Billionaire Lei Zhang founded Hillhouse Capital Management in 2005, one of the top hedge fund in Asia. Mr. Lei Zhang holds a B.A. in Economics from Renmin University of China, MBA and MA in International Relations from Yale University, is a Trustee of the Yale-NUS College and the Chairman of Yale Asia Development Council. According to the latest 13F filing, Hillhouse Capital Management’s equity portfolio is valued at $5.48 billion and the fund holds a total of 26 long positions. The hedge fund’s portfolio has a strong focus of almost 84% investments in the consumer discretionary sector. The largest new stock picks of the fund are represented by Momo Inc (ADR) (NASDAQ:MOMO), salesforce.com, inc. (NYSE:CRM), Workday Inc (NYSE:WDAY) and LinkedIn Corp (NYSE:LNKD).
Hillhouse Capital Management is one of more than 700 hedge funds that we track as part of our small-cap strategy. Based on our backtests, we determined that a portfolio that consist of 15 most popular small-cap picks among investors delivered an alpha of around 80 basis points per month and beat the market by nearly a percentage point per month on average, while the 50 most popular stocks among hedge funds overall delivered a monthly alpha of just six basis points per month and underperformed the market. Since we launched this strategy in August 2012, the system had a return of over 137%, outperforming the S&P 500 ETF (SPY) by over 80 percentage points (read more details here).
In the next paragraphs, we will analyze Lei Zhang’s new stock picks as of the end of March. On the first spot is Momo Inc (ADR) (NASDAQ:MOMO), the largest new pick of Hillhouse Capital Management, in which it disclosed a $57.93 million position that contains 5.46 million shares. Recently, the mobile social networking platform reported its financial results for the first quarter of 2015, with net income of $6.70 million, or $0.05 in diluted EPS, compared to a net loss of $1.23 million for the same period of 2014. Other funds that have significant positions in Momo Inc (ADR) (NASDAQ:MOMO) include Chase Coleman’s Tiger Global Management LLC owning 2.18 million shares, valued at $23.10 million, followed by Karthik Sarma’s SRS Investment Management, LLC with 1.35 million shares.
Next in line is the second-largest new pick of Hillhouse Capital Management, salesforce.com, inc. (NYSE:CRM), a $45.6 billion company. As reported in the latest 13F filing, the Lei Zhang’s fund holds 276,800 shares of the customer relationship management (CRM) software provider, valued at $18.49 million. For the fourth consecutive year, salesforce.com, inc. (NYSE:CRM) has been on the Forbes’ list of “Most Innovative Companies” and this year it was awarded the “Most Admired Software Company” title by the by Fortune Magazine. The company’s net income for the first quarter of the 2015 has increased to $4.09 billion or $0.01 per share, compared to net loss of $96.91 million for the same period of 2014. salesforce.com, inc. (NYSE:CRM) expects by the end of the year to receive approximately $6.55 billion in revenues and its diluted EPS to be in the range of $0.69 to $0.71. As of the end of March, other investors that have disclosed positions in the company include Christopher Lord’s Criterion Capital with 1.76 million shares, worth $117.73 million, followed by Bain Capital’s Brookside Capital and Eric W. Mandelblatt’s Soroban Capital Partners.
Hillhouse Capital Management’s also disclosed a new stake in Workday Inc (NYSE:WDAY) with a total of 218,700 shares, valued at $18.46 million. The $17.1 billion company’s stock gained more than 10% year-to-date and 19.76% during the last 52 weeks. Workday Inc (NYSE:WDAY) founded in 2005, provides cloud applications for finance and human resources for enterprises. In a recent press release, the company announced a support of an international insurance company, Hyperion Insurance Group Limited, to its global expansion. Other large investors in Workday Inc (NYSE:WDAY), at the end of March, were Pennant Capital Management, managed by Alan Fournier, which owns 2.45 million shares, followed by David Goel And Paul Ferri’s Matrix Capital Management and Criterion Capital.
Finally, the fourth largest new position of the Lei Zhang’s fund is represented by LinkedIn Corp (NYSE:LNKD), in which the investor owns 35,600 shares valued at $8.89 million. LinkedIn Corp (NYSE:LNKD) has a market cap of $24.4 billion and it is the world’s leading professional network, with around 350 million members. Recently the company has announced that it closed a $1.5 billion transaction, in approximately 52% cash and 48% stock, that involved the acquisition of lynda.com, an online learning company. During the first quarter of 2015, the company had an increase in net revenues by 34.76% to $637.68 million, compared to the same period of 2014. It also posted for the first three months of the year a net loss of $42.54 million or $0.34 in diluted EPS, while in 2014 the company’s net loss amounted to $13.44 million or $0.11 per share. Philippe Laffont’s Coatue Management, D. E. Shaw’s D. E. Shaw and Lansdowne Partners are other large investors that hold large positions in the LinkedIn Corp (NYSE:LNKD), according to the latest round of 13F filings.
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