Legendary investor Julian Robertson (Trades, Portfolio) is not just known for his leadership of Tiger Management, but also for taking a group of protégés under his wing. These student investors, many of whom later opened their own practices, are referred to as “tiger cubs.”
As they were influenced the same teacher, it is no surprise that some of these guru fund managers have similar investing styles and even invest in some of the same stocks. An example of this is Chase Coleman (Trades, Portfolio), who now heads up Tiger Global Management, and Robert Karr (Trades, Portfolio), leader of Joho Capital. Both gurus are known for their investments in tech and online media stocks.
According to the Aggregated Portfolio, a Premium feature, the two value investors both have positions in Microsoft Corp. (MSFT, Financial), Spotify Technology SA (SPOT, Financial), Alibaba Group Holding Ltd. (BABA, Financial) and Farfetch Ltd. (FTCH, Financial) as of the first quarter.
Microsoft
While Coleman boosted his stake in Microsoft by 0.95% in the first quarter, Karr established a 408,000-share holding.
The Redmond, Washington-based software company founded by Bill Gates (Trades, Portfolio) has a $940.99 billion market cap; its shares were trading around $122.38 on Monday with a price-earnings ratio of 27.28, a price-book ratio of 10.04 and a price-sales ratio of 7.80.
The Peter Lynch chart shows the stock is trading above its fair value, suggesting it is overpriced.
GuruFocus rated Microsoft’s financial strength 6 out of 10. Although the company has issued approximately $25.6 billion in new long-term debt over the last three years, it is at a manageable level as a result of adequate interest coverage. In addition, the robust Altman Z-Score of 4.98 indicates the company is in good fiscal standing.
The company’s profitability and growth scored a 9 out of 10 rating. While the operating margin is in decline, it still outperforms a majority of competitors. The company is also supported by strong returns, a high Piotroski F-Score of 8, which implies operations are healthy, consistent earnings and revenue growth and a business predictability rank of 4.5 out of five stars. According to GuruFocus, companies with this rank typically see their stocks gain an average of 10.6% per year.
GuruFocus estimates Coleman has gained 61% on his investment since the fourth quarter of 2016. Karr has gained approximately 12%.
Of the many gurus invested in Microsoft, PRIMECAP Management (Trades, Portfolio) has the largest stake with 0.49% of outstanding shares. Other top shareholders include Dodge & Cox, Ken Fisher (Trades, Portfolio), Pioneer Investments (Trades, Portfolio), Spiros Segalas (Trades, Portfolio), Andreas Halvorsen (Trades, Portfolio), Barrow, Hanley, Mewhinney & Strauss, Steve Mandel (Trades, Portfolio) and Hotchkis & Wiley.
Spotify
While Karr established a 220,000-share position in Spotify during the quarter, Coleman trimmed his stake by 35.93%.
The Swedish music and audio streaming service has a market cap of $22.14 billion; its shares were trading around $122.37 on Monday with a price-book ratio of 7.94 and a price-sales ratio of 3.51.
According to the median price-sales chart, the stock is trading below its historical average.
Spotify’s financial strength was rated 7 out of 10 by GuruFocus. In addition to a high cash-debt ratio, the Altman Z-Score of 4.6 suggests the company is in good fiscal health.
The company’s profitability and growth did not fare as well, scoring a 2 out of 10 rating on negative margins and returns that underperform a majority of industry peers.
According to GuruFocus, Coleman has lost an estimated 20% on the investment since the second quarter of 2018. Karr has lost nearly 10%.
With 4.54% of outstanding shares, Coleman is Spotify’s largest guru shareholder. During the quarter, Stanley Druckenmiller (Trades, Portfolio) and Pioneer also established positions in the stock, while Ron Baron (Trades, Portfolio), Louis Moore Bacon (Trades, Portfolio), Paul Tudor Jones (Trades, Portfolio) and Robertson added to their holdings. Jim Simons (Trades, Portfolio)’ Renaissance Technologies and Steven Cohen (Trades, Portfolio) reduced their positions.
Alibaba
While Coleman expanded his Alibaba stake by 5.22% in the first quarter, Karr curbed his position by 9.91%.
The Chinese e-commerce company has a $387.44 billion market cap; its shares were trading around $151.04 on Monday with a price-earnings ratio of 30.59, a price-book ratio of 5.41 and a price-sales ratio of 7.06.
Based on the Peter Lynch chart, the stock appears to be overvalued.
GuruFocus rated Alibaba’s financial strength 7 out of 10, driven by comfortable interest coverage and a high Altman Z-Score of 5.78.
The company’s profitability and growth scored an 8 out of 10 rating. Although the operating margin is in decline, it still outperforms a majority of competitors. Alibaba is also supported by strong returns, a moderate Piotroski F-Score of 4, which suggests business conditions are stable, and consistent earnings and revenue growth. The 2.5-star business predictability rank, however, is on watch as a result of assets building at a faster rate than revenue is growing, suggesting it is becoming less efficient.
GuruFocus says Coleman has gained an estimated 5.3% on his investment since the third quarter of 2016, while Karr has gained 80.1%.
PRIMECAP is the company’s largest guru shareholder with 0.59% of outstanding shares. Other top guru investors include Frank Sands (Trades, Portfolio), Fisher, Halvorsen, Mandel, Segalas, Pioneer, Chris Davis (Trades, Portfolio), Philippe Laffont (Trades, Portfolio), Dodge & Cox and Sarah Ketterer (Trades, Portfolio).
Farfetch
Karr beefed up his stake in Farfetch by 30% during the quarter. Coleman maintained his current holding.
The online luxury fashion retail platform, which is headquartered in London, has a market cap of $5.87 billion; its shares were trading around $19.55 on Monday with a price-book ratio of 5.57 and a price-sales ratio of 8.69.
The price chart shows the stock has tumbled 31% since its initial public offering on Sept. 21, 2018.
Boosted by no long-term debt, Farfetch’s financial strength was rated 8 out of 10 by GuruFocus. In addition, the sturdy Altman Z-Score of 10.94 indicates it is in great fiscal standing.
The company’s profitability and growth did not fare as well, scoring a 2 out of 10 rating on negative margins and returns that underperform a majority of industry peers.
According to GuruFocus, Karr has lost an estimated 10% on the investment since establishing it in fourth-quarter 2018. Coleman has lost approximately 30.9% on his investment, which was established in third-quarter 2018.
With 0.92% of outstanding shares, Karr is Farfetch’s largest guru shareholder. Segalas, Cohen and Bacon also own the stock.
Portfolio composition
Coleman’s $18.11 billion equity portfolio, which is composed of 69 stocks, is largely invested in the technology and consumer cyclical sectors. The guru’s New York-based hedge fund is known for focusing on small-cap stocks and technology startups.
Like his fellow tiger cub, Karr’s $593.22 million equity portfolio, which is composed of 10 stocks, is heavily invested in the consumer cyclical and technology sectors. His New York-based firm, which is now run as a family office, focuses on a concentrated number of investments and specializes in online media stocks.
Disclosure: No positions.
Read more here:
- Robert Karr Buys 3 Stocks in 1st Quarter
- The Top 5 Buys of First Pacific Advisors
- Jeff Ubben's ValueAct Buys 1, Sells 2 in 1st Quarter
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