Testing the Performance of the Tiger Cubs’ Favorite Stocks

Following the Tiger Cubs into their most popular stocks during the third quarter might have seemed like a risky strategy, given the market’s overall volatility and the group’s skew toward riskier tech, Internet and media stocks.

The Standard & Poor’s 500 index finished up by less than 1 percent in the September three-month period while the Russell 2000, which comprises smaller companies, many of them technology issues, lost more than 7 percent. So it is interesting to look at the performance of stocks we earlier highlighted as the most popular among the four dozen or so hedge funds with roots in Julian Robertson, Jr.’s Tiger Management. It’s sort of an accountability exercise.

Now remember that the average investor has little way of knowing the managers’ portfolios until they are disclosed quarterly in 13F filings, most of which are made public around the filing deadline 45 days after the quarter ends. In the case of second quarter holdings, most portfolios were not publicly available until mid-August.

So, we calculated how each of the 17 most widely-held stocks among the Cub crowd fared for the entire quarter as well as from August 16 through September 30, the period during which the average person could have known this list if they were not investors in Cub funds.

The verdict: sort of mixed.

On average, the group of 17 stocks outperformed the S&P 500 from July 1 through September 30, gaining 0.86 percent, slightly better than 0.60 percent for the benchmark.

However, if you held the basket from August 16 through the end of the quarter, you would have lost money; the group dropped 0.11 percent versus a slight 0.36 percent gain for the S&P 500 during that period. But, that works out to a nearly half point lag of the benchmark, which annualized is a significant 2 percentage points.

Even more significantly, 8 of the 17 stocks lost money for the entire quarter, while 11 lost money from mid-August until the end of the period. Seven stocks lost money during both periods. Interestingly, seven of the 17 stocks fared better in the second half of the quarter than they did for the entire period, although in some cases the outperformance was a smaller loss.

Three stocks rose more in price in the second half of the quarter than they fared for the entire quarter — Valeant Pharmaceuticals International, Actavis, Endo (which lost money for the entire quarter but rose 8.8 percent for the second half of the quarter) and Google, albeit very slightly.

Of course, the flaw in this exercise is that it is just a snapshot of one quarter. And as we pointed out earlier, the Tiger crowd rarely makes drastic changes to its top holdings list from quarter to quarter.

In fact, seven stocks topped the most widely held list among Tiger descendants in each of the past two quarters. They were Facebook, Priceline Group, two different classes of Liberty Global, FleetCor Technologies, Charter Communications and Valeant.

If you bought just these seven on May 16, the fist day after all of the first quarter 13F’s were filed, and held them until September 30, you would have way outperformed the market. The group rose nearly 9.9 percent. During that same period, the S&P 500 rose about 5.4 percent. Two of the seven — the two different classes of Liberty Global — lost money, but by low single-digit rates. Otherwise, Facebook surged more than 36 percent during that period, FleetCor jumped more than 18 percent, Charter 10.6 percent, Valeant 5.8 percent and Priceline 2 percent.

Still, this longer time period’s performance comes closer to corroborating New York-based research firm Novus’ previously published white paper that concluded that investors can handily beat the market by following the stock purchases of Tiger descendants.