One of the “Tiger Cub” hedge funds, so named because one or more founders previously worked under Julian Robertson at Tiger Management, is Tiger Global Management. This fund tends to be overweight technology stocks, as well as services stocks with a connection to technology or the Internet. Read on for our quick take on the fund’s five largest technology stocks on its most recent 13F filing or see the full list of Tiger Global’s stock picks.
Tiger Global owned 1.3 million shares of Apple Inc. (NASDAQ:AAPL), which made that the largest position by market value in the 13F portfolio. Apple Inc. (NASDAQ:AAPL) had been the most popular stock among hedge funds in the third quarter of 2012 (see the rest of the top ten), and that was before the recent drop in its stock price. It is now at a trailing P/E of 12, which seems incredibly low for a market leader in growing industries. We do expect Apple Inc. (NASDAQ:AAPL)’s recent high earnings growth rates to slow- but not to zero, which is what the market is apparently pricing in.
The fund’s second largest reported position was its close to 24 million shares of Yandex NV (NASDAQ:YNDX), a Russian search engine. Yandex can be considered a growth stock: in its most recent quarterly report, revenue was up 41% from the third quarter of 2011 and this pulled net income up 34%. Investors expect much more growth, given that the stock trades at 30 times trailing earnings. Wall Street analysts are also optimistic, with a forward P/E of 20 and a five-year PEG ratio of 0.9. It might be worth considering further, but we’d have to be quite convinced that the company will meet these growth targets to buy such an expensive stock.
Tiger Global also had a large position in Google Inc (NASDAQ:GOOG). Google is in a more challenging environment: its recent purchase of Motorola Mobility Holdings has helped its positioning in the smartphone market, but has delivered a (hopefully one-time) hit to earnings. The stock now carries a trailing P/E multiple of 22, meaning that Google will have to grow its net income substantially over the next several years to justify its current valuation let alone prove undervalued. We think it’s best to wait for another quarter or two of financial results to come in- if the growth rates do look strong enough, and the price hasn’t already reacted too much by then, it could be a buy. Billionaire- and fellow Tiger Cub- Stephen Mandel’s Lone Pine Capital reported a position of 1.1 million shares at the end of the third quarter (find Mandel’s favorite stocks).
The hedge fund must really love search engines and Web portals: it initiated a position of 25 million shares in Yahoo! Inc. (NASDAQ:YHOO) between July and September, making that one of its five largest 13F holdings. Yahoo’s forward P/E multiple is 17, placing it about in line with Google and Yandex’s valuation. However, revenue was about flat last quarter versus a year earlier. Billionaire Dan Loeb’s Third Point had taken a large position in Yahoo during an activist campaign, and has actually been adding shares after it managed to oust the company’s CEO. Check out Dan Loeb’s stock picks.
Facebook Inc (NASDAQ:FB) was another tech stock pick as Tiger Global reported owning almost 12 million shares of the social network. See our previous coverage of Facebook news. Growth is even more necessary here than at Yandex: the forward P/E is 40, and even that assumes that the company will improve its bottom line over the next year. Short interest seems to have cooled, and is now at a fairly moderate 12% of the outstanding shares. We doubt that growth will be high enough going forward and so we would advise against buying the stock.
