Facebook Inc (FB), Tableau Software Inc (DATA), Qihoo 360 Technology Co Ltd (QIHU): What SRS Investment Management and Jericho Capital Have in Common

SRS Investment Management is a New York City-based, hedge fund founded and managed by Karthik Sarma since 2007. Previously, Karthik was one of the senior investors at Chase Coleman’s Tiger Global Management LLC for five years. According to the fund itself, Karthik invests globally, with a strong focus outside the US (India, China, Korea), and with differentiated expertise in high-growth industries (like technology, media and gaming). For the second quarter of 2014, the fund disclosed an equity portfolio with 15 stocks, focused mainly on information technology (43.6%) and transports (44.5%) companies, worth more than $2.4 billion. In this article, we will take a look at three of its tech bets, Qihoo 360 Technology Co Ltd (NYSE:QIHU), Facebook Inc (NASDAQ:FB), and Tableau Software Inc (NYSE:DATA), in order to elucidate if any of them deserve further research. You will find that SRS Investment Management’s tech picks are very similar to those of Josh Resnick’s Jericho Capital Asset Management L.P. –which you can check out here.

facebook FB logo

Same as in Jericho’s case, Qihoo 360 Technology Co Ltd (NYSE:QIHU) is first in this list. SRS kept its position untouched over the second quarter. Its 4.48 million shares, worth more than $400 million, account for roughly 17% of the fund’s equity portfolio’s total value. This position makes of SRS the largest hedge fund shareholder, amongst those we track.

In addition to SRS and Jericho, several other major hedge funds are betting on Qihoo 360 Technology Co Ltd (NYSE:QIHU). For instance, John Burbank’s Passport Capital last disclosed ownership of 1.69 million shares, following a 31% boost in its stake in the company.

As outlined in Jericho’s article, there are several reasons to invest in Qihoo 360 Technology Co Ltd (NYSE:QIHU), despite a weak stock performance for the second quarter. In fact, this weakness provided an attractive entry point for investors in that period. Shareholders will benefit from the company taking on search engine market leader Baidu Inc (ADR) (NASDAQ:BIDU), as it finally starts to monetize its search business.

The second-runner-up is Facebook Inc (NASDAQ:FB), which also saw SRS keep its stake unchanged over the second quarter. The fund owns 5 million shares of Class A stock, worth more than $336 million. This makes it the second-largest hedge fund shareholder among those tracked by us, only outranked by Philippe Laffont’s Coatue Management, which holds 5.87 million shares, worth almost $400 million.

Reasons to invest in Facebook Inc (NASDAQ:FB), an established market leader, abound. However, the question is: is the stock worth its price? Trading at 82 times the company’s earnings (versus an industry average of 46x P/E), is the stock overvalued? Or do the company’s margins, returns and growth prospects justify its valuation?

Last in SRS’ list is Tableau Software Inc (NYSE:DATA), a $4.7 billion market cap computer software company. The fund started a position, with 690,000 shares, over the second quarter of 2014. The stake, worth almost $50 million, accounts for approximately 2% of the fund’s total equity portfolio, and situates it amongst the top five hedge fund investors in the company. The largest one of them is David Goel And Paul Ferri’s Matrix Capital Management, which also started a position in the company over the quarter, and now owns 1.6 million shares, worth more than $100 million.

Disclosure: Javier Hasse holds no positions in any stocks or funds mentioned.