Did Tesla and FANG Stocks’ Poor Q1 Performance Do In Daniel Benton’s Andor Capital?

Famous technology investor Daniel Benton is closing his hedge fund Andor Capital Management for the second time since its founding in 2001 (Mr. Benton shut the fund down for more than two years between 2008 and 2011), according to a recent report published in the magazine Institutional Investors’ Alpha. Although the magazine didn’t reveal Mr. Benton’s motivation behind the latest decision, the poor performance of Andor Capital Management in the first quarter could be one of the reasons. Research done by Insider Monkey on Andor Capital Management’s 13F holdings as of the end of 2015 shows that the 16 long positions held by the fund delivered a weighted average loss of 6.1% during the first quarter. Mr. Benton is famous on the Street for his bullish views on Tesla Motors Inc (NASDAQ:TSLA), which was Andor’s largest equity holding at the end of 2015 by a substantial amount. Along with that, he is also known for his large bets on the FANG growth stocks (Facebook (NASDAQ:FB), Amazon.com, Inc. (NASDAQ:AMZN), Netflix (NASDAQ:NFLX), and Alphabet (NASDAQ:GOOGL)), which made up the rest of Andor’s top-5 equity holdings. Since Andor Capital Management’s five largest equity holdings amassed over 65% of the value of the fund’s portfolio at the end of 2015, its success was heavily dependent on these five stocks, four of which suffered first quarter losses. Let’s check out the performance of these stocks and see why they may have been Andor Capital’s undoing.

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#5 Amazon.com, Inc. (NASDAQ:AMZN)

– Shares Owned by Andor Capital Management (as of December 31): 60,000

– Value of Holding (as of December 31): $40.55 million

Let’s start with Amazon.com, Inc. (NASDAQ:AMZN), which after a brief pullback at the beginning of 2016 has resumed its bull run. However, while it’s now up for the year, the stock did nothing to help Andor in the first quarter, when it lost over 10% of its value after Andor Capital Management upped its stake in the company by a whopping 140% during the fourth quarter. For its first quarter, Amazon reported EPS of $1.07 on revenue of $29.10 billion, crushing analysts’ EPS estimate of $0.58, as well as their consensus revenue estimate of $27.97 billion. The major driver of growth for the company during the quarter was its cloud platform, Amazon Web Services, whose revenue grew by 64% year-over-year to $2.57 billion, while its operating profit more than tripled to $604 million. Following the earnings beat, several analysts reiterated their ‘Buy’ rating on the stock including analysts at Sanford C. Bernstein, who also upped their price target on the stock to $1,000 from $770. Hedge funds that initiated a stake in Amazon during the first quarter included Doug Silverman and Alexander Klabin’s Senator Investment Group, which purchased 255,000 shares of the company.

#4 Netflix, Inc. (NASDAQ:NFLX)

– Shares Owned by Andor Capital Management (as of December 31): 400,000

– Value of Holding (as of December 31): $45.75 million

Netflix, Inc. (NASDAQ:NFLX)’s stock is currently trading down by nearly 24% year-to-date, which included a loss of about 7.5% in the first quarter. Coincidentally, the 24% figure is the same by which Andor Capital Management increased its stake in Netflix, Inc. (NASDAQ:NFLX) during the final quarter of 2015. After plummeting heavily at the beginning of 2016, shares of Netflix managed to steadily rebound between mid-February and mid-April. However, they ended up giving up all of that rebound and more after the company reported mixed numbers for the first quarter. While the EPS of $0.03 that it declared was $0.03 higher than analysts’ projections, the revenue of $1.96 billion that it managed was $10 million lower than what the Street had expected. According to analysts, Amazon’s recently launched standalone Prime Video service will be detrimental to Netflix’s growth going forward, as the company will find it hard to update its catalog while facing pricing pressure. Matthew Hulsizer‘s PEAK6 Capital Management initiated a stake in Netflix during the first quarter, purchasing 118,690 shares.

We’ll discuss Andor Capital’s top-3 holdings at the end of 2015 on the next page.

#3 Facebook Inc (NASDAQ:FB)

– Shares Owned by Andor Capital Management (as of December 31): 525,000

– Value of Holding (as of December 31): $55 million

Moving on, Andor Capital Management upped its stake in Facebook Inc (NASDAQ:FB) by 5% during the fourth quarter. Driven by another quarter of impressive performance, shares of the social media behemoth recently broke above the $120 mark for the first time and currently trade with year-to-date gains of 12.8%, which included gains of nearly 10% during the first quarter, making it the only positive performer in Andor Capital’s top-5 during the period. Going into its first quarter earnings, analysts had projected Facebook to report EPS of $0.62 on revenue of $5.25 billion. However, Facebook Inc (NASDAQ:FB) managed to comfortably beat those estimates by declaring EPS of $0.77 on revenue of $5.38 billion. Mobile ads contributed 82% to the company’s total ad revenue during the quarter, compared to 73% in the first quarter of 2015. Facebook’s first quarter report included the announcement that it will issue a batch of Class C shares, which won’t have any voting rights attached to them. On May 13, analysts at MKM Partners reiterated their ‘Buy’ rating on the stock while upping their price target on it to $150 from $135.

#2 Alphabet Inc (NASDAQ:GOOGL)

– Class A Shares Owned by Andor Capital Management (as of December 31): 100,000

– Value of Holding (as of December 31): $77.80 million

Andor Capital Management initiated a stake in Alphabet Inc (NASDAQ:GOOGL) during the third quarter of 2015 and continued to hold the same total of 100,000 Class A Alphabet shares at the end of 2015. Shares of the search giant plummeted heavily recently after it reported weaker-than-expected results for the first quarter because of  a 9% year-over-year decline in ad prices. Owing largely to this decline, the stock is currently trading down by 8.28% year-to-date. The company recently announced that it is partnering with Fiat Chrysler Automobiles (NYSE:FCAU) for its autonomous car program. Under the partnership, Alphabet will fit its self-driving car technology into 100 Pacific minivans manufactured by Fiat Chrysler. Alphabet’s stock currently sports an average rating of ‘Buy’ and an average price target of $908.74 from the 48 leading analysts and research houses on the Street who track it. Alex Snow‘s Lansdowne Partners upped its stake in the company’s Class A shares by 26% during the first quarter.

#1 Tesla Motors Inc (NASDAQ:TSLA)

– Shares Owned by Andor Capital Management (as of December 31): 1 million

– Value of Holding (as of December 31): $240 million

Andor Capital Management didn’t make any changes to its stake in Tesla Motors Inc (NASDAQ:TSLA) during the final quarter of 2015, with it accounting for over one-third of the value of the fund’s portfolio at the end of the year. While shares of the electric car manufacturer were down only marginally in the first quarter, they have recently been hit much harder and now trade down by 13.5% this year. While the loss of $0.57 per share on revenue of $1.6 billion that the company reported for its first quarter was largely in-line with analysts’ expectations, it couldn’t meet its delivery numbers for the quarter and raised its capex projection for 2016, which was not received well by investors. Along with its latest quarterly results, the company also announced that it is advancing its plan to produce 500,000 vehicles a year by two years, with it now expecting to reach that milestone by 2018. Following the earnings release, analysts at Morgan Stanley reduced their 2016 EPS estimate for the company by $0.70 to a loss of $0.02 per share, in addition to lowering their 2017 EPS estimate for Tesla by $0.79 to $0.35. Joe Dimenna‘s Zweig Dimenna Partners increased its stake in Tesla by 112% to 27,000 shares during the first quarter.

Disclosure: None