Blue Ridge Capital, is one of the most well-known long/short equity hedge funds, which was founded by John Griffin in 1996. Prior to founding Blue Ridge, Mr. Griffin worked at Julian Robertson’s Tiger Management, where he was considered the second in-command after Robertson. Blue Ridge backs on fundamental analysis for its picks, focusing on individual companies and primarily invests in companies that have strong competitive advantages over their peers. According to Blue Ridge’s most recent 13F filing for the second quarter, the fund manages a well-diversified equity portfolio worth over $8.87 billion. Out of the five companies that Blue Ridge initiated stakes in during the second quarter, three went public during this period, namely Fitbit Inc (NYSE:FIT), TransUnion (NYSE:TRU), and Etsy Inc (NASDAQ:ETSY).
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 their short positions have lost a ton of money in the bull market since 2009. On the other hand, we have been tracking the performance of hedge funds’ 15 most popular small-cap picks in real time since the end of August 2012. These stocks have returned 123% since then and outperformed the S&P 500 Index by around 65 percentage points (see more details here).
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Blue Ridge was the first large investor to disclose a stake in Fitbit Inc (NYSE:FIT) and has acquired 3.5 million shares of the company, worth $133.80 million at the end of June. Fitbit Inc (NYSE:FIT) is an affordable wearables maker that went public on June 18, since then its stock has skyrocketed and is up by more than 120%. The company reported better than expected second-quarter earnings of $0.21 per share, trumping the estimates of $0.08, while its revenue of $400 million were significantly above the $319.02 million figure analysts were expecting. Several analysts and industry experts have been bullish on company since it was in the process of going public. Among them, Morgan Stanley released a note last week, after a meeting with the company’s management in which they highlighted how the company is poised for spectacular growth ahead. Prior to this note, on August 7 Morgan Stanley reiterated their ‘Equal Weight’ rating on the stock with a $43 price target. Another investor who initiated a stake in Fitbit was Daniel Benton’s Andor Capital Management bought 350,000 shares of the company.