Valiant Capital Betting Big on China in 2016, Reduces Exposure to U.S Tech Stocks

California-based, global long/short equity hedge fund Valiant Capital recently submitted its 13F filing with the Securities and Exchange Commission for the reporting period of December 31. The fund was founded by Christopher R. Hansen, an ex-Managing Director of Blue Ridge Capital, in March 2008. As per the latest available data, Valiant Capital manages $4.0 billion of investors’ capital; however, according to its latest 13F filing, less than half of that was invested in public U.S equities at the end of December, with that total being $1.88 billion. The filing also revealed that 43% of Valiant’s U.S equity portfolio consisted of stocks from the information technology sector and that its top-ten holdings alone accounted for 77.15% of the value of its equity portfolio. In this article we are going to analyze the five most notable moves made by the fund in U.S equities during the final quarter of 2015.

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Let’s begin with Chinese search giant Baidu Inc (ADR) (NASDAQ:BIDU), in which Valiant Capital initiated a stake during the fourth quarter. The fund purchased 284,700 shares of the company, worth $53.82 million as of December 31. Shares of Baidu Inc (ADR) (NASDAQ:BIDU) have formed a classic inverted V-shaped pattern since September of last year. After a swift move from $140 to near $220 during October and November, they have again fallen back to the $140 level. According to technical analysts, if the stock can hold on to the lows it made in September, it can go higher in the short-term. On the fundamental front, despite the downturn in the Chinese economy, analysts who track the stock remain optimistic about the company’s future, citing its dominance in the Chinese search market and the growth in its online-to-offline (O2O) business. William Von Mueffling‘s Cantillon Capital Management bought 11,097 shares of Baidu Inc (ADR) (NASDAQ:BIDU) during the fourth quarter, increasing its holding in the company to 2.23 million shares.

Chinese travel portal Ctrip.com International, Ltd. (ADR) (NASDAQ:CTRP) was another new addition to Valiant Capital’s portfolio during the fourth quarter. The fund bought nearly 1.44 million shares of the company during that period, valued at $66.65 million as of the end of December. Shares of the company have been on a consistent downtrend since it completed a 1-for-2 reverse stock split on December 1 and are currently trading down by 21.5% in 2016. According to market experts, a large part of the decline that the stock has seen is solely due to the rout in the Chinese equity markets during the last few weeks and has nothing to do with the company’s fundamentals. This claim is reinforced by the fact that 18 of the 25 analysts who track Ctrip.com International, Ltd. (ADR) (NASDAQ:CTRP)’s stock currently have a ‘Buy’ rating on it. The reason so many analysts are bullish on Ctrip.com International, Ltd. (ADR) (NASDAQ:CTRP) is because, notwithstanding China’s domestic troubles, travel spending in the country rose by 19% during 2015 and is expected to triple by 2020.

Moving on, amid a 15% rise in Facebook Inc (NASDAQ:FB)‘s stock during the fourth quarter, it seems Valiant Capital decided to take some more profits off the table, reducing its stake in the company by 18%.  Valiant Capital was among the largest shareholders of Facebook Inc (NASDAQ:FB) at one point in time, owning 36.3 million shares of the company before its IPO. Those shares recently made their lifetime high of $117.59, after the company reported its fourth quarter numbers on January 27. While analysts were expecting Facebook to report $0.68 in EPS on revenue of $5.36 billion, it managed to blow their estimates out of the water by declaring EPS of $0.79 on revenue of $5.84 billion. Following the earnings release, several analysts have raised their price target on the stock over the last few days. Among them are analysts at MKM Partners, who reiterated their ‘Buy’ rating on the stock and increased their price target on it to $135 from $130, on February 11.  John Armitage‘s Egerton Capital Limited increased its stake in Facebook Inc (NASDAQ:FB) by 22% to nearly 5.2 million shares during the fourth quarter.

Apple Inc. (NASDAQ:AAPL) was another tech stock in which Valiant Capital reduced its stake during the fourth quarter. The fund sold 119,300 shares of the company to bring its total holding down to slightly above 1.0 million shares. As of December 31, this stake was worth $107.86 million. Interestingly, while the fund reduced the number of shares it held of the company during the quarter, it increased its position of call options underlying shares of Apple by 15% during the same time. In the last few months shares of Apple Inc. (NASDAQ:AAPL) have fallen significantly over fears that the company won’t be able to grow its revenue and earnings any further in the foreseeable future. These fears were validated by Apple Inc. (NASDAQ:AAPL) recently, when it provided fiscal year 2016 second quarter revenue guidance that would be lower by 9.2% year-over-year. Nonetheless, on February 9, analysts at Sanford C. Bernstein reiterated their ‘Outperform’ rating and $135 price target on the stock. Billionaire Ken Fisher‘s Fisher Asset Management increased its stake in Apple by 1% to 11.27 million shares during the fourth quarter.

Even though Valiant Capital reduced its stake in Amazon.com, Inc. (NASDAQ:AMZN) by 18% during the fourth quarter, the company managed to jump a spot quarter-over-quarter and become the fund’s largest equity holding at the end of the quarter. As of December 31, Valiant held 168,800 shares of Amazon worth $114.1 million. While 2015 was a dream year for the e-commerce behemoth, with its stock more than doubling during that period, 2016 is turning out to be rather dismal, as it has lost over 25% of its market cap since the start of the year. On February 2, Amazon.com, Inc. (NASDAQ:AMZN)’s board approved a $5 billion buyback program with no expiration date. Analysts feel this will insulate the stock from falling heavily in the near future. In its most recent 10-K filing, the company mentioned major logistics companies as its potential customers, which several investors see as a positive development. According to them, this shows that the company is trying to reduce its dependency on other infrastructure and logistics companies. Donald Chiboucis‘ Columbus Circle Investors also reduced its stake in Amazon.com, Inc. (NASDAQ:AMZN) during the fourth quarter, by 3%.

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