Our research shows that hedge funds’ underperformance is often the result of their hedged positions and high fees. Our data for hedge funds’ third-quarter returns backs this up, as among the funds in our database with at least 5 long positions in billion-dollar companies on June 30, we calculated the returns of their qualifying long positions at 8.3% for the quarter. Meanwhile, the Barclay Hedge Fund Index has hedge funds’ actual returns for the third-quarter at less than 4%, though it should be noted that the Barclay’s Index tracks the performance of thousands of funds, while we focus solely on the cream of the hedge fund crop. Thus, in this article we’ll take a look at four of the long positions held by Criterion Capital on June 30, Splunk Inc (NASDAQ:SPLK), Netflix, Inc. (NASDAQ:NFLX), Palo Alto Networks Inc (NYSE:PANW) and Arista Networks Inc (NYSE:ANET), and study their performance.
Criterion Capital is a London-based investment firm run by Christopher Lord. Criterion’s public equity portfolio was valued at $2.19 billion as of the end of June and the fund’s picks returned 12.65% when looking at its 27 long positions on June 30 in companies which had a market cap of at least $1 billion. Now then, let’s take a look at how it and other hedge funds traded the aforementioned stocks in Q2 and why they may be good investments.
Criterion Capital sold 23% of its stake in Splunk Inc (NASDAQ:SPLK) during the second quarter, ending the period with about 2.87 million shares of the company. The stock returned 8.3% during the third quarter. At Q2’s end, a total of 32 of the hedge funds tracked by Insider Monkey were long this stock, a gain of 3% from the previous quarter. After Criterion, Philippe Laffont of Coatue Management was the biggest stakeholder of Splunk in our database, with a $69.2 million position. Remaining members of the smart money with similar optimism encompass Brian Taylor’s Pine River Capital Management, Josh Resnick’s Jericho Capital Asset Management, and Jim Simons’ Renaissance Technologies.
Criterion Capital increased its holding in Netflix, Inc. (NASDAQ:NFLX) by a whopping 241% in the second quarter. Moving into the third quarter, the hedge fund had a total of 991,469 shares of the online streaming company. The value of this stake was $90.7 million and the investment lifted the fund’s third quarter gains, as the stock returned 7.7% during the third quarter. At the end of the second quarter, a total of 54 of the hedge funds in our system were bullish on this stock, a 16% dip from one quarter earlier. SRS Investment Management was the largest shareholder of Netflix, Inc. (NASDAQ:NFLX) among them, with a stake worth $932.9 million reported as of the end of June. Trailing SRS Investment Management was Viking Global, which amassed a stake valued at $575.3 million. Coatue Management, Matrix Capital Management, and Scopia Capital also held valuable positions in the company.
We’ll check out two more of the fund’s stock picks on the next page.
According to the 13F filings, Criterion Capital had 610,330 shares of Palo Alto Networks Inc (NYSE:PANW) at the end of the second quarter. The aggregate value of this stake was over $74.85 million, which was poised to jump near $100 million, as the stock returned 29.9% during the third quarter. Heading into the third quarter of 2016, 37 of the hedge funds tracked by Insider Monkey held long positions in this stock, a 12% decline from the first quarter of 2016. Among the funds long the stock, Renaissance Technologies held the most valuable stake in Palo Alto Networks Inc (NYSE:PANW), which was worth $139 million at the end of the second quarter. On the second spot was Alyeska Investment Group which amassed $126.4 million worth of shares. Moreover, SRS Investment Management and Tremblant Capital were also bullish on Palo Alto Networks Inc (NYSE:PANW).
Arista Networks Inc (NYSE:ANET) was a new addition to Criterion Capital’s portfolio in the second quarter, as the fund bought over 1.14 million shares of the company, with the position valued at $73.41 million at the end of June. The move proved to be perfectly timed, as the stock returned a massive 32.2% in the September quarter. Lone Pine Capital was the largest shareholder of Arista Networks Inc (NYSE:ANET), with a stake worth $120.5 million reported as of the end of June. McKinley Capital Management, Polar Capital, and Gotham Asset Management also held valuable positions in the company.