In the hedge fund universe, 13F filing season is here, and we’re bringing you up-to-date coverage of this situation. While money managers’ 13F filings are reported to the SEC with a 45-day delay, this actually improves investors’ ability to beat the market because, on average, fund managers are early into their investments. Our research has shown that hedgies’ consensus stock picks beat the market handily (see the details of our market-beating strategy), so let’s take a look at one particular fund’s latest Q4 moves.
Groupon’s continued comeback
Groupon Inc (NASDAQ:GRPN) was a new position for Tiger Global in the third quarter, and the hedge fund upped its stake in the daily deals company significantly one quarter later. Groupon now accounts for more than $315 million worth of Tiger Global’s 13F capital, after a 9.9% stake was reported in a 13G filing last November (see the full story here). Since the details of this bullish bet were made public, Groupon’s stock price has returned 99% (as of Valentine’s Day).
Despite this appreciation, GRPN shares still trade at a 68% discount to their industry’s average sales valuation, and optimism over the company’s Groupon Goods e-commerce platform is riding high. A recent “Buy” upgrade from Sterne Agee is the proverbial cherry on top, and indicates that more gains could be in store.
Apple Inc. (NASDAQ:AAPL) downsized; Facebook Inc (NASDAQ:FB), Google Inc (NASDAQ:GOOG) and LinkedIn Corporation (NYSE:LNKD) cut
Unlike some of its peers, Tiger Global did not sell its entire Apple Inc. (NASDAQ:AAPL) position last quarter, instead choosing to downsize its Cupertino holdings by 19.2%. Interestingly, the hedge fund did decide to cut its entire stakes in Facebook Inc (NASDAQ:FB), Google Inc (NASDAQ:GOOG), and LinkedIn Corporation (NYSE:LNKD), which should come as a surprise to most investors. At the end of the third quarter, each member of this group fell within Tiger Global’s top 12, so it’s not likely that many predicted such a drastic move to occur over the next three months.
It’s worth mentioning that the size of the hedge fund’s 13F portfolio shrank by nearly 25%, so it appears that this tech trio could have been a casualty of a year-end sell-off, though there’s no way we can be certain. Regarding Facebook Inc (NASDAQ:FB), we do know that Coleman and his team converted a significant portion of their private shares into public class A stock in Q3, which subsequently appreciated by 22.9% in Q4.
Still, out of these four stocks, Apple Inc. (NASDAQ:AAPL) is the only to pay a dividend, and is by far the cheapest no matter how we slice the valuation metrics. For those two reasons alone, Tiger Global’s sentiment is understandable.
Continued confidence in 3D Systems and Amazon
3D Systems Corporation (NYSE:DDD) was a new position for the hedge fund in the third quarter, and it received a vote of confidence at year’s end.
Why was this the case?
Tiger Global upped its stake in the 3D printing company by 15%, which has already returned 17.6% since the start of 2013. Though this stock has seen some mammoth gains over the past year, investors looking for exposure to 3D printing are best suited here, due to three key reasons: (1) 3D Systems’s products are some of the most affordable in the marketplace, (2) the variety of its product offerings is promising, and (3) shares are still 10% cheaper than key competitor Stratasys, Ltd. (NASDAQ:SSYS) on a PEG basis (see these points in greater detail).
Amazon.com, Inc. (NASDAQ:AMZN), meanwhile, was the beneficiary of a 158% boost by Tiger Global last quarter, and like 3D Systems, this appears to be a momentum play. Shares of the e-retailer rose by more than 40% in 2012, and despite many investors’ cries that Amazon’s sky-high valuation makes the stock a clear-cut “sell,” we think that its conversion rate—i.e. the percentage of web visitors that buy a product within its pages—still has room for improvement.
Though estimates vary, it is widely accepted that Amazon’s conversion rate is in high-single-digit territory. This is below eBay Inc (NASDAQ:EBAY), for example, which sports a conversion rate between 11% and 12%. In layman’s terms, this differential indicates that Amazon still has room to grow top line revenues, and the combination of its Prime and virtual currency services can boost conversions going forward.
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