Chase Coleman’s Tiger Global Likes Groupon and Pandora, Not Facebook
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Tiger Global, the hedge fund ran by Chase Coleman, released its 13F filing on Thursday. Evidently Coleman believes there is value to be found in shares of Pandora (NYSE: P) and Groupon (NASDAQ: GRPN), but Facebook (NASDAQ: FB) could be overbought. What are investors in these companies to make of Coleman’s moves?
Tiger Global is somewhat of a mystery
Unlike, say David Einhorn or Bill Ackman, Chase Coleman generally shuns the media. Consequently, many typical investors aren’t aware of Coleman or his fund. Yet, that would be a mistake -- Coleman’s fund is one the world’s most profitable, coming in at number six on Forbes’ list of the top hedge fund managers of 2011.
Many major hedge fund managers are known to deploy different, specific strategies. Warren Buffett, for example, is a value investor buying good companies trading at cheap valuations. On the other hand, Carl Icahn is an activist investor, frequently working to change the management teams of the companies he invests in, or even break them up entirely.
Tiger Global’s strategy doesn’t really fit into any neat category. Still, the fund has an affinity for tech stocks, even foreign ones, and frequently invests in startup companies before they IPO. For example, Tiger Global took a stake in Facebook prior to the company going public (it even contributed to the IPO, selling 23.4 million shares).
It’s dangerous to blindly follow 13Fs
It’s worth noting that investors shouldn’t blindly follow 13F filings from hedge fund managers, even filings from elite funds with profitable track records like Tiger Global.
By the time the filing is released, it is already out of date: 13Fs only reveal the positions the fund had on its books at the end of the quarter. Further, the filings only show long positions -- not shorts. Any long position might simply be there to act as a hedge against a corresponding short, and not as a bet on that particular stock’s future.
That said, investors should still take a look at filings from major funds, like Tiger Global, just to get a sense of how the most elite investors view particular companies.
Tiger Global is now the fourth largest holder of Groupon shares in the world
As Bloomberg points out, Tiger Global is now the fourth largest investor in online daily deals site Groupon. The fund first took a stake in the company back in November, and the 13F filing shows that it held those shares at least through the end of 2012.
When Groupon shares were trading near their all-time lows last fall, Tiger Global jumped in, purchasing a 9.9% stake in the company, or about 65 million shares, in mid-November. The fund got a remarkable deal, as it scooped up shares near three dollars.
Assuming that Tiger Global still owns those shares, it’s sitting on a nearly 100% gain -- Groupon shares closed Thursday at $5.95, and traded above $6 in the after-hours session.
At this point, investors might simply conclude that Tiger Global was successful in catching the ultimate falling knife. Shares of Groupon traded as high as $31 after going public late in 2011, and then, over the course of roughly a year, tumbled nearly 90%. Questions of excessive valuation, management immaturity and shaky accounting combined to decimate shares.
Given Groupon’s tremendous rally in such a short period of time, it might be best for investors to hold off on following Tiger Global into this trade. Yet, there could be further upside: Analysts at Sterne Agee raised Groupon’s rating from Neutral to Buy Wednesday, and bumped its price target to $9, arguing that shares were still cheap.
Tiger Global bought about 8.5 million shares of Pandora
While keeping its Groupon stake intact, Tiger Global built a position in Internet radio company Pandora, buying about 8.5 million shares.
Like Groupon, Pandora has performed terribly since going public. Shares traded as high as $20 before falling to about $7.50 last November. Pandora has steadily reported loss after loss in nearly every quarter since going public, while rumors of a forthcoming competitor from tech giant Apple have periodically led to short-term sell-offs.
Pandora is fairly heavily shorted -- more than one-fifth of shares have been sold short -- as investors remain skeptical of the company’s long-term viability.
But like Groupon, Tiger Global was willing to take a chance on a hated company. If the fund still holds shares of Pandora, it’s likely sitting on a large profit -- shares are up nearly 40% since the turn of the year, and rallied an additional 5% Thursday.
Risk-averse investors might do well to stay away, particularly after such a tremendous rally in the last six weeks alone. That said, Tiger Global’s investment shows that buying shares of a company everyone seemins to hate can work out.
Tiger Global gives up on Facebook
As previously mentioned, Tiger Global was involved in Facebook prior to the company going public. In the social network’s IPO, Tiger Global sold about half its stake.
Since then, it has aggressively traded Facebook. In the third quarter of 2012, for example, Tiger Global bought back many of the shares it had sold in the IPO, adding 9.79 million shares. Now, the fund has apparently exited Facebook entirely.
With Facebook shares up about 7% since the turn of the year, that was likely a mistake. But given the fund’s propensity to shift its Facebook holdings around, it’s possible that the fund added shares to its portfolio in just the last six weeks.
Since Tiger Global is so apt to move in and out of Facebook, there probably isn’t a lot investors can take away from this part of the fund’s filing, except that Tiger Global doesn’t seem to believe the company is ripe for a long-term investment.
The bottom line
Looking at Tiger Global’s filing, investors might conclude that the bottom is in for both Pandora and Groupon -- two of 2011’s most hated IPOs. Facebook, however, might still have room to fall from here.
Of course, it’s important to note that blindly following 13F filings is a mistake. They are outdated and fail to present a complete picture of a fund’s holdings. Further, as Tiger Global is apt to aggressively trade its positions, it’s possible that the fund might have significantly changed its positions in just the last six weeks.
At any rate, for investors who like to trade hot tech stocks, Tiger Global’s 13F filings should be mandatory reading.
joekurtz is long shares of Groupon. The Motley Fool recommends Facebook. The Motley Fool owns shares of Facebook. 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!