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Groupon Inc (GRPN) and More: Tiger Global Management’s Small Cap Picks

Colfax Corp (NYSE:CFX) was another of Tiger Global’s small cap picks; according to the 13F, it initiated a 3.5 million shares position between January and March. The diversified machinery company trades at 29 times forward earnings estimates, indicating that markets are expecting high earnings growth here as well. Given the industry, it’s not that surprising that Colfax carries a beta of 1.9; this shows that the stock price tends to react strongly to moves in broader market indices. Sales numbers, at least, have not been that strong recently and we think that we would avoid the stock.

Tiger Global disclosed ownership of 1.3 million shares of $3.4 billion market cap 3-D printing related company Stratasys, Ltd. (NASDAQ:SSYS). Sales more than doubled in its most recent quarter compared to the same period in the previous year, and many market participants are very optimistic about 3-D printing. Though we are a bit concerned that specific companies in the business might be overhyped, the fund’s participation here is somewhat notable. Analyst consensus for 2014 implies a forward earnings multiple of 35, so once again the current valuation already assumes high growth for at least some time.

Talk about catching a falling knife: J.C. Penney Company, Inc. (NYSE:JCP), which is down 31% in the last year and over 40% in the last two years, rounds out our list of Tiger Global’s top five small cap picks. The retailer experienced a 16% decline in revenue last quarter (fiscal Q1) compared to the first quarter of its last fiscal year, and has been unprofitable for some time; free cash flows are also highly negative. According to the most recent data, about a third of the float is held short. J.C. Penney looks like a highly risky investment- we’re highly skeptical that its turnaround efforts will be successful.

Disclosure: I own no shares of any stocks mentioned in this article.

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