Billionaire Coleman and Feroz Dewan’s Newest Moves May Surprise
Meena is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
In the hedge fund universe, 13F filing season is here, and we’re bringing you up-to-date coverage of this situation. While money managers’ 13F filings are reported to the SEC with a 45-day delay, this actually improves investors' ability to beat the market because, on average, fund managers are early into their investments. Our research has shown that hedgies’ consensus small-cap picks beat the S&P 500 index by 18 percentage points per year (see the details of our market-beating strategy), so let’s take a look at one particular fund’s latest Q4 moves.
Of the 400-plus hedge funds we track, Tiger Global Management is truly elite. Founded by Chase Coleman, one of the most notable “tiger cubs,” Tiger Global has returned more than 20% a year since 2001. In addition to Coleman and his co-manager Feroz Dewan, Lee Fixel and Scott Shleifer are both managing directors and co-portfolio managers of the firm’s venture capital/private equity funds. At the end of the fourth quarter, Tiger Global’s equity portfolio—according to its 13F filings with the SEC—totaled more than $5 billion.
Groupon’s Continued Comeback
Groupon (NASDAQ: GRPN) was a new position for Tiger Global in the third quarter, and the hedge fund upped its stake in the daily deals company significantly one quarter later. Groupon now accounts for more than $315 million worth of Tiger Global’s 13F capital, after a 9.9% stake was reported in a 13G filing last November (see the full story here). Since the details of this bullish bet were made public, Groupon’s stock price has returned 99% (as of Valentine’s Day).
Despite this appreciation, GRPN shares still trade at a 68% discount to their industry’s average sales valuation, and optimism over the company’s Groupon Goods e-commerce platform is riding high. A recent “Buy” upgrade from Sterne Agee is the proverbial cherry on top and indicates that more gains could be in store.
Apple Downsized, Facebook, Google and LinkedIn Cut
Unlike some of its peers, Tiger Global did not sell its entire Apple (NASDAQ: AAPL) position last quarter, instead choosing to downsize its Cupertino holdings by 19.2%. Interestingly, the hedge fund did decide to cut its entire stakes in Facebook (NASDAQ: FB), Google, and LinkedIn, which should come as a surprise to most investors. At the end of the third quarter, each member of this group fell within Tiger Global’s top 12, so it’s not likely that many predicted such a drastic move to occur over the next three months.
It’s worth mentioning that the size of the hedge fund’s 13F portfolio shrank by nearly 25%, so it appears that this tech trio could have been a casualty of a year-end sell-off, though there’s no way we can be certain. Regarding Facebook, we do know that Coleman and his team converted a significant portion of their private shares into public class A stock in Q3, which subsequently appreciated by 22.9% in Q4.
Still, out of these four stocks, Apple is the only to pay a dividend and is by far the cheapest no matter how we slice the valuation metrics. For those two reasons alone, Tiger Global’s sentiment is understandable.
Continued Confidence in 3D Systems and Amazon
3D Systems (NYSE: DDD) was a new position for the hedge fund in the third quarter, and it received a vote of confidence at year’s end. Tiger Global upped its stake in the 3D printing company by 15%, which has already returned 17.6% since the start of 2013. Though this stock has seen some mammoth gains over the past year, investors looking for exposure to 3D printing are best suited here, due to three key reasons: (1) 3D Systems’ products are some of the most affordable in the marketplace, (2) the variety of its product offerings is promising, and (3) shares are still 10% cheaper than key competitor Stratasys on a PEG basis (see these points in greater detail).
Amazon.com (NASDAQ: AMZN), meanwhile, was the beneficiary of a 158% boost by Tiger Global last quarter, and like 3D Systems, this appears to be a momentum play. Shares of the e-retailer rose by more than 40% in 2012, and despite many investors’ cries that Amazon’s sky-high valuation makes the stock a clear-cut “sell,” we think that its conversion rate—i.e. the percentage of web visitors that buy a product within its pages—still has room for improvement.
Though estimates vary, it is widely accepted that Amazon’s conversion rate is in high-single-digit territory. This is below eBay, for example, which sports a conversion rate between 11% and 12%. In layman’s terms, this differential indicates that Amazon still has room to grow top line revenues, and the combination of its Prime and virtual currency services can boost conversions going forward.
This article is written by Jake Mann and edited by Meena Krishnamsetty. Meena has long positions in Apple and Google. The Motley Fool recommends 3D Systems, Amazon.com, Apple, and Facebook. The Motley Fool owns shares of 3D Systems, Amazon.com, Apple, and Facebook and has the following options: Short Jan 2014 $55 Calls on 3D Systems and Short Jan 2014 $30 Puts on 3D Systems. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!