Valiant Capital’s Favorite Consumer Stocks for Q3

Christopher R. Hansen‘s Valiant Capital Management recently disclosed the contents of its U.S. equity portfolio as of the end of June via a 13F filing submitted with the SEC.  The Seattle-based long/short equity hedge fund was founded by Mr. Hansen in March 2008, prior to which he worked as a Managing Director at billionaire John Griffin’s Blue Ridge Capital for nearly seven years. According to Valiant Capital’s most recent Form ADV, it had $3.6 billion in regulatory assets under management as of June 30. However, its latest 13F filing shows that less than half of that, or $1.50 billion, was invested in publicly-traded U.S. stocks and derivatives. The 13F filing also revealed that Valiant Capital was managing a very concentrated portfolio at the end of the second quarter, with long positions in only 14 stocks and two derivatives positions.

Since Valiant has historically invested a large chunk of its assets in the technology sector, it wasn’t surprising to see that technology stocks amassed over 54% of the value of the fund’s equity portfolio at the end of June. What was surprising, though, was that out of the 14 stocks the fund was invested in, nine of them belonged to the consumer sector. Moreover, if one were to take out the large derivative position the fund had in Apple Inc. (NASDAQ:AAPL) call options, stocks from the technology sector amassed only 24% of the value of the fund’s equity portfolio, only slightly ahead of the 19% that was amassed by stocks from the consumer sector. Considering the number of positions that Valiant has in consumer stocks and its conviction on the sector into the third quarter, in this article we’ll focus on the fund’s top-five stock picks from that sector and discuss how they have been performing of late.

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Chris Hansen - Valiant Capital

#5. Liberty Global plc – Class C Ordinary Shares (NASDAQ:LBTYK)

– Shares Owned by Valiant Capital Management (as of June 30): 1.9 Million

– Value of Valiant Capital Management’s Holding (as of June 30): $54.47 Million

Let’s start with Liberty Global plc – Class C Ordinary Shares (NASDAQ:LBTYK) in which Valiant Capital increased its stake by 24% during the second quarter. Shares of the European telecommunications company have fallen by almost 25% in 2016, with about half of those losses coming in after the Brexit result. In the last few quarters the company has made acquisitions in the mobile space and invested in content to fight an influx of video streaming services, which has been appreciated by analysts. Liberty Global plc – Class C Ordinary Shares (NASDAQ:LBTYK) is among the entities that have recently bid to acquire a minority stake in the lucrative auto-racing franchise Formula One, the result of which will be announced soon. Liberty Global’s stock currently sports an average rating of ‘Overweight’ and an average price target of $43.87 from the 16 leading analysts and research firms on Wall Street who track it. Joseph Mathias‘ Concourse Capital Management also increased its stake in the company during the second quarter, by 20% to 156,126 shares.

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#4. Tripadvisor Inc (NASDAQ:TRIP)

– Shares Owned by Valiant Capital Management (as of June 30): 927,100

– Value of Valiant Capital Management’s Holding (as of June 30): $59.61 Million

Tripadvisor Inc (NASDAQ:TRIP) was a new entrant to Valiant Capital’s equity portfolio during the second quarter. Shares of the online travel company have been on a gradual decline since mid-2014 and even though they have rebounded a bit since the start of the third quarter, they are still trading down by almost 28% year-to-date. Despite the correction the stock has seen, several analysts feel that trading at a forward P/E of nearly 30 means that the stock is still not cheap to buy, especially when one takes into account the uncertainties faced by the company. Tripadvisor Inc (NASDAQ:TRIP) was expected to report EPS of $0.42 on revenue of $402.56 million for the second quarter, but missed the mark on both counts, announcing EPS of $0.38 on revenue of $391 million. For the same quarter of 2015, the company had reported EPS of $0.54 on revenue of $405 million. Columbus Circle Investors was another hedge fund that initiated a stake in Tripadvisor Inc during the second quarter; it purchased 13,520 shares of the company.

