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Julian Robertson: Eye of the Tiger

TIGER MANAGEMENTJulian Robertson is best known for founding Tiger Management in 1980, where he turned an initial $8 million investment from friends and family into $7.2 billion in 1996 and hitting a peak AUM of $23 billion in 1998. But in the late 90s, the fund did not sustain the returns of earlier years, so Roberston closed it in 2000 at a value of $6 billion. The demise of Tiger is attributed to sub-par stock picks and Robertson’s failure to partake of the technology stock bubble. In 1999, arguably the height of the dotcom bubble, the S&P 500 index was up 21% while Tiger was down 19%.

What’s not particularly clear is his investment style, which has been characterized by a “smart idea, grounded on exhaustive research, followed by a big bet.” That is not much practical direction to go on but what is striking about Robertson and other successful hedge fund managers is their willingness to pull the trigger when they have high conviction. Indeed, a former Tiger Management executive notes that “When Robertson is convinced that he is right, Julian bets the farm.” His investment style is also known for being very personal; at Tiger, Robertson would listen to his analysts for ideas and input but make all the investment decisions himself.

And in fact, his former analysts have gone on to run some of the top performing hedge funds in the industry, spawning a generation of “Tiger Cubs” and “Tiger Grandcubs,” many of which were seeded by Robertson. Some of the better known cubs include Tiger Global run by Chase Coleman, Blue Ridge Capital run by John Griffin, Maverick Capital run by Lee Ainslie, Viking Global run by Andreas Halvorsen, and Lone Pine Capital run by Stephen Mandel. Robertson also has a part in the Tiger Accelerator Fund, which invests in six Tiger-seeded hedge funds. He is investing $250 million of his own capital (chump change for guy with a $2.5 billion net worth) on top of the $450 million raised from other investors. The six funds are Tiger Eye Partners, Long Oar Global Partners, Tiger Ratan Capital, Cascabel Management, Tiger Veda Management, and Teewinot Fund. In total, Robertson seeds over 40 funds.

Top 10 Holdings:

Company Ticker Value ($000s) Activity
APPLE INC AAPL 53,174 29%
GOLDMAN SACHS GROUP INC GS 31,225 9%
MASTERCARD INC MA 22,286 29%
LIBERTY GLOBAL INC LBTYA 20,412 0%
GOOGLE INC GOOG 20,226 -13%
VISA INC V 20,007 21%
WUXI PHARMATECH CAYMAN INC WX 15,607 -25%
QUALCOMM INC QCOM 14,703 0%
P N C FINANCIAL SERVICES GRP INC PNC 12,711 49%
WELLS FARGO & CO NEW WFC 12,659 57%

Though Roberston’s new picks did not make it into his top holdings, they include healthcare REIT HCA Holdings (HCA), Starbucks (SBUX), Sherwin Williams (SHW), Verisign (VRSN), and XPO Logistics (XPO). He added substantially to Apple (NYSE:AAPL), Mastercard (NYSE:MA), Visa (NYSE:V), PNC Financial Services (PNC), and Wells Fargo (WFC), remaining heavily weighted in Technology, Financials, and Consumer Services. He commented that electronic transactions “are still a relatively small percentage of transactions. With the concept of the mobile wallet gaining traction, we think there are opportunities for MA and V to enter into the mobile payments market. Though most companies are well-positioned to continue to growth, we like Visa’s collaboration with Google Wallet/Isis. Meanwhile, MA is in the midst of the merchant litigation lawsuit, which we would rather wait out.

HCA continues to be a strong performer in the hospital business but we think that Tenet (NYSE:THC) is being underestimated by the market. If THC’s Conifer division is able show compelling performance next quarter with the Catholic Health Initiatives (CHI) contract, we think that that earnings acceleration is just one quarter away. Robertson also pared down positions in Google (NYSE:GOOG) and Chinese pharma company Wuxi Pharmaceuticals (WX). This is an interesting move. Google is the second most popular stock among hedge funds, catching up with Apple (see the 10 most popular stocks). Tiger cubs Chase Coleman and Andreas Halvorsen reduced their Apple positions and increased their Google positions during the first quarter. We don’t think these moves signal anything negative about these stocks. Apple and Google are two tech giants with high growth rates and low price multiples. Investors are unnecessarily cautious about these two stocks and we think they will be long-term winners.

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