One of the most interesting 13F updates to be published this week comes from Tiger Global. For readers who don’t keep an eye on the hedge fund world, this firm has been one of the biggest winners of the decade-long technology revolution that has played out over the past 10 years. Founded by Chase Coleman (Trades, Portfolio) around the turn of the millennium, Tiger Global was able to capitalize on depressed technology sector valuations after the dot-com bubble burst.
By getting in early, the hedge fund manager was able to learn the ins and outs of the industry and then take high conviction bets on the most promising technology giants after the financial crisis. This strategy helped Tiger Global build a track record as one of the most profitable hedge funds in history by the end of 2020.
However, in 2021, the strategy started to unravel as high-flying tech stocks started to fall out of favor with the market. Then, Tiger Global's profits collapsed in the first half of this year, with the hedge fund losing around 50% in the first couple of months. Such a spectacular loss of value has completely reversed Tiger Global’s fortunes.
It is no longer one of the most profitable hedge funds in history. Instead, it has earned the accolade of having presided over one of the biggest losses of investor capital. Against this backdrop, I thought it would be interesting to look at the firm's latest 13F to see which stocks the hedge fund decided would get the axe from the inevitable fund outflows and the changing market situation.
Investors should be aware that 13F reports do not provide a complete picture of a guru’s holdings. They include only a snapshot of long equity positions in U.S.-listed stocks and American depository receipts as of the quarter’s end. They do not include short positions, non-ADR international holdings or other types of securities. However, even this limited filing can provide valuable information.
Broad-based reductions
It looks as if the firm decided to react by significantly reducing many of its technology holdings. Specifically, it reduced many of the larger holdings and sold out of many of the smaller holdings. Of the top five holdings, only one position was increased. The rest were reduced by between 20% and 37%.
JD.com (JD, Financial), which was the most prominent position in the portfolio at the end of the first quarter, accounting for nearly 20% of total assets, was cut by 37% (it is still the top holding but now accounts for just 16% of the portfolio). The second largest holding, Microsoft Corp. (MSFT, Financial), was cut by nearly 30%.
The only position in the top five holdings to be increased was Facebook owner Meta Platforms (META, Financial). The hedge fund increased its stake in this company by 15% in the second quarter, which seems to suggest that this is one of the highest conviction holdings in the portfolio of Tiger Global.
Outflows abound
The firm’s 13F report only details $12 billion of equity positions, which suggests that the U.S. common stock holdings are not the only holdings in the portfolio.
At its height, Tiger Global managed around $100 billion in both public and private equities. Even after recent declines, the total equities managed are likely to be worth significantly more than $12 billion. The SEC data shows that the decline was driven by a loss of $37.7 billion from performance and a loss of $41.1 billion from net outflows.
This is one of the significant drawbacks of 13F reports. They only show public U.S. equity holdings; they do not show international equity holdings, private investments or other assets. What’s more, if a firm like Tiger Global manages several funds (which it does), it can become impossible to distinguish which fund owns what.
Still, 13Fs provide some data and can be a good indicator of hedge fund sentiment. On that basis, Tiger Global’s 13F for the second quarter shows us where the bruised hedge fund seems to be finding value in U.S. stocks.
As well as adding to Meta, Tiger Global also bought Alphabet (GOOGL, Financial), Samsara (IOT, Financial), Lamb and Weston (LW, Financial) and Zillow Group (Z, Financial). It also added to Kanzhun (BZ, Financial), another top 10 holding. These holdings stand out because Tiger Global was buying them while selling or reducing virtually every other position.
