Hedge Fund Manager Chase Coleman's 7 Favorite Stocks

by: The Keating Letter

Chase Coleman is one of the most successful Tiger Cubs, hedge fund managers who learned under and were seeded by Julian Robertson. He runs Tiger Global and has $4.1 billion under management. As of his most recent reporting period, Coleman is most heavily invested in consumer services and technology. He tends to have a pretty focused portfolio and currently holds 33 stocks.

Let’s take a look at Coleman’s seven favorite stocks:

Apple (NASDAQ:AAPL): Apple makes up slightly under 12% of Coleman’s portfolio. He typically trades around his position and added to it in Q1 this year. The stock has been choppy so far this year, but looks cheap, and has looked cheap for quite awhile. With a P/E of 15 and a forward P/E of near 11, it’s hard to believe shares will remain this undervalued for long, especially with their large cash hoard. As I’m sure you are aware, Apple recently announced its iCloud offering and, on Wednesday, announced a settlement with Nokia (NYSE:NOK) regarding a patent dispute. A day before that the company lost its retail boss, Ron Johnson, to J.C. Penney (NYSE:JCP). I think Apple will survive.

Viacom (VIA.B): Coleman has about a 9% position in Viacom’s B shares. Shares have climbed in the last quarter from below $44 on an increased dividend. The new $0.25 quarterly dividend will put the yield up above 2%. Coleman slightly added to his position in Q1 after entering the stock in the second quarter in 2010. Now that shares aren’t as cheap as they were before the dividend hike, it will be interesting to see how much longer Coleman hangs on. On the other hand, maybe he’s a big Jersey Shore fan and wants to remain a partner with MTV’s boss.

Liberty Global (NASDAQ:LBTYA): John Malone’s empire is beloved by value investors and it’s no different here. LBTYA makes up about 6.5% of Coleman’s portfolio, and he also owns other Liberty stock, LCAPA and LBTYK. If you add all of those holdings up, it would be about 12.7% of his portfolio, which would be his largest holding. Liberty Global is the internet and telephone arm serving Europe, Chile and Australia. The market cap is $10 billion and has gone up roughly 60% in the past year.

MercadoLibre (NASDAQ:MELI): If you ever watch Fast Money on CNBC, you’ll see Tim Seymour talk about MercadoLibre. He describes it as the Amazon.com (NASDAQ:AMZN) of Latin America. On first glance, it appears expensive, but it’s a fast grower and not necessarily in the value camp. Coleman has owned it for at least four years and it makes up 6.5% of his portfolio. He may not be buying now, which suggests that you shouldn't be either, but he’s sitting on huge gains in the name.

Amazon.com (AMZN): It’s only fitting that Amazon is his next largest holding at 6.2% of the portfolio. Coleman bought into the company in Q3 2010 and added to his position in the first quarter of this year. Shares are certainly rich, but the growth story has played out very well over the last few years. They are currently about 10% off of the 52-week highs. There are a few threats out there, specifically with state and localities looking to collect sales tax. In the pre-Internet age the Supreme Court clearly disallowed this, but times have changed and with huge state debts, so has public sentiment. In the meantime, Amazon has been printing money, introducing new services, and building a nearly impenetrable moat.

Priceline.com (NASDAQ:PCLN): Coleman has been cutting his Priceline holdings over the last few years, but it still makes up just under 6% of his portfolio. The price has increased significantly in the past year, 150%. With a P/E in the 40s, I wouldn’t be surprised if he continues to reduce the size of this stake. On the other hand, if the economy does begin to truly turn, perhaps Priceline will be the recipient of more travel dollars. Because of its growth, the forward P/E is below 20. That doesn’t necessarily make it expensive.

Netflix (NASDAQ:NFLX): Here’s one that is pricey. I don’t like this stock at all and, like those who were and are short Netflix, I question the company's accounting. Of course, I could be wrong, and Coleman seems to be taking the other side of that trade. He bought into Netflix in the first quarter this year and it makes up about 4.8% of his portfolio. With a market cap of $13.5 billion and a P/E in the 70s, Netflix will have to perform to expectations and above in order to justify the stock price. Investors seem to love CEO Reed Hastings. For this reason I’m staying away from the short position. Coleman has made out well with the stock this year as shares have risen nearly 50%. Still, this stock is far from a fastball down the middle on a 3-1 count.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.