The Only 4 Stocks That Matter to VY Capital

VY Capital is a Dubai-based investment firm that primarily invests in startups and private companies. The firm was founded in 2013 by Alexander Tamas, a former partner at Russian billionaire Yuri Milner’s DST Global who is credited with DST’s international expansion and its investments in Airbnb, Alibaba Group Holding Ltd (NYSE:BABA) and other successful tech companies. Though VY Capital is largely a private equity firm, it also invests in a handful of publicly-traded tech companies. The firm recently disclosed its U.S equity holdings as of the end of March via a 13F filing submitted with the Securities and Exchange Commission. The filing revealed that VY Capital’s U.S equity portfolio was worth $124.10 million at the end of the first quarter and consisted of only four positions. In this post, we will go over those four stocks and discuss how they have been performing of late.

We track prominent investors and hedge funds because our research has shown that historically their stock picks delivered superior risk-adjusted returns. This is especially true in the small-cap space. The 15 most popular small-cap stocks among a select group of investors delivered a monthly alpha of 80 basis points between 1999 and 2012 (see the details here).

#4 MakeMyTrip Limited (NASDAQ:MMYT)

 – Shares held by VY Capital (as of March 31): 370,000

 – Value of Holding (as of March 31): $6.69 million

Let’s start with MakeMyTrip Limited (NASDAQ:MMYT), in which VY Capital more than tripled its stake during the first quarter. Shares of the Indian online travel company spiked at the beginning of the year after Chinese online travel leader Ctrip.com International, Ltd. (ADR) (NASDAQ:CTRP) announced an investment of $180 million in MakeMyTrip Limited (NASDAQ:MMYT) through convertible bonds. Along with the investment, Ctrip.com was also given permission to make open-market purchases of MakeMyTrip Limited’s shares. Through convertible bonds and stock purchases Ctrip.com is allowed to boost its stake in the company to up to 26.6% of its shares. Following the investment by Ctrip.com, MakeMyTrip has started offering heavy discounts in an effort to increase its customer base. That coupled with the rollout of 4G services in India and the projections of explosive growth in the Indian online travel space could push the company’s stock higher in the coming quarters, according to analysts. Among the hedge funds tracked by us, Daniel Gold‘s QVT Financial  was the largest shareholder of MakeMyTrip Limited at the end of 2015, owning 1.55 million shares of the company,.

#3 LinkedIn Corp (NYSE:LNKD)

 – Shares held by VY Capital (as of March 31): 265,000

 – Value of Holding (as of March 31): $30.30 million

The 50% drop in LinkedIn Corp (NYSE:LNKD)’s stock during the first quarter was used by VY Capital as an opportunity to boost its holding in the company by 71% during that period. Shares of the online professional networking company tanked in February after it issued dismal guidance for the full 2016 year along with its fourth quarter of 2015 results. Though the first quarter numbers the company recently released seem to suggest that it is back on track and that a lot of investors’ fears were unfounded, its stock hasn’t recovered much from the beating it took in February and currently trades down by 43.37% year-to-date. Going into its first quarter earnings, analysts had expected the company to report EPS of $0.60 on revenue of $829.90 million. However, LinkedIn Corp managed to beat those estimate by reporting EPS of $0.74 on revenue of $861 million for the quarter. Following the earnings release, several analysts and brokerages raised their price target on the stock, including analysts at Goldman Sachs, who raised their price target on the stock to $162 from $155 on May 1, while maintaining their ‘Buy’ rating on it. Funds that reduced their stake in the company during the first quarter included Paul Cantor, Joseph Weiss, and Will Wurm’s Beech Hill Partners, which cut its small holding by two-thirds to 1,875 shares.

VY Capital’s top two U.S public equity positions are uncovered on the next page.

#2 LendingClub Corp (NYSE:LC)

 – Shares held by VY Capital (as of March 31): 4.5 million

 – Value of Holding (as of March 31): $37.35 million

VY Capital boosted its holding in LendingClub Corp (NYSE:LC) by 46% during the first quarter. Shares of the online lending facilitator have been on a perpetual decline since it was listed on the New York Stock Exchange in December 2014. Though the stock jumped by over 60% to the $25 level from its IPO price of $15 around the time of its debut, it currently trades down by 47% from its IPO price and has lost 26.78% of its value this year alone. The company recently raised the lending interest rates on its platform by a weighted average total of 23 basis points, citing worsening economic conditions around the world. This is the third time that LendingClub has increased the lending rate on its platform since the Fed raised interest rates in December. For the first quarter, analysts are expecting the company to report EPS of $0.05 on revenue of $148.23 million, which would be solid growth from EPS of $0.02 on revenue of $81.04 million it reported for the same quarter of last year. David Keidan‘s Buckingham Capital Management also increased its stake in the company during the first quarter, by 85% to 933,334 shares.

#1 Activision Blizzard, Inc. (NASDAQ:ATVI)

 – Shares held by VY Capital (as of March 31): 1.5 million

 – Value of Holding (as of March 31): $50.76 million

Activision Blizzard, Inc. (NASDAQ:ATVI) continued to remain VY Capital’s top stock pick at the end of March, with the fund making no change to its stake in the company during the first quarter. The position amassed over 40% of the value of the fund’s public equity portfolio going into the second quarter. Activision Blizzard, Inc. (NASDAQ:ATVI) was one of the best performing stocks of 2015, rising by over 90% during that period. However, the stock has been underperforming the broader market this year, trading down by 11.4% year-to-date. One of the reasons behind the correction in the stock is the view shared by some analysts and investors that the company has been boosting EPS through share repurchases financed by cheap debt, while its growth has plateaued. Activision Blizzard is expected to report its first quarter earnings this week and analysts are expecting it to report EPS of $0.12 on revenue of $811.92 million. For the same quarter of the previous year the gaming developer and publisher reported EPS of $0.12 on revenue of $703 million. Billionaire Ken Fisher’s Fisher Asset Management sold its entire stake in the company during the first quarter, which previously consisted of 6,445 shares.

Disclosure: None