Billionaire Chase Coleman and Feroz Dewan’s Top Picks for 2013
Meena is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Chase Coleman of Tiger Global Management may have had a leg up on other hedge fund managers with his professional upbringing. As one of the original “Tiger Cubs,” Coleman was groomed by Julian Robertson, one of the most legendary managers in hedge fund history. Coleman’s team, which includes fellow portfolio managers Feroz Dewan, Lee Fixel and Scott Shleifer, has returned more than 20% to investors each year since 2001 (including a 71% return in 2007 alone). This outstanding performance has caused us to take a closer look at many of the most popular smaller-cap investments that managers like Coleman invest in; we believe we’ve found an outstanding market beating strategy (learn more here). Continue reading to see the top five stocks Coleman has the largest conviction in.
Although Tiger’s top pick is still Apple (NASDAQ: AAPL), Coleman reduced his position in the stock by almost 20%, cutting his portfolio percentage holding from 12% to slightly over 10%. We side with the majority of analysts who feel that AAPL is undervalued at current levels, especially taking into consideration the decline in price since the start of the year. The stock is seemingly light-years away from its 52-week high price of $705, but if it just reached Wall Street's consensus target a year from today, investors could capture almost 40% of upside from current levels. We still like AAPL from a valuation and dividend standpoint, and Coleman still has plenty of skin in the game, as does fellow billionaire David Einhorn (see his top picks here).
Starz (NASDAQ: STRZA) represents both a top pick and a new holding for Coleman, with over 7% of the fund’s $5.4 billion allocated to the stock. The premium subscription media provider was recently spun off as a standalone entity from Liberty Media. Previous shares of LMCA were renamed as STRZA shares, with new shares being generated under the LMCA ticker on the twenty-second of last month. Our search of Coleman’s 13F filing from Q3 2012 shows no shares of LMCA being held, indicating that he built his STRZA position from scratch. The stock has nearly returned 50% since the start of 2013, highlighting a large win for Coleman so far. Murray Stahl of Horizon Asset Management saw his nearly 3 million shares of LMCA turn into STRZA shares during the same time period.
Yandex N.V. (NASDAQ: YNDX) is Tiger’s third largest holding. The Russian search engine is a favorite amongst users in the world’s largest country, helping to fuel the growth in revenue and earnings that YNDX has experienced year over year. Sell-side analysts are largely bullish on the stock, considering its respectable earnings performance each quarter, and analysts from HSBC and Barclays have placed an overweight stamp on YNDX since the start of this month. At least a small part of the company’s growth in the mobile app sector is being impeded by Facebook, however, which recently blocked Yandex’s SIRI-esque search engine app due to violation of terms. Brookside Capital more than doubled its position in Q4 2012.
MasterCard (NYSE: MA) finds its way into the top five as well, with 6% of the fund’s assets committed to the payment technology company. MA has been on a tear recently, racking up a gain of 32% starting a year back and breaking the $500 mark in the past few weeks. The company continually surprised analysts throughout 2012 by beating their earnings expectations quarter after quarter, even doing so in their last announcement on Jan. 31. We see slightly more upside in the stock, around 10% from current levels, but would keep on eye on consumer spending, overall macroeconomic climate, and competition from Visa and American Express before expecting much more. Julian Robertson has $25 million investment in MA.
Groupon (NASDAQ: GRPN) rounds out Coleman’s top five, pushing out Google and Priceline relative to Tiger’s Q3 2012 rankings. The hedge fund bumped up their GRPN position in a big way, purchasing 63.7 million shares in the last quarter of 2012 alone. The online retailer and coupon slinger had some wild valuations when first going public at the end of 2011 and has lost a considerable amount of market cap since then, down 77% since its offering. Coleman is looking for a pop in price for 2013, although he mostly stands alone; more than two-thirds of analysts polled are not ready to issue a buy rating just yet. Legg Mason Capital Management portfolio manager Bill Miller has over 7 million shares of GRPN.
This article is written by Eric Winter and edited by Meena Krishnamsetty. Meena has a long position in AAPL. The Motley Fool recommends Apple and Yandex. The Motley Fool owns shares of Apple and MasterCard. 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!