Valiant Capital’s Favorite Consumer Stocks for Q3

Christopher R. Hansen‘s Valiant Capital Management recently disclosed the contents of its U.S. equity portfolio as of the end of June via a 13F filing submitted with the SEC.  The Seattle-based long/short equity hedge fund was founded by Mr. Hansen in March 2008, prior to which he worked as a Managing Director at billionaire John Griffin’s Blue Ridge Capital for nearly seven years. According to Valiant Capital’s most recent Form ADV, it had $3.6 billion in regulatory assets under management as of June 30. However, its latest 13F filing shows that less than half of that, or $1.50 billion, was invested in publicly-traded U.S. stocks and derivatives. The 13F filing also revealed that Valiant Capital was managing a very concentrated portfolio at the end of the second quarter, with long positions in only 14 stocks and two derivatives positions.

Since Valiant has historically invested a large chunk of its assets in the technology sector, it wasn’t surprising to see that technology stocks amassed over 54% of the value of the fund’s equity portfolio at the end of June. What was surprising, though, was that out of the 14 stocks the fund was invested in, nine of them belonged to the consumer sector. Moreover, if one were to take out the large derivative position the fund had in Apple Inc. (NASDAQ:AAPL) call options, stocks from the technology sector amassed only 24% of the value of the fund’s equity portfolio, only slightly ahead of the 19% that was amassed by stocks from the consumer sector. Considering the number of positions that Valiant has in consumer stocks and its conviction on the sector into the third quarter, in this article we’ll focus on the fund’s top-five stock picks from that sector and discuss how they have been performing of late.

At Insider Monkey, we track around 765 hedge funds and institutional investors. Through extensive backtests, we have determined that imitating some of the stocks that these investors are collectively bullish on can help retail investors generate double digits of alpha per year. The key is to focus on the small-cap picks of these funds, which are usually less followed by the broader market and allow for larger price inefficiencies (see more details).

#5. Liberty Global plc – Class C Ordinary Shares (NASDAQ:LBTYK)

– Shares Owned by Valiant Capital Management (as of June 30): 1.9 Million

– Value of Valiant Capital Management’s Holding (as of June 30): $54.47 Million

Let’s start with Liberty Global plc – Class C Ordinary Shares (NASDAQ:LBTYK) in which Valiant Capital increased its stake by 24% during the second quarter. Shares of the European telecommunications company have fallen by almost 25% in 2016, with about half of those losses coming in after the Brexit result. In the last few quarters the company has made acquisitions in the mobile space and invested in content to fight an influx of video streaming services, which has been appreciated by analysts. Liberty Global plc – Class C Ordinary Shares (NASDAQ:LBTYK) is among the entities that have recently bid to acquire a minority stake in the lucrative auto-racing franchise Formula One, the result of which will be announced soon. Liberty Global’s stock currently sports an average rating of ‘Overweight’ and an average price target of $43.87 from the 16 leading analysts and research firms on Wall Street who track it. Joseph Mathias‘ Concourse Capital Management also increased its stake in the company during the second quarter, by 20% to 156,126 shares.

#4. Tripadvisor Inc (NASDAQ:TRIP)

– Shares Owned by Valiant Capital Management (as of June 30): 927,100

– Value of Valiant Capital Management’s Holding (as of June 30): $59.61 Million

Tripadvisor Inc (NASDAQ:TRIP) was a new entrant to Valiant Capital’s equity portfolio during the second quarter. Shares of the online travel company have been on a gradual decline since mid-2014 and even though they have rebounded a bit since the start of the third quarter, they are still trading down by almost 28% year-to-date. Despite the correction the stock has seen, several analysts feel that trading at a forward P/E of nearly 30 means that the stock is still not cheap to buy, especially when one takes into account the uncertainties faced by the company. Tripadvisor Inc (NASDAQ:TRIP) was expected to report EPS of $0.42 on revenue of $402.56 million for the second quarter, but missed the mark on both counts, announcing EPS of $0.38 on revenue of $391 million. For the same quarter of 2015, the company had reported EPS of $0.54 on revenue of $405 million. Columbus Circle Investors was another hedge fund that initiated a stake in Tripadvisor Inc during the second quarter; it purchased 13,520 shares of the company.

We check out Valiant Capital’s top-three consumer stock picks on the next page.