In late October Christopher Hansen’s Valiant Capital filed its 13F for the third quarter of 2012, which disclosed many of the fund’s long equity positions as of the end of September. Hansen had previously been a managing director at Blue Ridge Capital, which is managed by Tiger Cub John Griffin. Even though the fund was founded in March 2008- not long ago, and also a poor time in the business cycle to launch a new fund- it has $2.7 billion under management. Read on for our quick take on the largest positions that the fund reported and compare them to previous filings.
The largest position by market value in Valiant’s 13F portfolio was its roughly 220,000 shares of Apple Inc. (NASDAQ:AAPL). Apple Inc. (NASDAQ:AAPL) was the most popular stock among hedge funds in the second quarter of 2012 according to our database of filings (see the full rankings) and from what we have seen so far it may very well continue its reign in our third quarter rankings. Apple Inc. (NASDAQ:AAPL) currently trades at 14 times trailing earnings; even if it does not meet the targets for next year set by Wall Street (the forward P/E is only 10), that is very low for such an economy-defining company. Its earnings were up 24% in its most recent quarter compared to a year earlier, and we’d expect some growth to continue in the next few years.
Google Inc (NASDAQ:GOOG) was right behind Apple in our second quarter hedge fund rankings, and it’s right behind that company in Valiant’s portfolio with the fund reporting about 120,000 shares at the end of September. Google Inc (NASDAQ:GOOG)’s earnings dropped 20% in the third quarter from what the company had done in the third quarter of 2011, and when we looked at the company we thought that part of the reason had been a failure to make the Motorola Mobility Holdings acquisition pay off for shareholders. Read our recent article on Google, in which we advised investors to wait to see if it can do better at meting analyst expectations. Google Inc (NASDAQ:GOOG) trades at 15 times forward earnings estimates, so it would be a good value if it can do so.
Hansen and his team also liked Liberty Global Inc. (NASDAQ:LBTYA), a $16 billion market cap Internet, TV, and phone services company; Valiant owned 1.4 million shares at the end of the quarter. Liberty Global is unprofitable on a trailing basis, but broke into the black in the second quarter of the year and is expected to earn $1.72 per share in 2012 (which would place it at a forward P/E of 35). Sell-side analysts anticipate strong growth and so the five-year PEG ratio is only 0.5. We think that it could be a good stock to investigate further, as the company could fall short of analyst projections and still be a good value at the current price.
Internet registry services company Verisign, Inc. (NASDAQ:VRSN) was another of Valiant’s favorites as the fund reported owning 1.6 million shares. Verisign’s stock price dropped recently after the company announced that its .com registry agreement is being subjected to further review by the Department of Commerce with regards to the company’s prices. Verisign’s business has been experiencing good growth recently, and its earnings multiples aren’t particularly high, but we’d still avoid the stock as we are concerned that it might struggle to continue its growth if it is forced to renegotiate its registry agreement.
In general, the fund didn’t increase the previous four positions by much and they’d been among its top five picks at the end of the second quarter as well. Valiant did, however, increase its stake in Priceline.com Inc (NASDAQ:PCLN) from about 70,000 shares at the beginning of July to about 90,000 at the end of September. Priceline has kept on growing, even as its market cap nears $30 billion: in the second quarter, its revenue and earnings were both up at least 20% from Q2 2011. It trades at 24 times trailing earnings, but expectations of continued strong growth place it at a forward P/E of 16 and a five-year PEG ratio of 0.9. We think that it’s a good “growth at a reasonable price” pick.
