Philippe Laffont’s Coatue Management is considered one of the “Tiger Cub” hedge funds as Laffont worked for several years at legendary investor Julian Robertson’s Tiger Management. Coatue was founded in 1999 and our records show that the fund tends to be overweight technology and services stocks. We have gone through the fund’s 13F for the third quarter of 2012, which discloses many of its long equity positions as of the end of September. Read on for our quick take on Laffont’s top picks and compare them to previous filings.
Coatue’s top pick was the most popular stock among hedge funds for the third quarter of 2012- Apple Inc. (NASDAQ:AAPL). See the full rankings of the most popular stocks. The fund reported a position of 1.4 million shares. We think that Coatue and the other funds in the industry have this one right as a recent pullback in Apple Inc. (NASDAQ:AAPL)’s stock price has left it trading at only 13 times trailing earnings. Analyst consensus is for strong growth over the next several years, giving Apple Inc. (NASDAQ:AAPL) plenty of room to underperform those expectations but still prove undervalued at the current price.
Equinix Inc (NASDAQ:EQIX) was another of Coatue’s top picks with the fund leaving its position of 4.2 million shares in the data center and connectivity services company unchanged over the course of the quarter. The growth company’s earnings were up 42% in the third quarter of 2012 from a year earlier, with both higher revenue and stronger margins contributing to improvement on the bottom line. However, an even better performance in the stock market has left the stock’s forward P/E multiple higher than 50. High growth would have to consider for a substantial period of time to make it a good value.
Laffont and his team increased their stake in Internet, TV, and phone company Virgin Media Inc. (NASDAQ:VMED) by 10% to a total of 16.1 million shares. This puts it in stark opposition to a number of short sellers, as the most recent data shows that 17% of Virgin Media’s shares outstanding are held short. With revenue only up slightly over the last year, according to the most recent 10-Q, we’d be wary of getting long the stock.
Coatue also bought shares of Liberty Global Inc. (NASDAQ:LBTYA), reporting a position of 6.5 million shares at the end of September. Liberty Global is another Internet, TV, and phone stock and it is focused on Europe (compare this with Virgin Media, which is primarily a British company). It’s not as popular a short seller target that Virgin is, even though the stock trades at quite high multiples in relation to its trailing and forward earnings and its sales growth has been mediocre. It too looks like a stock to avoid rather than take a position on.
Priceline.com Inc (NASDAQ:PCLN) rounded out Coatue’s top five picks on the long side. Priceline- which recently bought Kayak to even further cement its market leadership in the travel website space- now has a market cap of about $31 billion, which places it at 24 times trailing earnings. As such it’s another stock priced for growth, though its earnings growth rate has been quite high. Wall Street analysts expect growth in net income to continue, resulting in a forward P/E multiple of 17 and a five-year PEG ratio of 1. It’s not as clear a buy to us as Apple is, and there’s some concern that the acquisition of Kayak will destroy shareholder value, but we’d still consider it a “growth at a reasonable price” stock at this time. Our database of 13F filings shows that top holders of Priceline are essentially a who’s who of Tiger Cubs, with billionaire Stephen Mandel’s Lone Pine Capital having the largest position at 1.4 million shares (see more stock picks from Lone Pine Capital).
