This Tech Hedge Fund Manager’s Stock Picks Got Blasted In Q3

The stock picks of Philippe Laffont’s Coatue Management only slightly underperformed the market in the third quarter according to our calculations. Unfortunately, that doesn’t bode well when the market lost about 6% during that period. On June 30, Coatue Management held 61 long positions in stocks with at least a $1 billion market cap, and those positions had a weighted average returns loss of 7.0% in the third quarter, with the fund’s year-to-date returns through the end of the third quarter using the same metric standing at a gain of 1.9%. These calculations are not meant as an approximation of the fund’s actual returns, as they don’t factor in short positions, options, or multiple other variables.

In this article we’ll look at five of the top tech stock picks of the tech-focused investor and detail their recent performance.

We follow hedge funds like Coatue Management because our research has shown that their stock picks historically managed to generate alpha even though the filings are delayed by up to 45 days. We went a step further and used a 60-day delay in our back tests to be on the safe side and our research showed that the 15 most popular small-cap stocks among hedge funds still outperformed the S&P 500 Total Return Index by an average of 95 basis points per month between 1999 and 2012. After adjusting for risk, our calculations revealed that these stocks’ monthly alpha was 80 basis points. We have also been sharing and tracking the performance of these stocks since the end of August 2012, during which time they have returned 102%, outperforming the S&P 500 ETF by over 53 percentage points (see more details here).

Apple Inc. (NASDAQ:AAPL)

– Shares Owned by Coatue Management (as of June 30): 8,547,236
– Value of Coatue Management’s Shares (as of June 30): $1.07 Billion
– Percentage of Coatue Management’s Public Equity Portfolio (as of June 30): 10.68%
– Third Quarter Returns: -11.66%

Apple Inc. (NASDAQ:AAPL) was the top stock pick of Coatue Management on June 30, having increased its position in it by 12% during the second quarter. That proved to be unwise in the short-term, as Apple suffered a poor quarter and weighed heavily on Coatue’s returns. Billionaires tracked by Insider Monkey were wisely pulling some of their capital out of Apple in the second quarter, though unsurprisingly, the iconic tech company remains one of the most popular stocks among the investors we track. Nonetheless, there continue to be questions about the long-term growth of Apple Inc. (NASDAQ:AAPL), which is still highly dependent on the sale of smartphones despite its various other ventures (e.g. Apple Watch, Apple Pay, Apple TV). David Einhorn and Ray Dalio were a couple of the billionaires to trim their holdings in Apple during the second quarter.

Facebook Inc (NASDAQ:FB)

– Shares Owned by Coatue Management (as of June 30): 8,733,801
– Value of Coatue Management’s Shares (as of June 30): $749 Million
– Percentage of Coatue Management’s Public Equity Portfolio (as of June 30): 7.46%
– Third Quarter Returns: 4.82%

The good news for Coatue was that the rest of its favorite tech picks discussed in this article, beginning with Facebook Inc (NASDAQ:FB), all beat the market and delivered positive returns, helping to offset Apple’s losses. The social media giant had a strong quarter relative to the market, as it excites investors with its preparations to monetize some of its other assets, like Instagram. Facebook was a very popular stock among the elite investors we follow, gaining ground on Apple in the race to be the most popular tech stock among them, though it still has a ways to go yet, trailing by 11 investors. It did however have a slight edge over Apple among the billionaires we track, though it also ranked second there, behind a surprising leader. Laffont held the second-largest position in Facebook Inc (NASDAQ:FB) among the investment firms we monitor, trailing only billionaire Stephen Mandel’s 9.76 million-share position.

Electronic Arts Inc. (NASDAQ:EA)

– Shares Owned by Coatue Management (as of June 30): 5,746,677
– Value of Coatue Management’s Shares (as of June 30): $382 Million
– Percentage of Coatue Management’s Public Equity Portfolio (as of June 30): 3.80%
– Third Quarter Returns: 1.88%

Electronic Arts Inc. (NASDAQ:EA) enjoyed a small gain during the third quarter, continuing a strong year for the behemoth video game developer, which is up by 38.34% in 2015. Nor does it appear that EA investors should expect a slide any time soon, as it is poised to have at least two hit games this upcoming holiday season. EA was the most popular gaming stock in our database on June 30, being found in the portfolios of 47 investors, who held 8.50% of its shares. Laffont had the largest long position in Electronic Arts Inc. (NASDAQ:EA) of those 47 investors, followed by Cliff Asness with 4.61 million shares.

Microsoft Corporation (NASDAQ:MSFT)

– Shares Owned by Coatue Management (as of June 30): 8,478,532
– Value of Coatue Management’s Shares (as of June 30): $374 Million
– Percentage of Coatue Management’s Public Equity Portfolio (as of June 30): 3.73%
– Third Quarter Returns: 0.91%

A microcosm of Microsoft Corporation (NASDAQ:MSFT)’s up-and-down year on the market could be witnessed in the third quarter, as the stock made some gains early in the quarter, plummeted during the market pullback, and then steadily rebounded from that point onwards. Shares are up by a modest 1.42% year-to-date. We recently covered Microsoft’s live event, which showed off a live demonstration of its mixed-reality headset HoloLens, as well as unveiling new Lumia phones, the Surface 4 tablet, and a new Surface Book laptop. Windows 10 recently set a one-month adoption record for an OS, which also bodes well for Microsoft, which plans to monetize the software in the future. David Blood and Al Gore’s Generation Investment Management was among the firms heavily invested in Microsoft Corporation (NASDAQ:MSFT) as of June 30, owning 14.95 million shares, representing 8.84% of the value of its public equity portfolio.

Amazon.com, Inc. (NASDAQ:AMZN)

– Shares Owned by Coatue Management (as of June 30): 760,722
– Value of Coatue Management’s Shares (as of June 30): $330 Million
– Percentage of Coatue Management’s Public Equity Portfolio (as of June 30): 3.29%
– Third Quarter Returns: 17.92%

Lastly is Amazon.com, Inc. (NASDAQ:AMZN), the top performer in the third quarter among the stocks highlighted in this article. Amazon continued to impress investors with its strong earnings as well as the rapid growth of its Amazon Web Services platform. It recently launched a direct salvo at both eBay Inc (NASDAQ:EBAY) and Etsy Inc (NASDAQ:ETSY) by launching its Amazon Handmade marketplace, and continues to battle Netflix, Inc. (NASDAQ:NFLX) for the streaming video service crown in the U.S, which it is now arguably leading. Amazon enjoyed the support of 103 investors in our database on June 30, led by Ken Fisher’s Fisher Asset Management with a $1.08 billion holding.

Disclosure: None