Fir Tree Goes Big on Tech, Consumer Stocks in Q3: Hewlett Packard (HPE), TiVo (TIVO), More

New York-based, privately-owned hedge fund Fir Tree Partners recently disclosed its U.S public equity portfolio as of the end of third quarter via a 13F filing submitted with the SEC. The fund was founded in 1994 by Jeffrey Tannenbaum, who holds a J.D.-M.B.A. degree from New York University. Fir Tree currently manages regulatory assets worth $13.87 billion and invests in public and private companies, real estate, and sovereign debt around the world.

According to its latest filing, Fir Tree’s equity portfolio was worth $2.34 billion at the end of September. The fund had higher exposure towards the tech sector  at the end of September than it has for several quarters, as tech stocks amassed 41% of the value of the fund’s portfolio. The tech sector was followed by consumer discretionary sectors, stocks from which accounted for 21% of the value of Fir Tree’s portfolio. In this article, we’ll be discussing the five major bullish moves the fund made during the third quarter and will try to find out why it is betting on those stocks.

We follow over 700 hedge funds and other institutional investors and by analyzing their quarterly 13F filings, we identify stocks that they are collectively bullish on and develop investment strategies based on this data. One strategy that outperformed the market over the last year involves selecting the 100 best-performing funds and identifying the 30 mid-cap stocks that they are collectively the most bullish on. Over the past year, this strategy generated returns of 18%, topping the 8% gain registered by S&P 500 ETFs.

#5 Hewlett Packard Enterprise Co (NYSE:HPE)

– Shares Held By Fir Tree (as of September 30): 3.24 Million

– Value of the Holding (as of September 30): $73.82 Million

Hewlett Packard Enterprise Co (NYSE:HPE) made its debut in Fir Tree’s equity portfolio during the third quarter and was the fund’s 13th-largest holding in terms of value at the end of that period. The company became a separate publicly traded entity last year after HP split its business into two. That decision has worked out well for both stocks that were created from the split, especially for Hewlett Packard Enterprise Co (NYSE:HPE), which has registered a gain of 52.11% so far in 2016. Earlier this year, while reporting its third quarter numbers, the company also announced plans for a spin-off and merger of its non-core software assets with Micro Focus in a transaction valued at $8.8 billion. On November 18, Raymond James’ analyst Simon Leopold released a note in which he upgraded Hewlett Packard Enterprise’s stock to ‘Outperform’ from ‘Market Perform’ and also raised his price target on it to $29 from $23.60, which represents potential upside of over 25%.

#4 Liberty Global plc – Class C Ordinary Shares (NASDAQ:LILAK)

– Shares Held By Fir Tree (as of September 30): 2.9 Million

– Value of the Holding (as of September 30): $81.19 Million

Liberty Global plc – Class C Ordinary Shares (NASDAQ:LILAK) was a new entrant in Fir Tree’s equity portfolio during the third quarter as well. The Class C stock was issued by Liberty Global in July of last year and has lost more than 43% of its value since then. Liberty Global plc – Class C Ordinary Shares (NASDAQ:LILAK) tracks Liberty Global’s cable business in Latin America and the Caribbean. On November 16, the parent company Liberty Global announced that it had agreed to acquire Caribbean cable operator Cable & Wireless Communications for $5.3 billion in a cash-and-stock deal. Earlier this month, analysts at Pivotal Research lowered their price target on Liberty’s Class C stock to $26 from $45 while keeping their rating on it unchanged at ‘Buy’.

We’ll check out three more of the fund’s biggest Q3 moves on the next page.

#3 TiVo Corp (NASDAQ:TIVO)

– Shares Held By Fir Tree (as of September 30): 7.24 Million

– Value of the Holding (as of September 30): $81.87 Million

Like the two stocks discussed previously, TiVo Corp (NASDAQ:TIVO) also made its debut in Fir Tree’s equity portfolio during the third quarter. Shares of the video technology and cloud-based software company declined heavily last year, but have recouped most of those losses in 2016 and are currently trading up by 20% year-to-date. For its fiscal 2016 third quarter, TiVo Corp (NASDAQ:TIVO) reported net income of $49.9 million on revenue of $153.1 million, compared to a net loss of $18.5 million on revenue of $144.9 million that it had reported for the same quarter of last year. The year-over-year jump in net income and revenue experienced by the company was primarily due to the completion of its TiVo acquisition and its license agreement renewal with DISH Network .

#2 Microsoft Corporation (NASDAQ:MSFT)

– Shares Covered Under The Call Options Held By Fir Tree (as of September 30): 1.7 Million

– Value of the Holding (as of September 30): $97.92 Million

Although Fir Tree reduced its stake in Microsoft Corporation (NASDAQ:MSFT) by 11% to 1.52 million shares during the third quarter, it also made a short-term bullish bet on the company during that time by buying Call options. That bet seems to have worked out in favor of the fund, as shares of the software giant broke above the $60 barrier for the first time last month after the company reported strong quarterly numbers. They are now trading up by 5.65% for the current quarter. The 20% rise in Microsoft Corporation (NASDAQ:MSFT)’s stock this year has lowered the annual dividend yield of the stock, which at present stands at 2.56%. Nevertheless, most investors expect the company to hike its quarterly dividend in the coming months, which could again push its forward yield above 3%. According to analysts, Microsoft’s cloud business Azure will continue to do well in the coming quarters despite the intense competition in the cloud space, due to its compatibility with different applications and flexibility.

#1 Molson Coors Brewing Co (NYSE:TAP)

– Shares Held By Fir Tree (as of September 30): 1.14 Million

– Value of the Holding (as of September 30): $125.44 Million

Fir Tree increased its stake in Molson Coors Brewing Co (NYSE:TAP) by 32% during the third quarter, which raised the position three spots in the fund’s portfolio to become its eighth largest holding in terms of value at the end of September. Shares of the Colorado-based brewing major made their lifetime high at $122.19 last month, but have declined considerably since then and are now trading up by only 5% for the year. On October 11, Molson Coors Brewing Co (NYSE:TAP) announced that it had completed the acquisition of SABMiller’s 58% stake in the MillerCoors joint venture. Most analysts who track Molson Coors are bullish on it. The stock sports an average rating of ‘Buy’ and an average price target of $125.60 from the 13 leading analysts and research firms on the Street who track it, suggesting potential upside of over 27%.

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