As a newly amended filing with the Securities and Exchange Commission showed, Chase Coleman‘s Tiger Global Management has further boosted its stake in Ehi Car Services Ltd (ADR) (NYSE:EHIC), around a month after disclosing a new position in the company. Following the increase, Tiger Global holds 16.67 million class A shares of the company, which represent 30.5% of the outstanding stock, versus 9.40 million shares held previously. The stake is activist by nature and includes 666,666 class A shares, held in form of American Depository Shares (ADS).
In May, Tiger Global and Karthik Sarma’s SRS Investment Management and Ehi Car Services Ltd (ADR) (NYSE:EHIC) signed a securities purchase agreement, under the terms of which, the investors planned to acquire some 11.44 million shares, with additional 10.90 million shares to be bought at a later date. At an extraordinary general meeting of shareholders held in Shanghai on June 30, the shareholders voted in favor of the issuance of 10.90 million shares to Tiger Global and SRS Partners.
Ehi Car Services Ltd (ADR) (NYSE:EHIC) is a $900 million Chinese holding company that provides car rental services to individual and corporate clients. The stock is up by nearly 80% since the beginning of the year, but since its IPO in November 2014, it has appreciated by around 25%. The appreciation came as the company posted a 60% annual increase in revenue to $47.7 million in the first quarter and turned to a profit of around $600,000 from a loss of $2.87 million a year earlier.
Since it went public at the end of last year, the company has not managed to gain a lot of attention from hedge funds. At the end of March, four of more than 700 hedge funds from our database held long positions in Ehi Car Services Ltd (ADR) (NYSE:EHIC) with an aggregate value of some $9.66 million, versus five funds with $9.09 million worth of stock a quarter earlier. With Tiger Global disclosing a massive stake, we can expect an inflow of capital in the company during the second quarter, but we have to wait for a couple of weeks until 13F filings start to come up. Aside from Tiger, two other investors with stakes in Ehi Car Services are Mark Kingdon‘s Kingdon Capital, which owns 488,100 shares and Israel Englander’s Millennium Management, which holds 105,900 shares as of the end of March. In addition, Ted Kang’s Kylin Management sold out its entire stake during the first three months of 2015, which previously contained 150,000 shares.
We pay attention to hedge funds’ moves because our research has shown that hedge funds are extremely talented at picking stocks on the long side of their portfolios. It is true that hedge fund investors have been underperforming the market in recent years. However, this was mainly because hedge funds’ short stock picks lost a ton of money during the bull market that started in March 2009. Hedge fund investors also paid an arm and a leg for the services that they received. We have been tracking the performance of hedge funds’ 15 most popular stock picks in real time since the end of August 2012. These stocks have returned some 135% since then and outperformed the S&P 500 Index by around 80 percentage points (see the details here). That’s why we believe it is important to pay attention to hedge fund sentiment; we also don’t like paying huge fees.
Tiger Global Management is one of the most successful funds founded with seed money from Julian Robertson, which returned 44% per year since its inception in 2001 and by the end of 2007. The fund also had returns of 23%, 14%, and 17% in the last three years. Aside from Ehi Car Services Ltd (ADR) (NYSE:EHIC), last month, the investor disclosed a new passive stake in Etsy Inc (NASDAQ:ETSY), which contains 10.0 million shares, representing 8.9% of the common stock. In April, the investor raised its stake in another Chinese company, Zhaopin Ltd (ADR) (NYSE:ZPIN), in which it disclosed holding 2.30 million shares, versus 1.28 million shares held earlier.