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Alibaba Group Holding Ltd (BABA), Apple Inc. (AAPL), Actavis plc (ACT): Discovery Capital Management is Betting Big on These Stocks

Discovery Capital Management is a fund that was founded in 1999 by Rob Citrone and is one of the so-called Tiger Cub hedge funds, with Mr. Citrone prior to founding Discovery working as portfolio manager at Julian Robertson‘s Tiger Management. The fund is focused on liquidity and valuation multiples, as well as past and potential growth. In the latest round of 13F filings, Discovery revealed an equity portfolio worth $8.86 billion, down from $10.47 billion in the previous quarter. The fund is still focused on the technology sector, which amasses around 40% of the total equity portfolio value. The fund has made some changes to its top holdings during the third quarter, so we are going to discuss Alibaba Group Holding Ltd (NYSE:BABA)Apple Inc. (NASDAQ:AAPL), and Actavis plc (NYSE:ACT), which in aggregate represent 25% of Discovery’s equity portfolio.

Discovery Capital Management

Mr. Citrone added Alibaba Group Holding Ltd (NYSE:BABA) to its equity portfolio after the company went public at the end of September. Discovery’s position in the company amasses 10.39 million shares, valued at $923.45 million, which represent over 10% of the equity portfolio. Overall, Alibaba Group Holding Ltd (NYSE:BABA) has been included in the equity portfolios of 109 funds, the stock being one of the top 10 most popular picks among over 700 funds that we track, which is impressive, taking into account that the company went public at the end of the third quarter. The aggregate value of the stakes held by these funds amounts to $7.68 billion as of the end of September. Billionaire George Soros has also bet on Alibaba Group Holding Ltd (NYSE:BABA) and reported ownership of 4.40 million shares in its latest 13F filing. Mr. Citrone’s mentor, Julian Robertson is also bullish on the company and owns 1.22 million shares as of the end of September, the position being the highest in terms of value.

Next in line is Apple Inc. (NASDAQ:AAPL), which moved down one position in comparison with the second quarter, being replace by Alibaba. Discovery owns around 8.55 million shares of the company, valued at $861.06 million. The investor initiated the position during the second quarter and during the third quarter it raised its stake by 31%. However, Discovery also reported ownership of shares of Apple Inc. (NASDAQ:AAPL) as of the end of last year, but the stake was sold out during the first quarter of 2014. So, Mr. Citrone went back to Apple after the company split its stock which made it more available to investors and gave it more room to grow. Overall, Apple Inc. (NASDAQ:AAPL) is the most popular choice among the funds that we track, with 153 funds reporting long positions, versus 152 in the previous quarter. However, the aggregate value of the funds’ stakes went down by $2.71 billion to $22.51 billion, which can be explained by the growth of the stock (28% since the split) and by Alibaba’s IPO which has also attracted the attention of investors. However, Mr. Citrone and other investors remained bullish on Apple Inc. (NASDAQ:AAPL), with one of the largest shareholders, Carl Icahn, still holding 52.76 million shares of the company.

In addition, Discovery boosted its position in Actavis plc (NYSE:ACT), which is the most popular healthcare stock among hedge funds. The fund reported ownership of more than 1.82 million shares, with an aggregate value of $439.80 million, up by 230% on the quarter. Mr. Citrone added the company to his fund’s equity portfolio during the first quarter and initially held 459,200 shares, while the stock jumped by more than 58% year-to-date. Actavis plc (NYSE:ACT) has made several important acquisitions this year, the latest being the purchase of Allergan, Inc. (NYSE:AGN), which is expected to create one of the largest pharmaceutical companies in the world. In this way, Mr. Citrone made the right decision to raise the stake in Actavis plc (NYSE:ACT) as the Street was only speculating a possible transaction, while Allergan was fighting against Bill Ackman‘s Pershing Square and Valeant Pharmaceuticals Intl Inc (NYSE:VRX) who made an unsolicited bid earlier this year. Dan Loeb‘s Third Point raised its position in Actavis by 15% during the third quarter to around 2.88 million shares.

Disclosure: none

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