Viking Global Investors’ big bet on old industrial companies produced mixed success during the third quarter. Even so, the firm headed by Tiger Cub O. Andreas Halvorsen posted pretty strong results for the three-month period.
Viking Global Equities, its long-short fund, gained 2.1 percent for the September quarter, boosting its gain for the year to 7.1 percent, according to an investor. Its Viking Long Fund rose 5.3 percent during the quarter and is now up 8.7 percent, according to the investor.
Although the results don’t stack up as well as some other long-short funds that are up in the upper teens and low 20 percent range, they are still a sharp reversal from the first quarter, when Viking’s two main funds lost money. The firm declined to comment.
As the disparity between the long-short and long-only funds indicates, the hedge fund firm lost money on its short positions in the third quarter and for the year.
As Institutional Investor earlier reported, in the second quarter Viking took sizable new stakes in General Electric, which immediately became the firm’s fifth-biggest U.S. long, and DowDuPont, which became the eighth-biggest long. In addition, Viking nearly doubled its stake in industrial conglomerate United Technologies, catapulting the stock to its No. 1 U.S. long position.
In the third quarter UT surged nearly 12 percent. Back in May, the company became an activist target of both Dan Loeb’s Third Point and Bill Ackman’s Pershing Square Capital Management.
In a letter to investors in Pershing Square Holdings, Ackman lamented that even though UT has “one of the most advantaged business portfolios in the multi-industrial sector,” its stock’s valuation was “significantly” below its estimate of the company’s underlying value. The company is best known for its Pratt & Whitney, Otis and Carrier businesses.
On October 1, the Justice department gave UT the go-ahead for its previously announced $30 billion acquisition of Rockwell Collins, strengthening its position as the world’s largest aerospace parts supplier. Meanwhile, UT is mulling the sale of its Chubb Fire & Security division for more than $3 billion, according to Reuters.
The stock is down about 7.4 percent so far this month, however.
Shares of GE plunged 17 percent in the third quarter. On September 30, GE dumped John Flannery as chief executive officer, replacing him with Larry Culp. At the same time the company said in 2018 it will fall short of previously indicated guidance for free cash flow and earnings per share due to “weaker performance” at its power division.
However, earlier this week the Financial Times reported that GE appears to be in position to beat out Siemens for a $15 billion deal to supply power-generation equipment to Iraq.
The stock, the third-biggest holding of activist Trian Fund Management, is up nearly 10 percent so far this month.
DowDuPont, meanwhile, fell 2.4 percent in the third quarter. In February, the company, which is the fourth-biggest long holding of Third Point, announced it would break into three separate companies in 2019.
Otherwise, Viking holds several of the familiar tech and internet names you would expect in a Tiger Cub’s portfolio.
Facebook is its second-biggest long, Microsoft is No. 3, and Alphabet is No. 7.
While Facebook fell more than 15 percent in the third quarter, Microsoft surged nearly 16 percent, and Alphabet gained nearly 6 percent.
