3D Systems Corporation (DDD), Groupon Inc (GRPN), Pandora Media Inc (P) & More: Hedge Fund Tiger Global’s Small Cap Picks

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Related tickers: 3D Systems Corporation (NYSE:DDD), Groupon Inc (NASDAQ:GRPN), Pandora Media Inc (NYSE:P)

Tiger Global was founded by several former employees of legendary investor Julian Robertson’s Tiger Management. We track its quarterly 13F filings alongside those of many other hedge funds and other notable investors, and have found that the most popular small cap stocks among the filers we track outperform the S&P 500 by 18 percentage points per year on average (learn more about our small cap strategy).

TIGER MANAGEMENT

We think that this is because small cap stocks (which we define as those with market capitalizations between $1 billion and $5 billion) are more likely to be inefficiently priced. Investors can also use small cap picks from individual funds such as Tiger Global as initial ideas for further research, potentially buying these companies or their peers if they appear to be good investments. Here are five small cap stocks which Tiger Global owned as of the end of December (or see the full list of stocks the fund reported owning)

Tiger Global had Groupon Inc (NASDAQ:GRPN) as one of its five largest holdings by market value at the end of the fourth quarter of 2012, with 65 million shares in its portfolio. Groupon rallied recently upon the departure of CEO Andrew Mason, though the stock is still down 75% from levels shortly after its November 2011 IPO as the company has underperformed market hype. Revenue has been up, but Groupon Inc (NASDAQ:GRPN) still struggles with profitability and the forward P/E is a bit high at 22. Fellow Tiger Cub fund Coatue Management, managed by Philippe Laffont, bought 7.5 million shares during Q4 (check out Coatue’s stock picks).

TIGER GLOBAL MANAGEMENT LLCThe fund initiated a position of 8.5 million shares in another disappointing recent IPO: Pandora Media Inc (NYSE:P), which is down 23% from shortly after going public in the summer of 2011. Pandora, too, is straining to break even with analyst consensus calling for 1 cent per share of earnings in the current fiscal year. Revenue grew 54% in its most recent quarter compared to the same period in the previous fiscal year, and the stock has been rallying strongly in the last 12 months, but it does seem speculative to us. Crosslink Capital was another major shareholder in Pandora Media Inc (NYSE:P) at the end of 2012.

3D Systems Corporation (NYSE:DDD) was another of Tiger Global’s small cap picks. 3D Systems has been receiving considerable attention from the financial media as a provider of 3-dimensional printers and printing tools. The stock has more than doubled in the last year, and is priced for high growth with trailing and forward P/Es of 75 and 27, respectively. Growth on both top and bottom lines has been strong though 56% of the float is held short as a number of market players are bearish. Christopher Lord’s Criterion Capital was the only other filer we track with more than $10 million invested in the stock (research more stocks Criterion owns).

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Insider Monkey Small Cap Strategy
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