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We check out Valiant Capital’s top-three consumer stock picks on the next page.

#3. Amazon.com, Inc. (NASDAQ:AMZN)

– Shares Owned by Valiant Capital Management (as of June 30): 92,250

– Value of Valiant Capital Management’s Holding (as of June 30): $66.01 Million

Moving on, Valiant Capital reduced its stake in Amazon.com, Inc. (NASDAQ:AMZN) by 6% during the April-to-June period, to 92,250 shares. After undergoing a minor correction at the start of 2016, Amazon’s stock has again resumed its uptrend since mid-February and has appreciated by over 14% so far this year. The e-commerce behemoth recently reported its second quarter results, which were better than what the Street had anticipated. While analysts were expecting the company to report EPS of $1.11 on revenue of $29.35 billion, Amazon declared EPS of $1.78 on revenue of $30.4 billion. Amazon’s cloud platform AWS was again a star, showing remarkable growth with its net sales climbing by 58% year-over-year to $2.88 billion. After losing the battle in China due to the country’s biased policies toward domestic companies, Amazon is leaving no stones unturned in its bid to win the title of market leader in the growing Indian e-commerce market. In the past few months it has been investing heavily in the country and recently launched its Prime services there. Larry Chen and Terry Zhang’s Tairen Capital initiated a stake in Amazon.com, Inc. (NASDAQ:AMZN) during the second quarter, purchasing 28,700 shares of the company.

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#2. Walgreens Boots Alliance Inc (NASDAQ:WBA)

– Shares Owned by Valiant Capital Management (as of June 30): 813,331

– Value of Valiant Capital Management’s Holding (as of June 30): $67.72 Million

After reducing its stake in Walgreens Boots Alliance Inc (NASDAQ:WBA) moderately during the previous two quarters, Valiant Capital reduced it by a further 6% during the second quarter. Walgreens Boots’ stock has largely been range-bound since late-October when it announced its $17.2 billion acquisition of Rite Aid Corporation (NYSE:RAD) and is currently trading down by 2.7% year-to-date. Although both companies remain confident that the deal will be approved by regulators, in the last few months some analysts have become skeptical about its successful completion due to the time that the FTC is taking to probe the deal. In a regulatory filing submitted on July 27, Walgreens Boots Alliance Inc (NASDAQ:WBA) revealed that it is planning to shut down its websites Drugstore.com and Beauty.com, thus reducing its e-commerce presence. Last month, analysts at Credit Suisse reiterated their ‘Buy’ rating on the stock while reducing their price target on it to $82.51 from $95.00. Ray Carroll’s Breton Hill Capital boosted its Walgreens holding by 7% to 19,526 shares during the second quarter.

#1. Priceline Group Inc (NASDAQ:PCLN)

– Shares Owned by Valiant Capital Management (as of June 30): 54,452

– Value of Valiant Capital Management’s Holding (as of June 30): $68.09 Million

Despite its stock declining by 3.14% during the second quarter, Priceline Group Inc (NASDAQ:PCLN) jumped five spots to become Valiant Capital’s sixth-most valuable equity holding at the end of June, as the fund increased its stake in the company by 39% during the quarter. Shares of the online travel and restaurant reservation and related services provider suffered a big drop following the Brexit results, but are still trading up by over 10% year-to-date. Priceline Group Inc (NASDAQ:PCLN) also posted strong bottom-line results earlier this month, declaring $2.56 billion in revenue and adjusted earnings of $13.93 per share for the second quarter, slightly missing revenue estimates, but walloping EPS estimates by $1.24. Analysts at RBC Capital Markets reiterated their ‘Buy’ rating and $1,600 price target on the stock on August 8, which represents potential upside of 19%. Concourse Capital Management also boosted its stake in the company during the second quarter, by 45% to 5,115 shares.

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Disclosure: None