In any discussions concerning legendary investors, George Soros and Steve Cohen are two names that are bound to come up. While Mr. Soros was among the first individuals who started a hedge fund and is one of the most successful hedge fund managers of all time, Steve Cohen has been one of the most revered traders on the Street in his own right. Even though both individuals don’t manage investors’ money anymore, their respective family offices, Soros Fund Management and Point72 Asset Management, can still boast housing more investment capital than most hedge funds’ AUM (assets under management). With the track record that Mr. Soros and Mr. Cohen have, any stock they pick up (or discard) should be considered by potential investors of those stocks. Needless to say, if both of these legends are betting on the same stock, we believe that to be a great sign, which is why in this article we are going to take a closer look at two tech stocks both Mr. Soros and Mr. Cohen liked during the second quarter, and one tech stock they both got rid of during the same period.
Most investors don’t understand hedge funds and indicators that are based on hedge funds’ activities. They ignore hedge funds because of their recent poor performance in the bull market. Our research indicates that hedge funds underperformed because they aren’t 100% long. Hedge fund fees are also very large compared to the returns generated and they reduce the net returns experienced by investors. We uncovered that hedge funds’ long positions actually outperformed the market. For instance the 15 most popular small-cap stocks among funds beat the S&P 500 Index by more than 80 percentage points since the end of August 2012. These stocks returned a cumulative of 118% vs. a 57.6% gain for the S&P 500 Index (read the details). That’s why we believe investors should pay attention to what hedge funds are buying (rather than what their net returns are).
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Social media behemoth Facebook Inc (NASDAQ:FB) featured prominently in the portfolios of both Soros Fund Management and Point72 Asset Management at the end of the second quarter. While Point72 reduced its stake in the company by 40% during that period, it still held almost 740,000 shares worth around $63.39 million. Unlike Point72, Soros Fund Management almost tripled its stake in Facebook Inc (NASDAQ:FB) during the quarter, holding slightly above 2.59 million shares worth $222.25 million at the end of it. After returning just 4.3% during the second quarter, shares of the company had a huge rally in July in anticipation of the company’s second quarter results, and currently trade up by more than 18% year-to-date. Facebook Inc (NASDAQ:FB) recently announced that it will be opening up its marquee acquisition Instagram for advertisers in over 200 countries by the end of September. Stephen Mandel‘s Lone Pine Capital was the largest shareholder of Facebook at the end of June among the hedge funds we track, owning over 9.7 million shares.
Moving on, it seems both Soros and Cohen had differing immediate outlooks on eBay Inc (NASDAQ:EBAY) [pre Paypal Holdings Inc (NASDAQ:PYPL) spin-off] as well. Whereas Point72 increased its stake in the company by 1,364% to 758,200 shares, Soros Fund Management reduced its stake marginally, by 4% to slightly under 3.2 million shares during that period. Shares of eBay Inc (NASDAQ:EBAY) remained range-bound throughout the first half of the year, but were up by 4.4% for the second quarter. On September 10, Cantor Fitzgerald analyst Youssef Squali downgraded eBay’s stock to ‘Hold’ from ‘Buy’, while reducing his price target to $27 from $72, which represents a potential upside of just 4% from the stock’s current price. Famous activist investor Carl Icahn, who also played an important role in getting eBay Inc (NASDAQ:EBAY) to spin-off Paypal Holdings Inc (NASDAQ:PYPL), was the largest shareholder of the combined company among funds in our database, owning over 46 million shares on June 30.
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Finally, both Point72 Asset Management and Soros Fund Management sold off their entire stakes of LinkedIn Corp (NYSE:LNKD) during the second quarter, consisting of 193,100 shares and 13,000 shares respectively. Although LinkedIn Corp (NYSE:LNKD)’s stock started the year on a promising note, it cracked significantly after the release of its first quarter earnings on April 30 and ended the second quarter down by 17.3%. The company recently launched ‘Next Wave’, which is an original list that will identify and profile the upcoming influencers in different industries. For the second quarter of the year, the company reported EPS of $0.55 on revenue of $712 million, compared to analysts’ consensus estimate of EPS of $0.30 on revenue of $679.82 million. Unlike Point72 and Soros Fund Management, Eric Bannasch‘s Cadian Capital was one of several hedge funds that initiated a stake in LinkedIn Corp (NYSE:LNKD) during the second quarter, and held 571,100 shares at the end of June.
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