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Rupert Hargreaves
Rupert Hargreaves
Articles (559)  | Author's Website |

Facebook Dominates Gurus' Portfolios in 1st Quarter

Gurus snapped up shares of Facebook in the first quarter

Facebook (NASDAQ:FB)'s reputation might have taken a hit following its data and security scandal at the end of March, but it seems as if Wall Street believes the social media giant still have what it takes to remain on top of the tech world.

According to the latest set of 13F filings, which profile the stock holdings of U.S. hedge funds with more than $100 million in assets, Facebook was the most acquired stock during the first quarter of 2018 as fund managers took advantage of the plunge in the price of Facebook's shares from $185 to $155 in just a few short weeks.

According to data from Dataroma, a total of 13 hedge funds added or increased their stakes in Facebook in the first quarter, buying in at an average price of $162 below the current $182.

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Some well-known names took advantage of the stock price weakness to increase stakes, including David Tepper (Trades, Portfolio) who boosted his position by 12.3% to 6.2 million shares. Facebook now accounts for just under 10.7% of Appaloosa Management's portfolio. Lee Ainslie (Trades, Portfolio) of Maverick Capital, Lone Pine Capital and Third Point (Dan Loeb) all increased positions by 5.4%, 75% and 17.7% respectively. Lone Pine capital now owns the most significant share with 7.7 million shares. It is interesting to see that Wallace Weitz (Trades, Portfolio)'s Weitz Value, Sequoia and FPA Crescent, all of which are generally considered to be value investors, initiated stakes in the business during the period.

Aside from Facebook, the second most popular stock among hedge funds last quarter was Microsoft (NASDAQ:MSFT). Eight funds acquired or added to positions, the largest of which was Chris Hohn's TCI Fund Management.

Activist involvement

Hohn runs a highly concentrated portfolio, and he's not afraid to take an activist stance if he believes he can unlock value from an investment.

Currently, his portfolio is dominated by five positions: Altaba (NASDAQ:AABA), Charter Communications (NASDAQ:CHTR), 21st Century Fox (NASDAQ:FOX), Alphabet (NASDAQ:GOOG) and Microsoft. Together these account for $15.5 billion of the $18 billion portfolio. The most notable position changing made during the first quarter was TCI's acquisition of 4% of 21st Century Fox, giving the manager "crucial leverage to influence the future of Rupert Murdoch’s media empire at a time when it is involved in a series of complex takeover battles" according to the Financial Times.

According to sources cited in the paper, TCI believes there is a chance the media company could become entangled in a bidding war. And Hohn isn't the only one betting big on such an outcome. 21st Century Fox is the most significant position in Jeffrey Ubben's ValueAct Capital portfolio, taking up 19.4% of assets.

Coming back to hedge funds' most-loved stocks, Lone Pine and Maverick were also significant buyers of Microsoft during the period, increasing their holdings by around a fifth.

Somewhat unsurprisingly, the third most-loved holding for hedge funds in the quarter was Alphabet, Google's parent company. TCI, Maverick and Tepper were all big buyers.

Moving away from tech

Outside of the tech sector, six funds added or acquired steaks in United Health Group Inc. (NYSE:UNH). Once again, Lone Pine, Maverick and Tepper all boosted positions in this business.

Alliance Data Systems (NYSE:ADS) seems to be very popular with value investors. Allan Mecham's Arlington Value Capital increased its holding in the company fourfold during the quarter to 14% of its portfolio, while Glenn Greenberg (Trades, Portfolio)'s Brave Warrior added shares equal to 4%. ValueAct owns a stake, and so does Leucadia National (Trades, Portfolio).

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Overall, it looks as if tech stocks were the most loved stocks in the hedge fund industry last quarter, extending a multi-quarter run in which this sector has dominated 13Fs. Luckily, funds have profited from this move. As tech has smashed the wider market over the past three years, hedge funds have been able to produce a positive performance for investors. They will be hoping this can continue.

Disclosure: The author owns no stock mentioned.

About the author:

Rupert Hargreaves
Rupert is a committed value investor and regularly writes and invests following the principles set out by Benjamin Graham. Prior to his investing and writing career, Rupert was as a proprietary currency trader. Rupert holds qualifications from the Chartered Institute for Securities & Investment and the CFA Society of the UK. He covers everything value investing for ValueWalk and other sites on a freelance basis.

Visit Rupert Hargreaves's Website


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