Several of the largest firms descended from Julian Robertson Jr.’s Tiger Management posted strong results in August. However, for at least two of them, it was a one-month respite from what is still a disastrous year, with just four months remaining to make up lost ground.
The hedge funds managed by Tiger Cub Chase Coleman’s Tiger Global Management jumped 3.7 percent in August, by far their best month of the year. Yet they are still down 17.7 percent for the year.
The New York firm is still trying to dig out of the huge hole it created earlier in the year, when its long-short funds lost 14.4 percent in January and another 8.5 percent in February. Since then Tiger Global — which also manages long-only and venture capital funds — has made many significant changes to its portfolio.
For one thing, in the first quarter the firm cut its hedge funds’ gross exposure to 134.2 percent from about 199 percent at the end of 2015 and slashed their net exposure to just 5 percent from 40 percent at year-end. By the end of June, the gross exposure was trimmed to 127.5 percent, while net exposure stood at about 6 percent after averaging about 12 percent for the second quarter.
In the June quarter Tiger Global closed out its huge position in streaming video giant Netflix, previously the firm’s largest U.S. long holding. Since then four stocks have dominated the firm’s $5 billion U.S. long equity portfolio, which consists of only 20 individual stocks. In descending size order they are Amazon.com, Charter Communications, the Priceline Group and JD.com. During the second quarter Tiger Global boosted its stake in the first three stocks, more than doubling its position in Charter.
All of the top four positions were profitable last month. Online retailer Amazon.com returned 1.3 percent, cable and broadband giant Charter gained 7.2 percent, online travel agency Priceline rose 4.8 percent, and Chinese Internet giant JD.com surged nearly 18 percent.
Hound Partners also enjoyed its best month of the year in August, with its long-short fund, Hound Partners Offshore Fund, gaining 4.3 percent. However, this still leaves the New York–based Tiger Seed, headed by Jonathan Auerbach, down 11.9 percent for the year.
This is a bigger loss than the roughly 11 percent decline the fund posted over the first two months of the year. That was when the fund still held its large position in Valeant Pharmaceuticals International, which it expanded in the March period.
As we earlier reported, Hound finally liquidated its stake in the embattled drugmaker back in June at $25 per share, according to its first-half letter to clients.
Hound has also been reducing its net exposure each month this year, to 21 percent by the end of May from 37 percent just four months earlier.
Meanwhile, in the second quarter Hound built a new, 14-million share position in hospitality giant Hilton Worldwide Holdings, which instantly became Hound’s third-largest individual U.S. common stock position.
The stock gained nearly 3 percent last month and is up 15 percent from its low price in May. We don’t know what Hound paid for its shares. In August, Hound undoubtedly benefited from its huge position in call options on Citgroup’s common stock. The stock itself gained nearly 9 percent last month.
Hound’s largest individual stock position at the end of the second quarter was Spirit AeroSystems, a maker of large commercial aircraft structures. The stock returned 5.6 percent last month after dropping more than 13 percent in the first seven months of the year.
Chinese web search firm Baidu, Hound’s fourth-largest U.S. long, jumped more than 7 percent last month after slumping about 16 percent in the first seven months of the year.
On the other hand, shares of refiner and marketer Tesoro Corp., Hound’s second-largest individual U.S. long position, lost about 1 percent last month.
Elsewhere in the Tiger family, Greenwich, Connecticut–based Viking Global Investors also posted a strong gain in its long-short fund last month. Unlike the Tiger Global and Hound funds, the Viking fund moved close to breaking even.
In August, Viking Global Equities rose 1.9 percent, cutting its loss to just 1.2 percent for the year. It had posted an 8.8 percent loss in the first quarter but rebounded with a 3.2 percent gain in the second quarter, reducing its loss for the year to 5.9 percent at that time. The fund’s second-quarter gains came largely from its longs, especially energy issues.
Entering the third quarter, Amazon.com, Facebook and both share classes of Alphabet (Google) combined —three of the four stocks that comprise the so-called FANG stocks — made up the largest long holdings of the entire firm, which also manages a long-only fund and a hybrid fund.
In August, Amazon added 1.3 percent and Facebook returned 1.7 percent, while Alphabet fell very slightly.
With four months remaining, Viking could close out the year with a respectable gain. However, Tiger Global and Hound will need a furious finish to wind up in the black.
