The last time we have seen a 13F filing from the billionaire owner of the Tampa Bay Lightning was May 2013. Jeff Vinik is a former manager of Fidelity’s Magellan Fund, the largest actively managed mutual fund in the US. Jeff Vinik managed the fund from 1992 to 1996, generating an average return of 17% per year. He launched his own hedge fund, Vinik Asset Management, after leaving Fidelity.
Vinik’s performance was spectacular. In his first 11 months, he nearly doubled investors’ money. In the following three years, he made about 50% annually. In October 2000, Jeffrey Vinik announced that he would stop managing money for outsiders and returned $4.2 billion to his investors by the end of the year.
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Last year Jeff Vinik said the following to Barron’s in an interview:
“I am positive on semiconductors. We’re in an age of disruption that is potentially revolutionary and definitely disinflationary, which is a great backdrop for standards of living to rise for decades. In health care, there’s a ton of disruption related to wearable devices and electronic records. Media is being disrupted by low-cost digital distribution. Autonomous cars will give people a ton of time back that goes into quality of life. Blockchain, which I’m frankly just starting to learn about, seems potentially disruptive.
…I’ve been investing in some growth companies and ventures in private markets. I’m invested in Longford Capital Management, a private-equity fund dedicated to litigation finance, and some other funds. I have private investments in companies like Delos, a New York wellness firm; aXiomatic, an e-sports and gaming company; Homee, a facilities management firm; a film production company called Mandalay Endurance Media Ventures; and Dreamit, which invests in start-ups that are building the cities of tomorrow.”
Jeff Vinik’s biggest current investment is a $3 billion real estate project in Tampa, partnering with Billionaire Bill Gates’ investment fund Cascade Investments. This week in a 13G filing Jeff Vinik resurfaced and revealed a 6.4% passive stake in Turtle Beach Corp (NASDAQ:HEAR). This is a very active stock. My guess is that Jeffrey Vinik didn’t try to spread his purchase over several weeks. He probably bought his stake between September 14th and September 19th, and paid around $19 a share.
Turtle Beach Corp (HEAR) was trading at $1.81 at the end of last year, so it is one of the best performing stocks in the market this year. It is a headset company that’s hugely benefiting from the video game crazy Fortnite. Basically, gamers prefer Turtle Beach’s headset to play Fortnite and as a result Turtle Beach’s market share, sales, and profits are going through the roof.
Bulls are pointing out that the stock is cheap based on trailing earnings and Turtle Beach Corp may expand into other geographies (i.e. huge growth opportunity). On the other side, I am pretty certain Jim Chanos identified this company as a fad and shorting it. The company has 13.4 million shares outstanding and 5.5 million of these were sold short at the end of August. Here is what one short seller said about the stock:
“Turtle Beach gained a strong market position in the US console gaming headset market before a protracted decline in electronic input costs as well as the advent of the one-product-fits-all “media headsets” associated with widespread inter-operability enabled by adaptors and bluetooth. With their product rendered nondifferentiable, their vestigial brand strength continues to erode as competitors have consistently outperformed in product offerings, consolidated in mergers, and rapidly gained US console headset market share associated with broader market reach synergies (PC/international headset companies). Turtle Beach now dominates the lowerend US console headset market, a highly indefensible competitive position, facing pressure from above as highend competitors move “down-market” and a bottom floor as console manufacturers Microsoft and Sony bundle basic headsets with consoles and any mic-equipped headphones may be used as “gaming headsets”. Turtle Beach is consistently unprofitable while TB management has been unable to execute in the areas they identify as mission-critical to their success, namely penetration into PC and international markets. The gaming headset market is also relatively saturated – 40% of US gamers own a headset and headsets lack evolving/differentiating technology to warrant regular upgrades.”
Insider Monkey follows the stock picks of the 100 best performing hedge funds. Our flagship strategy identifies the best stock picks of the hedge funds every quarter. Since its inception in May 2014 through the end of August our flagship strategy returned 121% and outperformed the S&P 500 Index by 54 percentage points. At the end of the second quarter only one of these 100 best performing hedge funds had a position in HEAR and that position was worth only $616 thousand. Since we don’t see strong support from the best performing hedge funds (some of these are probably short the stock given the large short interest), we don’t think it is a good idea to follow Jeff Vinik and initiate a position in Turtle Beach Corp.
