara.
About Parvinder Thiara
Parvinder Thiara was born in August of 1985; he is 36. Thiara is a Harvard graduate and Rhodes Scholar. He worked for DE Shaw for 8 years before setting up Athanor Capital.
“Executives concluded that he had not adhered to the hedge fund’s intraday risk guidelines and that he had not shared sufficient details of his trading with executives, according to the people, though Thiara ended most days with positions that were within DE Shaw’s protocols.
The firm confronted Thiara about his trading, and Thiara’s explanation was not sufficient for the DE Shaw executives, the people said. The parties could not resolve their differences, leading to his exit. Thiara has not been accused of violating any laws or regulations.”
Thiara likely has a different interpretation of events. The emphasis on risk controls at Athanor Capital speaks to Thiara’s clear focus and understanding of risk.
The legal battle and ‘bad blood’ surrounding another talented employee at DE Shaw – Daniel Michalow – unexpectedly leaving the company shows that this is not an isolated incident. Commenting on the Michalow situation, Parvender said:
“This seems like DE Shaw’s playbook when a talented former employee leaves and chooses to compete.”
Setting aside Thiara’s past with DE Shaw, it’s clear that investors are flocking to Athanor Capital based on the firm’s rapid asset growth.
Athanor’s Top 10 Holdings
Athanor’s portfolio of equities is diversified, currently invested in nearly 400 different companies, with no sector occupying more than 30% of its total holdings. However, the fund’s highest conviction picks still manage to stand out, with its top 10 holdings making around 43% of the total portfolio.
New Noteworthy Buys:
- Pioneer Natural Resources Co. (PXD)
- SPDR Gold Trust (GLD)
- Facebook Inc (FB)
- Aercap Holdings N.V. (AER)
- Reinvent Technology Partners Y (RTPY)
Source: 13F filings, author
Found amongst the top holdings of the majority of the funds we have covered, Microsoft is Athanor Capital’s largest holding, occupying comprising ~16% of its portfolio. The fund trimmed its position by around 23% during the quarter, most likely due to diversification reasons following Microsoft’s prolonged rally.
Microsoft is a mega-cap stock with a market capitalization of $2.2 trillion.
Supported by the company’s strong profitability, management has been consistently raising buybacks over the past decade to further reward its shareholders. The amount allocated to stock repurchases has reached new all-time highs over the past four quarters, at nearly $27.3 billion.
Revenue growth remains in the double-digits, so it’s likely to see capital returns accelerating moving forward. The company is also growing the dividend at a double-digit rate, though at the current yield, which stands below 1%, investors should expect the majority of their future returns in the form of capital gains.
Despite that, Microsoft’s cash position has been growing continually, with the company currently sitting on top of a massive $130 billion cash pile.
Further, while many companies have chosen to utilize the current ultra-low interest rates to raise cheap debt and buy back stock, Microsoft’s approach has been prudent and thoughtful. Not only are current earnings extensively covering buybacks (59% buyback “payout ratio”), but long-term debt has been substantially reduced from $76 billion in mid-2017 to around $50 billion as of its last report.
It is impressive that a stock with a market capitalization of $2.2 trillion still has such a strong growth momentum. Shares are also trading a P/E ratio of around 34.4, which is quite reasonable for a dominating tech behemoth.
Alphabet, Google’s parent company, occupies around 13.2% of Athanor’s holdings despite the fund trimming its stake by a significant 20% compared to its last 13F filing. It is now its second-largest position.
The company has become increasingly more attractive to investors, following Alphabet posting fantastic financials and robust growth consistently. Revenue growth has re-accelerated, with its most recent quarter posting growth of nearly 35%.
Net margins are above 25%, while revenue has seen uninterrupted growth. However, Alphabet still does not pay a dividend.
As a result of steady, robust organic growth, and stock buybacks, the company displays a 5-year EPS CAGR of 58.49%. This is quite impressive, considering its sheer size.
The company is one of the most attractively priced stocks in the sector as well, trading at around 27.2 times its forward earnings, despite its consistent growth, massive moat, and strong balance sheet. By accumulating $135.8 billion of cash on its balance sheet, the company should not face any sort of liquidity problems.
Being one of the five companies in the trillion-dollar-market-cap club, the company is currently the fourth-largest in the world, worth around $1.66T. As the company’s continuous advancements keep on taking over the world both in terms of its commerce and digital infrastructure, Amazon has become an unstoppable force, causing its stock to maintain substantial investor demand.
However, investors should not expect a dividend from Amazon anytime soon.
Amazon delivered another solid quarter recently, with Q2 AWS net sales up 37% YoY to $14.81 billion, topping the $14.1 billion consensus estimate. Revenues grew to $113.1 billion, a 27.2% increase YoY, contributing to all-time high LTM (last twelve months) sales of $443.3 billion.
Due to scaling its operations, the company’s net income margins have constantly been evolving, reaching 6.64% during this period, turning Amazon into an increasingly profitable growth monster. The stock is currently trading at a forward P/E of 59.2, but considering its EPS growth, it could be a reasonable valuation multiple.
