Chase Coleman (Trades, Portfolio)'s Tiger Global Management is one of the best-performing hedge funds of all time. The fund has produced a compound annual return for its investors of 21% since its inception two decades ago.
One of the reasons the firm has smashed the market since its founding is its exposure to tech. Coleman formerly worked at Julian Robertson (Trades, Portfolio)'s Tiger Management, where he specialized in analyzing technology stocks. When he moved on to set up his own firm, he was able to use this experience and focus on a sector he knew well.
It also helped that he started Tiger Global just as the internet began to take off. As such, he ended up being invested in the right companies at the right time.
As one might expect, today, Tiger Global's portfolio is heavily tech-weighted. The largest two holdings in the portfolio, accounting for around 15% of total assets at the end of September, were Microsoft (MSFT, Financial) and JD.com (JD, Financial).
Considering the track record of this outperforming hedge fund, it is interesting to note which technology stocks it is buying and selling each quarter. This information could provide some insight into the types of companies that Tiger Global believes have attractive prospects.
Technology focus
According to its third-quarter 13F, Tiger Global added 34 different new positions to its portfolio in the three months to the end of September. Considering the length of this list, there's not enough space here to go through all of the different acquisitions. As such, I will be concentrating my efforts on the top four new holdings.
The most significant new addition as a percentage of total assets under management was Warby Parker Inc. (WRBY, Financial). The hedge fund acquired 15 million shares in the group worth around $800 million in total, giving it a 1.5% portfolio weight.
This is not a technology stock. However, the company does specialize in eyewear and eye tests. Data shows that with consumers spending more time in front of screens, more and more are suffering from deteriorating eyesight. Companies like Warby Parker could benefit from this trend as demand for eye tests and eyewear may increase. This is an interesting investment for a hedge fund that specializes in technology stocks. It provides diversification without Coleman and his team having to deviate too far from their circle of competence.
The second-largest addition to the portfolio was a $575 million purchase of Robinhood Markets (HOOD, Financial), which gives the stock a 1.1% portfolio weight. The app-based stock trading platform pioneered commission-free trading in the U.S., opening the gates for more retail trading.
Tiger Global also acquired Blend Labs (BLND, Financial), giving it a 0.48% portfolio weight, and VTEX (VTEX, Financial), which it gives a 0.45% weighting. Both are relatively small positions compared to the overall portfolio. This suggests they could be tracking these stocks, which is when a fund buys seeking to learn more about the individual businesses before building a complete position.
Blend Labs is a fintech company seeking to help streamline the consumer journey for banking products. It is interesting to note that Tiger Global also owns shares of Square (SQ, Financial), but this is an even smaller position for the fund. It looks as if it wants exposure to the fintech sector, but wants to hedge its bets rather than taking an overweight position on a single business.
VTEX operates a similar business model. It is a commerce platform for business-to-consumer and business-to-business operations. This is an extension of the theme that is present in the rest of the portfolio. Tiger Global owns a range of stocks, including the companies outlined above, which help corporations and consumers buy and sell things online.
Based on this information, it seems that the firm is heavily invested in e-commerce, and rather than betting on individual retailers, it is seeking out the companies that own the plumbing of the electronic financial system. This could be where Coleman sees the most growth in the tech sector.
