Buy Tiger Global’s Top Holdings
Shweta is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Tiger Management invests in technology, telecommunication, and media sectors, mainly focusing on United States, Latin America, Southeast Asia, and Eastern Europe companies. For private equity investment, it specializes in investing in early stage companies. This hedge fund had $6.44 billion in assets under management as of March 31, 2013.
As per the recent 13F filing with the SEC, Groupon (NASDAQ: GRPN), Mastercard (NYSE: MA), and Liberty Media (NASDAQ: LMCA) are among the top three holdings of Tiger Global Management. These companies account for 20.95% in its portfolio.
Global expansion and new payment strategy
Mastercard is focusing on the global cash transaction conversion opportunity, as 85% of the world's transactions are done in cash. The company considers 'Cash Transactions' as its main competitor. It is expanding its operations in both the U.S. and international market.
The U.S. market generates 35% of the company’s revenue. The credit business in the U.S. is expected to improve with the recovery occurring in the economy this year. The remaining 65% of Mastercard’s revenue comes from the international market. The on-going consumer shift from cash spending to debit cards and credit cards in these international regions provides opportunities to the company to enhance revenue. With global expansion, the revenue will rise from $10.10 billion last year to $11.22 billion this year, and $12.78 billion next year.
Mastercard revised its old mobile payment strategy by introducing the digital cloud-based service MasterPass. This new wallet enables fast and secure checkout regardless of consumer location. It saves large amount of credit card and shipping information via attached digital cloud-based service, and it has multiple layers of security that protects a consumer’s Masterpass account from fraud.
In April 2013, the company launched its first Masterpass in Canada. The country has the highest rate of digital payment in the world with approximately 65% of payments done electronically. Initially, the company launched with four merchants offering this service. Mastercard will expand this payment platform to 800 merchants by end of this year and 2,800 merchants by next year.
Pull strategy along with emphasis on mobile device
In the initial three years, Groupon was using a push marketing strategy. Under this strategy, it reached customers through emailing them deals. The emailed deal connected merchants to consumers, offering a full range of discounted products and services. Initially, the company was able to provide deals for only one or two merchants per day. With an increase in the number of merchants, it was difficult for the company to decide which merchant deals to run and dedicate the fixed shelf space.
To overcome these constraints, Groupon is now shifting towards a pull strategy instead of push. This pull strategy allows direct deal marketing, opens its services to all consumers and not just to subscribers of Groupon, and eliminates the difficulty of limited shelf space. The company’s transition to pull from push has reduced marketing expense in North America to 3.5% in the first quarter from 29% in the last nine quarters. Groupon’s transition to the pull strategy will grow its billings by more than 20%, to $2.57 billion in this year and $2.84 billion next year compared to $2.33 billion last year.
Additionally, Groupon is now focusing on providing daily deals on mobile devices. Groupon reported revenue growth of 8% year-over-year in the first quarter ending March. This was driven by 42% revenue growth in the North American market due to the accelerated use of mobile devices.
Purchases through mobile devices accounted for 45% of completed deals in the first-quarter compared to 30% in the same quarter a year ago. More than 7 million mobile apps were downloaded in the first quarter. North American revenue is expected to rise to $1.4 billion this year from $1.1 billion last year.
Charter Acquisition and share repurchase program
On May 1, 2013 Liberty Media completed its acquisition of 27.3% ownership in Charter Communication (NASDAQ: CHTR) for $2.62 billion. Charter is the fourth largest cable service provider company in the U.S. The acquisition is valuable for Liberty Media, as Charter cable system provides high speed broadband and multichannel TV services in the U.S. There are growth opportunities for broadband Internet due to rising demand for faster speed broadband. The acquisition will help Liberty Media overcome the problems of slow broadband speed and to consolidate the cable industry. This acquisition provides Liberty Media the best opportunity to re-enter the U.S. cable industry.
Presently, Liberty Media has a 52% stake in Sirius XM (NASDAQ: SIRI). Sirius XM's share buyback program has been increased to $2.64 billion, from the $2 billion announced last year. Liberty Media will start selling Sirius shares in July 2013, and will generate $450 million in cash. Liberty Media is planning to use this cash in its share repurchase program to gain investors’ confidence. It repurchased $71 million in shares in April 2013. Sirius has $371 million remaining in share repurchase authorization. It will repurchase $215 million worth of shares this year and $100 million by next year.
Mastercard's global expansion with new mobile payment strategy, Masterpass, provides better prospects for revenue growth.
Groupon’s transition to a pull strategy along with mobile commerce growth in North America will increase its revenue.
Liberty Media's acquisition of Charter Communication will help it to re-enter the U.S. cable industry. Sirius XM cash flows will support its buyback program.
Therefore, I recommend a buy on all three stocks.
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Shweta Dubey has no position in any stocks mentioned. The Motley Fool recommends MasterCard. The Motley Fool owns shares of 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!