Julian Robertson became a billionaire through his success at Tiger Management, and also had an enormous effect on the financial world by identifying and grooming a pack of “Tiger Cubs” who are now successful hedge funds managers- and, in some cases, billionaires- themselves. While he no longer manages Tiger for outside investors, he reports many of his long equity positions in quarterly 13F filings (find Robertson’s favorite stocks). We’ve already looked at some of his top picks, and can also consider different sectors or industries to see which of those stocks Robertson likes. While it’s not a good idea to just copy any investor blindly, particularly as 13F filings can be out of date, we can consider these stocks to be free ideas that we can look at further. Here are the five services stocks that Robertson reported the largest positions on the 13F:
Robertson’s favorite services stock was Mastercard Inc (NYSE:MA), with close to 60,000 shares in his portfolio. The legendary investor had recommended credit card stocks about a year ago, arguing that the companies themselves did not bear credit risk and would see increased business from higher payment volumes. Mastercard’s stock price is up 28% in the last year, though net income is only 8%; this has resulted in a trailing earnings multiple of 28 and therefore a valuation dependent on strong growth. The forward P/E is 19, which is still a bit high for us given the company’s recent growth rates (and, of course, the gap between the trailing and forward multiples indicates high growth expectations for 2013).
Robertson owned about 410,000 shares of Liberty Global Inc. (NASDAQ:LBTYA), a cable, Internet, and phone company which operates primarily in Europe and Chile. It’s another pricy stock, valued at 34 times consensus earnings for 2013. In addition, sales were only up 4% in the third quarter compared to the same period in 2011. Billionaire- and Tiger Cub- Stephen Mandel’s Lone Pine Capital reported a position of 4.4 million shares in Liberty Global at the end of the quarter (check out more of Mandel’s stock picks). We don’t think that it’s a good stock to buy.
Visa Inc (NYSE:V) was the most popular services stock among hedge funds in the third quarter of the year (see the full rankings) as 69 hedge funds and other notable investors in our database of 13F filings owned the credit card issuer. Visa’s stock is up even more than Mastercard’s in the last year, recording a 53% increase that has brought its market cap close to $100 billion. The earnings growth has been very high as well. However, as with Mastercard Visa’s forward P/E (18 in this case) seems to have already priced in quite a bit of growth. We think other credit card stocks such as Discover, American Express, or Capital One might be better values.
The 13F showed that Robertson initiated a position of about 250,000 shares in Charter Communications, Inc. (NASDAQ:CHTR) between July and September. Charter provides cable, Internet, and other communication services. Revenue growth here has been limited as well, and the stock looks expensive relative to its earnings; in addition, the EV/EBITDA multiple is 7.6x. Again, the company doesn’t seem cheap enough to be a good value.
Robertson increased his holdings of Sirius XM Radio Inc (NASDAQ:SIRI) by 16% to a total of 5.9 million shares. Sirius is up 52% in the last year, and the stock currently trades at 27 times consensus earnings for 2013. The most recent data shows that 8% of the total shares outstanding are held short, which looks a bit high and suggests that a number of market players are bearish on the stock at these prices. We think that we’d avoid it.