Yelp Inc (YELP) Gets a Positive Review from This Tiger Cub’s Hedge Fund

Page 1 of 2

Yelp Inc (NYSE:YELP) recently saw niche hedge fund Joho Capital buy up almost 900,000 shares per a 13G filing with the SEC. Joho now owns over 5.2% of the social network site. Robert Karr founded Joho Capital in 1996 and is one of Julian Robertson’s ‘tiger cubs’. Karr worked at Robertson’s Tiger Management for four years before starting his hedge fund. Joho employs a niche strategy that focuses on a select number of companies – owning only nine at the end of the third quarter.

Yelp is down 20% since its March IPO, but has showed strength of late, beating EPS estimates by at least 25% each of the last two quarters. The social review site trades at an incalculable trailing P/E and an outrageous forward P/E of 750x.

Yelp admits that its international markets are currently un-monetized and that they are under-converting in the U.S. The social platform is currently only generating revenue from 35,000 businesses, versus the over 27 million businesses that operate in the U.S. Magna Global suggests that the addressable market for local advertising is upwards of $65 billion in the U.S. alone, where only 6% is being spent online. Online spending is expected to grow rapidly over the next few years as digital advertising continues its takeover of print advertising.

RENAISSANCE TECHNOLOGIES

A positive for the social review site is its strong mobile presence. Around 50% of all searches are being done via its mobile app and the majority of Yelp’s users are converted at a much higher rate on a monetization level in mobile versus desktop. Yelp is seeing its mobile app used across 8.2 million unique devices each month, and future growth in emerging markets should be driven by smartphone adoption. Although Yelp’s valuation may seem out of line, we believe its growth prospects and positioning present investors with a solid opportunity. Yelp’s five-year EPS growth rate is estimated to average 20% annually through 2017. Joho joins billionaire Ken Griffin in Yelp, who upped his stake over 50% during the third quarter (see Ken Griffin’s newest picks).

Joho’s tech-focused portfolio also includes the likes of Google Inc (NASDAQ:GOOG), Baidu.com, Inc. (NASDAQ:BIDU), Facebook Inc (NASDAQ:FB) and Zynga Inc (NASDAQ:ZNGA).

Google made up over 30% of Joho’s 13F portfolio last quarter and is its largest holding. Google has started to rebound from its third quarter earnings miss that drove the search stock down over 10%. The tech company still only trades at 15x forward earnings and 5x sales, the cheapest among Joho’s tech picks. We believe the tech company remains a solid investment opportunity despite the interim pressures it will face as a result of integrating newly-acquired Motorola Mobility. Jim Simons was one of the few big-name investors selling out on the Google weakness last quarter, dumping over 70% of his shares (check out Jim Simons’ top bets here).

Page 1 of 2
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The 10 Largest Pharmaceutical Companies In the World

The 10 Most Expensive Android Apps

The 9 Most Expensive Designer Bags in the World

The 7 Most Expensive Real Estate in the World

The 10 Most Expensive eBay Items Ever Sold

The 10 Most Expensive iPhone Apps

The 9 Most Expensive Designer Shoes in the World

The 10 Most Expensive Cigarette Brands

The 10 Most Expensive Law Schools in the US

The 10 Best Wall Street Movies

The 10 Most Expensive Golf Clubs Ever Sold

The 10 Most Expensive Golf Memberships

The 10 Best Disney Characters Ever Created

The 8 Best Foods for Gaining Weight

The 10 Most Expensive Colleges in the World

The 7 Most Memorable Ad Campaigns of All Time

The 7 Most Expensive High Schools in the World

The 10 Electric Vehicles with the Longest Range

The 10 Cities with the Worst Drivers in the World

The 10 Most Expensive Dresses Ever Created

10 Islands to Visit Before You Die

10 Famous Celebrities Who Needed Rehab

The 15 Countries with the Largest Oil Reserves

The 10 Most Overused Excuses in the World

The 5 Best iOS Apps You Can’t Get on Android

5 Companies Damaged By Social Media Blunders

The 10 Most Legendary Blues Songs

The 10 Most Lawless Places in the World

4 Reasons China is a Threat to the US

The 17 Most Sugary Drinks in the World

The 10 Most Ruthless Rulers in History

The 10 Greatest Generals in History

Top 8 Travel Destinations for 2015

The 10 Safest Dog Breeds for Children

The 10 Most Stolen Vehicles in the US

The 7 Most Expensive Celebrity Weddings

The 10 Best LoL Teams in the World

Top 10 Worst Marketing Campaigns Ever Produced

Top 5 Diets that Help You Lose Weight

The 10 Best Ways to Stay Awake

7 Artists That Switched Musical Genres

The 10 Most Expensive Cities to Live in New Jersey

The 10 Best High Schools in New York

The 10 Countries With the Least Gender Inequality

The 6 Biggest Musician-Manager Feuds

The 10 Countries with the Cheapest Gas Prices

The 7 Most Theatrical Bands of All Time

The 8 Worst Band Breakups of All Time

The 10 Most Important South American Leaders

The 7 Most Successful Casting Show Winners

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!