Shannon River’s Bets on the Gaming Industry: Activision Blizzard, Inc. (ATVI), Take-Two Interactive Software, Inc. (TTWO), Facebook Inc (FB)

Facebook Inc (NASDAQ:FB) is the third-largest gaming-related holding of Shannon River. The investment manager has 200,000 shares of the social network company in its equity portfolio with a market value of $16.44 million. Facebook’s acquisition of Oculus VR®, the company behind the Oculus Rift virtual reality headset, makes it a compelling future player in the gaming industry. While talking about the prospects of Oculus Rift in a town hall located at the Menlo Park, California-based headquarter of his company, CEO Mark Zuckerberg said that virtual reality is the next big computing platform. He further took a dip into the future and talked about the shrinking size of the virtual reality hardware. In his words, it would be amazing to pack this technology into normal glasses and have people able to share media without carrying their computer everywhere. At the same time, he added that this vision might take up to ten or even 12 years to be realizated. The shares of Facebook Inc. (NASDAQ:FB) were up by 4% after a JPMorgan analyst, Doug Anmuth, called its April engagement data “impressive.”As per Anmuth, the social network platform is still in the early phases of monetizing its 1.4 billion user base. JPMorgan has a $100 price target for the company, which currently trades at $80.35. Shares of Facebook are up by 2.71% year-to-date. Stephen Mandel‘s Lone Pine Capital, Coatue Management, and Citadel Investment Group maintain significant investments in Facebook Inc.

We pay attention to hedge funds and prominent investors because historically, a select group of their top stock picks (their small-cap picks) delivered superior risk-adjusted returns. Our research has shown that the 50 most popular large-cap stocks among hedge funds had a monthly alpha of about six basis points per month, while the 15 most popular small-cap stocks delivered a monthly alpha of 80 basis points between 1999 and 2012. This means investors would have generated a double-digit alpha per year simply by imitating the 15 most popular small-cap stocks among hedge funds. Moreover, we have been tracking the performance of these small-cap stocks since the end of August 2012, during which time it’s obtained returns of more than 141% vs. a less than 60% gain for the S&P 500 ETF (SPY) (see the details here).

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