The so-called Tiger Cubs — protégés of Julian Robertson, founder of the legendary hedge fund firm Tiger Management — are often touted as the quintessential bottom-up investors, whose unique skills enable them to uncover individual gems overlooked by most others.
This reputation is well deserved most of the time, as members of this group run some of the industry’s largest and most well-established hedge-fund firms and frequently rank among the top performers. That’s especially true this year, with Tiger Cub-run funds like Stephen Mandel’s Lone Pine Capital, Chase Coleman’s Tiger Global, O. Andreas Halvorsen’s Viking Capital and Philippe Laffont's Coatue Management poised to post gains of between 20 percent and 35 percent. But upon closer inspection, it appears that they and many of the other Tiger offspring can thank a small handful of the same stocks for their success.
Many of the famous and not-so-famous Tiger Cubs own all or most of a small group of about a half dozen technology, Internet and media stocks. These include Apple, Google, Priceline.com, Liberty Global, and Tripadvisor, and to a lesser extent Amazon.com and Qualcomm. In most cases, these stocks rank among each of these funds’ top-10 holdings. Their exposure to these stocks is magnified by the fact that descendants of Robertson’s hedge fund laboratory typically run concentrated portfolios, so the largest holdings generally play outsize roles in their returns.
In fact, one of the largest, most successful Cubs — Lee Ainslie’s Maverick Capital — owned all seven of these stocks. Coatue and Tiger Management owned six of the stocks, while four others (John Griffin’s Blue Ridge Capital, Christopher Hansen’s Valiant Capital Management, Lone Pine and Tiger Global) owned five of these seven stocks. Valiant owned these stocks in a portfolio of just 19 individual issues.
What’s more, Apple was the number one holding among nine prominent Tiger Cubs. Altogether at least 17 Cubs owned the stock at the end of the third quarter.
On Monday, the brokerage and investment banking firm Stifel Nicolaus reiterated its Buy recommendation and $825 target price for Apple, telling clients in a note that it is not concerned about a recent wave of discounting for its iPhone and iPad for the holiday shopping season. The stock is up 26 percent this year even though it has fallen 25 percent in the past three months.
Google was the largest holding among three of the funds and the second largest position among another five Cubs. At least 16 Cubs owned these shares, including three that made it their number one holding: Tiger Consumer Management, Hoplite Capital Management and Bridger Management.
On Monday, Credit Suisse Securities repeated its Outperform rating and $847 price target on Google, stressing it has high conviction on the stock after seeing it trade mostly sideways for most of the year. Google’s stock is up more than 8 percent this year.
At least 14 Cubs owned shares of Priceline.com, including nine that counted the stock among their top-10 holdings. In fact, it was Lone Pine’s largest holding. Credit Suisse recently highlighted the stock as one of its top investment ideas, with a target price of $838, calling it a “share gainer in the online travel sector and likely winner in the crucial hotel reservation segment” in a recent note to clients. Priceline.com’s stock is up more than 31 percent this year.
Liberty Global is owned by at least 10 large Tiger Cubs, of whom half count it among their top-four holdings. It is up 47 percent in 2012.
TripAdvisor is another popular choice among the Cubs, although this stock is not as frequently found among their largest holdings. Still, at least nine members of this group own the stock. It is up more than 65 percent for the year.
Qualcomm, the telecommunications equipment giant, is not as popular as the other six stocks. Yet it is found in the portfolios of at least six of these firms and is among the largest holdings at Maverick and Viking. The stock is up more than 9 percent this year.
Interestingly, one firm that owns six of these seven stocks is Julian Robertson’s Tiger Management itself. Obviously, the Cubs still keep the 80 year-old in the loop.