Glen Kacher is president of Light Street Capital Management, a firm he founded in May of 2010. He started in the hedge fund industry at Julian Robertson’s Tiger Management in 1993 and spent four years there while getting his MBA at Stanford University. He then spent the next 13 years at Integral Capital Partners as a managing director. During that time he developed his portfolio strategy and led a number of venture investments including in Agile Software, which was acquired by Oracle, Arcsight which was acquired by HP, BlueNile (IPO), OpenTable (IPO), and many more. Kacher’s investment horizon can range anywhere from three months to several years. Kacher’s 30 picks in stocks with a market cap of $1 billion or more achieved weighted average returns of 10.5% in Q1, blowing away the S&P 500, which returned just 0.9% over the same period.
Why is it important to follow Kacher and Light Street Capital Management, among other funds? After all, equity hedge funds returned just 1.4% in 2014, following returns of just 11.1% in 2013 and 4.8% in 2012. These are embarrassingly low returns compared to the S&P 500 ETF (SPY)’s 13.5% gain in 2014, 32.3% gain in 2013, and 16% gain in 2012. What is going on here? Have the managers lost their touch in picking stocks? The answer is a resounding no and the reason is simply size (see a more detailed explanation here). Our small-cap hedge fund strategy, which identifies the best small-cap stock picks of the best hedge fund managers returned 28.2% in 2014, 53.2% in 2013, and 33.3% in 2012 by avoiding the pitfall of primarily investing in lower return large-cap stocks that most hedge funds fall into (see the details here).
Now let’s look at some of Kacher’s picks, beginning with Facebook Inc (NASDAQ:FB), which is Light Street Capital’s most valuable holding. Kacher began to sell off some of the position during the fourth quarter, reducing Light Street Capital’s holding of Facebook Inc (NASDAQ:FB) by almost 20% by the end of it. At the end of 2014 the firm held 675,000 shares of Facebook Inc (NASDAQ:FB) valued at $52.66 million and representing 9.3% of its 13F portfolio. Facebook Inc (NASDAQ:FB)’s stock enjoyed a solid first quarter, rising by 5.38%. That performance comes on the heels of strong 2013 and 2014 campaigns for the stock in which it has made gains of 90% and 44% respectively. Facebook may also be on the cusp of big things with its Oculus Rift VR Headset, which may see release at some point this year. Digi-Capital, a consulting firm, predicts the virtual reality market will be a$150 billion one within just five years. Billionaire Stephen Mandel is betting big on Facebook, as is Karthik Sarma’s SRS Investment Management.
Apple Inc. (NASDAQ:AAPL) is Light Street Capital’s second largest holding. Kacher became more bullish on the technology giant during the fourth quarter, increasing his position by almost 50%. As of the latest filing, Light Street Capital holds 425,000 shares with a value of $47 million. Apple Inc. (NASDAQ:AAPL) shares rose 13.1% for the first quarter of 2015 on the strength of record iPhone 6 sales and quarterly revenue, in addition to the release of the new Apple Watch. Kacher’s bullish sentiment is in line with his former boss Julian Robertson of Tiger Management, who increased his position by 1,925%. Other billionaires with positions in Apple Inc. (NASDAQ:AAPL) include Ken Fisher and David Einhorn.
Of the top three holdings in Light Street Capital’s portfolio, YY Inc (ADR) (NASDAQ:YY) was likely the most frustrating one for Kacher. YY Inc is a social media platform that engages users in real-time online group activities through voice, text and video. Kacher increased his position in YY Inc (ADR) (NASDAQ:YY) by 7% during the first quarter to 560,800 shares at a value of almost $35 million and representing 6.2% of his firm’s 13F portfolio. Shares of YY Inc (ADR) (NASDAQ:YY) fell 12.5% in the first quarter of 2015. Phillippe Laffont’s Coatue Management is a big holder in the stock, as well as Morgan Sze’s Azentus Capital Management and Alex Sacerdote’s Whale Rock Capital Management.
Vipshop Holdings Ltd – ADR (NYSE:VIPS) appears to be Kacher’s biggest conviction buy as he increased his firm’s position in the Chinese online discount retailer by 950%. At the beginning of 2015 Light Street Capital held 1.15 million shares at a value of $22.5 million representing 4% of its equity portfolio. The stock rose a massive 50.67% during the first quarter after solid fourth quarter results in which the retailer reported a 122% increase in revenues and 150% increase in active customers during 2014. The bullish sentiment on Vipshop Holdings Ltd – ADR (NYSE:VIPS) is again in line with Julian Robertson’s Tiger Management, which also increased its position, as well as Stephen Mandel’s Lone Pine Capital.
Kacher’s buying spree didn’t just stay in the U.S. and China. He also liked Russia at a time when investors were fleeing the country. Kacher’s pick was Yandex NV (NASDAQ:YNDX), a Russian internet search provider. In the fourth quarter of 2014, Kacher increased his position in the company by 37% compared to the previous quarter, giving him a total of 1.23 million shares at a value of $22.0 million, representing 3.92% of the 13F portfolio. Billionaire Tiger cub John Griffin of Blue Ridge Capital is one of the largest holders of Yandex NV (NASDAQ:YNDX) among the funds we follow. Jim Simon’s Renaissance Technologies also ranks as one of Yandex NV (NASDAQ:YNDX)’s largest shareholders. For the first quarter of 2015, Yandex shares fell by 15.5%.
Disclosure: None