The stock accounts for 10.9% of Athanor’s portfolio.
Pioneer Natural Resources Co. (PXD):
Pioneer Natural Resources explores for and produces oil, natural gas liquids, and gas. It operates in the Permian Basin in West Texas. The company is one of the few amongst its U.S. peers that have been executing bold acquisitions over the past year, taking advantage of the energy sector’s recovery following the initial COVID-19 outbreak.
The stock is entirely new in Athanor’s portfolio which is likely capitalizing on Pioneer’s growing free cash flow opportunity.
Visa (V) & MasterCard (MA):
One can find Visa and MasterCard among many hedge funds’ top positions. The two companies comprise Athanor’s seventh and tenth-largest position, respectively. Visa and MasterCard have effectively monopolized the sector, with every bank utilizing their networks for consumers across the globe to complete their everyday transactions.
While both companies were hit hard by COVID-19, as consumer spending drastically fell during the early months of the pandemic, their latest operating metrics indicate complete recovery, with signs of growth resuming, due to a massive shift towards e-commerce transactions.
This shift should also have substantial positive effects on their long-term cash flows, as both Visa and MasterCard charge merchants double the rates for CNP (Card-Not-Present) transactions, as online sales have higher risks involved.
While cross-border volumes remain depressed due to strict traveling restrictions, we believe that the long-term shift of consumer spending in e-commerce will more than compensate for the current challenges. Therefore, the duo’s long-term growth story remains intact.
The fund trimmed its Visa and MasterCard positions by 22% and 43%, respectively, during the quarter.
Despite their miniature yield, Visa and MasterCard are rapid dividend growers, advancing their dividend payments at double-digit rates each year.
Facebook Inc. (FB):
Athanor has been long on Facebook since 2018 but the fund had sold its entire position up until the previous quarter. In Q2, Athanor initiated a position in Facebook again, accumulating enough shares that the stock is now Athanor’s 5th largest holding.
Facebook is a tremendous cash cow, but with a problem. On the one hand, with strong financials, one of Wall St.’s healthiest balance sheets, and the best platform for advertisers to utilize, Facebook has been dominating the social media industry. The company has reported an all-time high bottom line of $38.9 billion over the past four quarters, amid great user growth, notwithstanding now decelerating to the single digits.
For these reasons, it would not be a complete surprise if Facebook paid a dividend at some point in the future.
On the other hand, the stock has failed to attract a higher multiple, as the steep scrutiny it has faced over the past few years have had an impact on the valuation. The stock is only trading at around 25.9 times its underlying earnings, despite its rapid growth.
With its ARPU (average revenue per user) is still very strong, Facebook’s financials are more than likely to continue expanding rapidly. Facebook’s investment case today does not only include the potential for a significant upside but also comes with a great margin of safety.
If such a valuation expansion never occurs, and Facebook continues to trade at a forward P/E of around 26, at an EPS growth rate of 20%-30% in the medium term (which the current user and APRU growth trajectory could easily sustain), investors should achieve equally satisfactory returns with a constant valuation multiple.
AerCap Holdings N.V. (AER):
AerCap Holdings N.V. is active in the lease, financing, and management of commercial aircraft and engines primarily in Mainland China, Hong Kong, the United States, and Ireland. Despite the airline industry continuing to be relatively depressed from the effects of the ongoing pandemic, AerCap’s long-term leasing agreements have allowed it to generate robust cash flows over the past couple of years.
When the leasing agreement concludes, AerCap normally chooses between selling the aircraft in the secondary market or signing another lease. The company essentially profits by the spread between the leasing yields it is able to achieve and its cost of capital (debt/equity).
This is an entirely new holding for Athanor, which likely accumulated shares below the company’s book value.
Nuance Communications, Inc. (NUAN):
Nuance Communications develops conversational and cognitive artificial intelligence innovations that carry intelligence in everyday work and life. The company produces solutions that read, examine, and respond to people, expanding human capacity to enhance productivity and security. The company’s shares have skyrocketed over the past couple of years, which means that Athanor has profited significantly considering it initiated its position in Q3-2020. In April, Microsoft agreed to purchase Nuance Communications in a deal valued at $19.7B.
OneMain Holdings, Inc. (OMF):
OneMain Holdings is a financial service holding company, engaging in the consumer finance and insurance businesses. It underwrites, and services personal loans secured by automobiles or other titled collateral. Some are unsecured as well.
Athanor initiated a position in early 2020, currently holding 289 shares after the fund trimmed its position by 46% during the quarter.
The company has recently started paying massive dividends, resulting in double-digit yields. Still, investors need to be wary of its risky business model, which could result in future dividend cuts should loans start defaulting at a high rate.
OneMain is currently Athanor’s tenth-largest holding, comprising around 2.9% of its total holdings.
Athanor is holding 39 individual equities which means that its returns are dependent upon a concentrated portfolio of individual equities. The fund has been outperforming the S&P 500 index based on its 13F filings over the past few years, which shows that its investment strategy is truly beneficial and consistent.
You can download an Excel spreadsheet with metrics that matter of Athanor Capital’s current 13F holdings below:
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