Related tickers: 3D Systems Corporation (NYSE:DDD), Groupon Inc (NASDAQ:GRPN), Pandora Media Inc (NYSE:P)
Tiger Global was founded by several former employees of legendary investor Julian Robertson’s Tiger Management. We track its quarterly 13F filings alongside those of many other hedge funds and other notable investors, and have found that the most popular small cap stocks among the filers we track outperform the S&P 500 by 18 percentage points per year on average (learn more about our small cap strategy).
We think that this is because small cap stocks (which we define as those with market capitalizations between $1 billion and $5 billion) are more likely to be inefficiently priced. Investors can also use small cap picks from individual funds such as Tiger Global as initial ideas for further research, potentially buying these companies or their peers if they appear to be good investments. Here are five small cap stocks which Tiger Global owned as of the end of December (or see the full list of stocks the fund reported owning)
Tiger Global had Groupon Inc (NASDAQ:GRPN) as one of its five largest holdings by market value at the end of the fourth quarter of 2012, with 65 million shares in its portfolio. Groupon rallied recently upon the departure of CEO Andrew Mason, though the stock is still down 75% from levels shortly after its November 2011 IPO as the company has underperformed market hype. Revenue has been up, but Groupon Inc (NASDAQ:GRPN) still struggles with profitability and the forward P/E is a bit high at 22. Fellow Tiger Cub fund Coatue Management, managed by Philippe Laffont, bought 7.5 million shares during Q4 (check out Coatue’s stock picks).
3D Systems Corporation (NYSE:DDD) was another of Tiger Global’s small cap picks. 3D Systems has been receiving considerable attention from the financial media as a provider of 3-dimensional printers and printing tools. The stock has more than doubled in the last year, and is priced for high growth with trailing and forward P/Es of 75 and 27, respectively. Growth on both top and bottom lines has been strong though 56% of the float is held short as a number of market players are bearish. Christopher Lord’s Criterion Capital was the only other filer we track with more than $10 million invested in the stock (research more stocks Criterion owns).
According to the 13F, the fund had 5.4 million shares of Live Nation Entertainment, Inc. (NYSE:LYV) in its portfolio as of the beginning of January. The $2.4 billion market cap concert and entertainment company- whose numbers are highly seasonal- is expected to lose 23 cents per share this year, with an optimistic sell-side than projecting enough improvements in 2014 to imply a still very high forward earnings multiple of 80. As a result it doesn’t look like a good value to us. Fine Capital Partners, managed by Debra Fine, increased its stake in Live Nation between October and December to a total of 8.6 million shares (see more stocks Fine was buying).
Tiger Global reported ownership of almost 11 million shares of $4.2 billion market cap telecom company Frontier Communications Corp (NASDAQ:FTR), though this was down 48% from its holdings at the end of September. Frontier pays a dividend yield of 9.5% at current prices, though it has reduced its quarterly dividend payments over the last couple years. The earnings multiples are high here, and while the yield may be of interest to income investors we would be a bit worried that revenue and earnings declined in the last quarterly report compared to the fourth quarter of 2011.
Disclosure: I own no shares of any stocks mentioned in this article.
