Philippe Laffont’ Coatue Management Slashes Equity Portfolio by $1 Billion; Several Top Picks Scaled Back

Coatue Management is a New York City-based hedge fund sponsor founded by Philippe Laffont in 1999. The firm focuses on tech stocks and, to a lesser extent, on consumer discretionary companies. Prior to Coatue, Mr. Laffont worked for Julian Robertson’s Tiger Management, after graduating with an M.S. in Computer Science from MIT.

A few weeks ago, Coatue filed its latest 13F, disclosing its long equity stakes as of the end of the second quarter. Its equity portfolio value fell by almost $1 billion, to $7.01 billion during the second quarter and in this article, we will take a closer look at some of the stakes the fund scaled back on over the April to June period.

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Adobe Systems Incorporated (NASDAQ:ADBE)

– Shares held by Coatue as of June 30: 1.69 million

– Value of Coatue’s stake as of June 30: $162.55 million

Over the second quarter of 2016, Coatue trimmed its exposure to Adobe Systems Incorporated (NASDAQ:ADBE) by 56%, as the stock traded in the $90 to $100 territory. Also reducing its exposure to the software company was Gabriel Plotkin’s Melvin Capital Management, which disclosed ownership of around 500,000 shares following a 20% reduction in its stake over the period. Opposite was the case of Aaron Cowen’s Suvretta Capital Management, which boosted its participation by 6% to 1.96 million shares. Adobe Systems Incorporated (NASDAQ:ADBE)’s stock has managed to gain over 5% since the beginning of the year. Even though the stock is trading at roughly 56 times its trailing twelve-month earnings, it still looks cheaper than many of its software peers, which trade, on average, at around 77 times earnings. However, it is also trading at a price-to-sales ratio of almost 10x, nearly double compared to the average of its industry peers.

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– Shares held by Coatue as of June 30: 308,134

– Value of Coatue’s stake as of June 30: $220.5 million, Inc. (NASDAQ:AMZN) was another stock, in which Coatue cut its stake by 46% during the second quarter. The company remained the third most popular among the funds that we track, only trailing Facebook and Alphabet, with 145 funds holding shares of the eCommerce giant at the end of June, compared to 133 funds a quarter earlier. Other big supporters included Andreas Halvorsen’s Viking Global, which held 3.27 million shares at the end of June, following a 5% reduction in its exposure, and Ken Fisher’s Fisher Asset Management, which disclosed ownership of 1.98 million shares, down by 21% over the quarter. However, the decrease in hedge funds’ exposure to, Inc. (NASDAQ:AMZN) should not be interpreted as a bearish sign. Since the stock gained more than 19% over the second quarter, many of these sales could be simple profit taking. Moreover, since the period ended, the stock has managed to surge an extra 6.3%. On Tuesday, shares tumbled after the company announced it was offering Prime subscribers free access to the Audible digital audio service, and adding more “skills” to its Alexa system.

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Microsoft Corporation (NASDAQ:MSFT)

– Shares held by Coatue as of June 30: 4.88 million

– Value of Coatue’s stake as of June 30: $250.14 million

Unlike Amazon, Microsoft Corporation (NASDAQ:MSFT) slipped over the second quarter, losing more than 7% of its value. Coatue cut its position in Microsoft by 55% during the same period. Still, its stake remained quite significant, valued at around $250.14 million at the end of June. Among the 130 other funds in our database long this stock, we could highlight First Eagle Investment Management, with 23.45 million shares, valued at roughly $1.2 billion on June 30, and Fisher Asset Management, which held 18.3 million shares of the tech behemoth.  After a volatile year, Microsoft Corporation (NASDAQ:MSFT)’s stock has managed to return just 1.4% since January. However, since the beginning of the third quarter, shares have risen by more than 11%, largely on the back of strong fiscal fourth-quarter results posted in late-July, and, most recently, on the back of news related to its CRM segment. On Monday, the company said it had inked a deal with HP Inc (NYSE:HPQ), to provide it with Microsoft Dynamics, which will add to the suite of Microsoft cloud products HP already uses. “We have chosen Microsoft Dynamics as our CRM solution for our direct selling, partners and services. This brings us a cloud-based solution that delivers a more effective and efficient collaboration engine across our business,” HP’s COO Jon Flaxman explained.

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Alphabet Inc (NASDAQ:GOOG)

– Class C Shares held by Coatue as of June 30: 683,810

– Value of Coatue’s stake as of June 30: $475.05 million

Another tech giant that witnessed a drop in Coatue’s exposure over the second quarter was Alphabet Inc (NASDAQ:GOOG). The firm reduced its stake in Class C stock by roughly 28% over the period, to 527,235 shares, and its stake in Class A shares by 4% to 156,575 shares. Still, Alphabet remained the most popular stock among the funds that we track, counting 187 unique hedge fund backers holding almost $30 billion in class A or class C stock on June 30. Among large investors, we can also find Harris Associates, which declared holding 631,571 Class A shares and 2.18 million Class C shares as of the end of June. Shares of Alphabet’s class A stock have had a volatile year, managing to post returns of less than 2.7% year-to-date. Nonetheless, over the third quarter, the stock has gained almost 15%. At current valuations, Alphabet trades at less than 31 times its trailing twelve-months earnings, at a discount of about 40% to its Internet peers. Despite this, margins and returns on equity and assets are among the best in the industry.

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Facebook Inc (NASDAQ:FB)

– Shares held by Coatue as of June 30: 4.22 million

– Value of Coatue’s stake as of June 30: $483.27 million

Finally, there’s Facebook Inc (NASDAQ:FB), which saw Laffont’s fund trim its exposure by 26% over the second quarter, as the stock remained mostly flat – despite some ups and downs. Also long the social media behemoth was Alex Snow’s Lansdowne Partners, holding 5.58 million shares of Facebook after a 51% increase in its holding over the second quarter. Since the third quarter started, shares of Facebook Inc (NASDAQ:FB) have gained more than 11%. On Tuesday, shares tumbled amid news that Instagram rolled out a revision that allows users to search for specific wording/phrases and hide potentially offensive ones.

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Disclosure: Javier Hasse holds no interest in any of the securities or entities mentioned above.