Tiger Global’s Chase Coleman is one of the more successful tiger cubs. Coleman worked for Julian Robertson between 1997 and 2000, then launched Tiger Global in 2001 with funds from Robertson. Coleman has $4.4 billion under management and achieved an average 21% return per year since 2001. It’s not very fair to compare Chase Coleman’s returns to the S&P 500 index, though. Coleman invests significant amounts in illiquid technology stocks and start-up companies. Fortunately for his investors, Coleman has a Midas touch - whichever stock he purchases turns into gold.
Coleman was one of the early investors in Facebook, and his share of the company gained more than $1 billion during the past couple of years. According to Bloomberg, his other private investments included China’s largest online video company Youku.com (YOKU), E-Commerce China DangDang Inc (DANG), Russia’s Digital Sky Technologies, and LinkedIn, a networking website for professionals. LinkedIn already filed to go public in 2011.
Tiger Global’s flagship fund returned 64% during the first nine months of 2010. Chase Coleman also invests significant amounts in publicly traded companies. During the third quarter he picked the following stocks to invest:
1. Makemytrip Limited Mauritius (MMYT): Chase Coleman had $160 million worth of MMYT shares at the end of September. These shares lost 25.9% since then. Outsiders who bought these shares to imitate Coleman’s newest stock pick gained 2.8% since November 16th, underperforming the SPY by 5.9 percentage points.
2. Amazon.com Inc (AMZN): Tiger Global had $130 million worth of Amazon shares at the end of September. These shares returned 9% during the past four months, once again underperforming the SPY, which gained 12.5%. Outsiders mimicking Coleman’s purchase gained 8.5% since November 16th, slightly underperforming the market. Bridger Management’s Roberto Mignone, also a tiger cub, added AMZN shares around the same time. Clearly, tiger cubs share investment ideas.
3. Cninsure Inc (CISG): This is another disappointing new investment for Tiger Global, losing 26.5% since the end of September. Monkeying Coleman’s CISG purchase would have cost outsiders 21.8% of their investment.
4. Sears Holdings Corp (SHLD): Sears was also a bad stock pick, underperforming the SPY by 7 percentage points since September. Outsiders would have beaten the SPY by 8.5 percentage points if they had bought this stock on November 16th. Sears Holdings is one of top 20 stocks Wall Street analysts expect to dive the most this year. Analysts seem to have the upper hand for now over hedge fund managers.
5. Power One Inc New (PWER): Finally, an OK pick from Coleman. PWER gained 14.3% since September, beating the SPY by 1.8 percentage points. Power One performed much better during the past two months, gaining 16.2%.
6. Green Dot Corp (GDOT): Green Dot is Chase Coleman’s best performing new stock pick, returning more than 30%. The stock also gained nearly 20% since mid November. Roberto Mignone also bought GDOT during third quarter.
7. Rubicon Technology Inc (RBCN): Rubicon was another terrible pick from Coleman. One has to be really talented to be able to pick losing stocks. Rubicon underperformed the market by nearly 30 percentage points. Outsiders would have underperformed by 15.3 percentage points during the past 2 months or so.
The weighted average return of Coleman’s new stock picks was -9.2%, underperforming the market by 21.7 percentage points. If an outsider purchased these stocks in proportion to their weight in Coleman’s portfolio, their average return would have been 4.6 percent vs. 8.7 percent for the S&P 500 index. These are embarrassing results. These new stocks are still a small proportion of Coleman’s entire portfolio.
Maybe imitating his largest 10 stock positions in his 13F portfolio would have yielded better results. As you can see from his top holdings, Chase Coleman uses ETFs such as SPY and QQQQ to hedge his risk. QQQQ returned 13.8% since the end of September, and 8.5% since the middle of November. SPY’s returns were also similar to these. Coleman’s remaining top 10 positions at the end of September were as follows:
1. Apple Inc (AAPL): Coleman increased his Apple stake by 21% during the third quarter. This was a very timely move. Apple returned 18.4% since then. Apple is also one of top stocks hedge funds own. Stephen Mandel, Barry Rosenstein, and David Einhorn are also among the hedge fund managers with huge Apple investments. Apple returned 11.4% since mid-November.
2. Apollo Group (APOL): For profit education companies has attracted a lot of attention in 2010. Steve Eisman publicly came against them whereas other hedge fund managers, such as Maverick Capital’s Lee Ainslie (another tiger cub), had significant stakes in APOL. We also reported significant insider purchases in CECO in November, which turned out to be very profitable for the insiders. Although Apollo Group lost 20.1% since September, the stock gained 14.9% since mid-November.
3. Viacom Inc (VIA.B): This is also another hedge fund favorite stock. Farallon’s Tom Steyer also owns this. VIA.B outperformed the SPY by 2.7 percentage points since September and 1.2 percentage points since mid November.
4. DirecTV (DTV): This was a weak performing stock, returning 1.3% since September. The stock underperformed the SPY by nearly 7 percentage points since mid November.
5. Mercadolibre Inc (MELI): Coleman’s $274 million invested in Mercadolibre at the end of September lost 7% until today. The stock returned 10.9% since mid November, recovering some of the earlier losses.
6. Electronic Arts (ERTS): Tiger Global had $214 Million worth of Electronic Arts at the end of September. QQQQ increased by 13.8% vs. -8.8% return for ERTS since then. Electronic Arts underperformed the market by double digits since mid November as well.
7. Priceline.com Inc (PCLN): Priceline beat the market by nearly 10% since the end of September. However, most of the gains came early. So outsiders who started mimicking this position in mid November underperformed the SPY by more than 2 percentage points.
8. Cablevision Sys (CVC): Cablevision is the best performing stock in Coleman’s top ten 13F positions. It gained more than 30% since September and 18% since mid November. Coleman had $190 million invested at the end of September.
Overall, the value weighted return of these eight stocks is 5.1% since September, underperforming the SPY by 7.4 percentage points and QQQQ by 8.7 percentage points. Chase Coleman’s largest 13F positions performed much worse than the market. Considering Coleman achieved amazing returns in 2010, it must be due to his illiquid private investments in Facebook and other internet stocks. If we had constructed a portfolio of eight stocks with the same weights as Coleman’s, we would have beaten the SPY by 0.4 percentage points. It seems like the best way of matching Chase Coleman’s returns is to invest with him.
Disclosure: I am long SPY.