Chris Hansen‘s Valiant Capital had a tough 2013. The fund had double digit losses through October 2013 in a period when the S&P 500 Index was returning close to 25%. Despite these losses, he was still managing more than $2 billion. One reason why Valiant’s investors didn’t run away is the fact that Valiant also makes seed/early stage investments in emerging tech companies and investors can’t get the same exposure elsewhere. At the end of the third quarter Apple Inc. (NASDAQ:AAPL), Anheuser Busch Inbev SA (ADR) (NYSE:BUD), and Priceline Group Inc (NASDAQ:PCLN) were the largest positions in Valiant’s 13F portfolio.
We haven’t received any information regarding Valiant’s 2014 returns. However, the stocks in its 13F portfolio returned less than 8% in 2014, vs. a 13.5% gain for the S&P 500 ETF (SPY). Obviously, 13F portfolio returns are only a proxy for the liquid portion of Valiant’s US portfolio. Valiant invests in private and foreign companies as well. It may also short other stocks. So, its actual returns may be dramatically different from the 8% figure we guesstimated. Let’s take a look at the top 5 positions in Valiant’s portfolio at the end of 2014:
Apple Inc. (NASDAQ:AAPL) is still the largest position in Valiant’s portfolio. The stock returned 10% during the last 3 months of 2014 and today hit its all-time high. Hansen cut his Apple Inc. stake to 1.24 million shares from 1.6 million shares at the end of September. Last week we covered some recent hedge fund activity in Apple Inc. shares and reported on some indications that smart money is cutting their Apple Inc. bets (read the details). However, others remain bullish on the stock, and some are convinced it has nowhere to go but up, up, up, to $150 and beyond, which would bring it close to a market cap of $1 trillion. Yes, trillion.
Much of that potential short-term success will hinge on the Apple Watch, which has been predicted to be everything from a disaster waiting to happen, to the greatest thing since sliced bread. Sales estimates on the smart watch previously ranged as high as 100 million units within the first calendar year after its release, though expectations dipped after its unveiling and much higher than anticipated price point.
Apple Inc. (NASDAQ:AAPL)’s most recent quarterly results blew away expectations, as they reported $74.6 billion in revenue for the quarter, and a net profit of $18 billion, with earnings per diluted share coming in at a robust $3.06. Gross margins and international sales were also highly promising with margins rising to 39.9% from 37.9% during the same year-ago period, and international sales accounting for 65% of the quarter’s revenue as Apple continues to expand and flourish in foreign markets. Apple is up 9.75% in trading since that January 27 earnings report.
Hansen’s L Brands Inc (NYSE:LB) position didn’t change during the fourth quarter but the stock is now the second biggest position in his portfolio because of its 30% gain during the quarter. It was also the best performing stock in Hansen’s portfolio. After a brief dip in January from its record highs, the stock has gone back to the same upward trajectory that has seen it jump over 100% in value throughout the past two years, with a particularly strong rise of nearly 50% over the past six months alone.
Despite the record highs, short interest in L Brands Inc (NYSE:LB) had dropped 14.8% between the middle of January and the end of the month, as few seem willing to challenge its upward momentum. Telsey Advisory Group raised their price target on L Brands to $104 from $97 on February 10, showing a potential upside of 10% in the stock still. One has to wonder however if Hansen will soon sell off some of his position and take large profits from the investment he initiated in the middle of 2013.
Facebook Inc (NASDAQ:FB) is the third largest position in Hansen’s portfolio. Hansen boosted his stake in Facebook Inc by nearly 15% during the quarter, adding just under 125,000 shares. Facebook lost 1.3% during the last 3 months of 2014, but has made large strides since Hansen first took a position in it. However, despite being his third largest position today, Hansen sold off much of his holding in Facebook long before its value maximized, partly contributing to those poor returns in 2013, as more than 2.0 million shares were dumped before the stock really began to take off in the second half of the year.
Facebook Inc (NASDAQ:FB) shares have mostly stalled over the past six months, up 3.84% during that time, as the company continues to shield the advertising potential of some of their other popular services like WhatsApp and Instagram, by refusing to put much or any ads on them until they’ve reached one billion users. While WhatsApp is getting close, Instagram is still a ways away on that front, with 300 million. Despite their dip of 2.26% this year, their most recent earnings report beat analyst estimates and showed solid growth in mobile and video ad spending, though operating costs also notably rose.
Anheuser Busch Inbev SA (ADR), which was the second largest position at the end of September, and is now the fourth largest position. Hansen’s stake is unchanged. The stock returned 2.5% during the fourth quarter, and has enjoyed a much stronger start to 2015, up 7.84%. Boasting a P/E ratio of 21.68 , and enjoying an EPS growth ratio of 35.20% over the past five years, this stock is one that seems to be continually surprising investors. Institutional ownership in Anheuser Busch Inbev SA (ADR) is extremely low, at just 7%, despite that strong growth for over 4 years of more than 100%. Hansen opened his position in the first quarter of 2013, and it has remained largely unchanged since.
Lastly is Amazon.com, Inc. (NASDAQ:AMZN), which assumes the fifth largest position in Hansen’s portfolio, and also happens to be a new position, with 238,000 shares. What may have seemed a curious move at the time, as Amazon’s shares had stagnated throughout the first nine months of 2014, falling more than 20%, has quickly paid dividends. It has rebounded over 16% in the little over four months since then, with much of that pop being registered on January 30 after they announced better than expected fourth quarter results.
Quarterly revenue rose 15% year-over-year to $29.33 billion, while net income came in at $591 million, despite a negative impact of $895 million from year-over-year foreign exchange rate changes. Income would have risen by a substantial 18% if not for that, representing a big answer to investors over the longstanding question of “when is Amazon going to start making money?”
