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Facebook Inc (FB), Apple Inc. (AAPL) Among Light Street Capital’s Top Picks That Blew Away the S&P 500 in Q1

Glen Kacher is president of Light Street Capital Management, a firm he founded in May of 2010. He started in the hedge fund industry at Julian Robertson’s Tiger Management in 1993 and spent four years there while getting his MBA at Stanford University. He then spent the next 13 years at Integral Capital Partners as a managing director. During that time he developed his portfolio strategy and led a number of venture investments including in Agile Software, which was acquired by Oracle, Arcsight which was acquired by HP, BlueNile (IPO), OpenTable (IPO), and many more. Kacher’s investment horizon can range anywhere from three months to several years. Kacher’s 30 picks in stocks with a market cap of $1 billion or more achieved weighted average returns of 10.5% in Q1, blowing away the S&P 500, which returned just 0.9% over the same period.


Why is it important to follow Kacher and Light Street Capital Management, among other funds? After all, equity hedge funds returned just 1.4% in 2014, following returns of just 11.1% in 2013 and 4.8% in 2012. These are embarrassingly low returns compared to the S&P 500 ETF (SPY)’s 13.5% gain in 2014, 32.3% gain in 2013, and 16% gain in 2012. What is going on here? Have the managers lost their touch in picking stocks? The answer is a resounding no and the reason is simply size (see a more detailed explanation here). Our small-cap hedge fund strategy, which identifies the best small-cap stock picks of the best hedge fund managers returned 28.2% in 2014, 53.2% in 2013, and 33.3% in 2012 by avoiding the pitfall of primarily investing in lower return large-cap stocks that most hedge funds fall into (see the details here).

Now let’s look at some of Kacher’s picks, beginning with Facebook Inc (NASDAQ:FB), which is Light Street Capital’s most valuable holding. Kacher began to sell off some of the position during the fourth quarter, reducing Light Street Capital’s holding of Facebook Inc (NASDAQ:FB) by almost 20% by the end of it. At the end of 2014 the firm held 675,000 shares of Facebook Inc (NASDAQ:FB) valued at $52.66 million and representing 9.3% of its 13F portfolio. Facebook Inc (NASDAQ:FB)’s stock enjoyed a solid first quarter, rising by 5.38%. That performance comes on the heels of strong 2013 and 2014 campaigns for the stock in which it has made gains of 90% and 44% respectively. Facebook may also be on the cusp of big things with its Oculus Rift VR Headset, which may see release at some point this year. Digi-Capital, a consulting firm, predicts the virtual reality market will be a$150 billion one within just five years. Billionaire Stephen Mandel is betting big on Facebook, as is Karthik Sarma’s SRS Investment Management.

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