The turmoil in the markets this summer crushed many hedge funds, wiping out their gains and in some cases increasing their losses. However, John Thaler’s JAT Capital Management performed well and was up 24% through mid-October. Before starting JAT Capital in 2007, Thaler worked five years at Shumway Capital Partners and he was a star at this fund. JAT Capital invests mostly in technology, media and telecommunication companies. Obviously, the fund has this focus because of the fact that Thaler once worked at Spectrum Equity Investors, a PE firm focusing on technology, media and telecom sectors after his graduation from University of Chicago.
Thaler’s 13F portfolio increased from $2.7 billion to $3.2 billion during the third quarter. But he reduced his number of positions from 46 at the end of June to 41 at the end of September. Thaler sold out his position in Liberty Media Corp (LCAPA). JAT Capital disclosed to own $111 million worth of LCAPA at the end of June. LCAPA returned 18.25% since the end of September. Thaler also sold out his position in Alcatel Lucent (ALU). The stock lost 34.63% since the end of the third quarter, while SPY returned 7.92% in the same period. In addition to LCAPA and ALU, Thaler also sold out Sandisk Corp (SNDK), Cablevision Systems Corp (CVC),and American Tower Corp (AMT).
Thaler increased his position in Baidu Inc (BIDU) by 71% in the third quarter. JAT Capital disclosed to own $358 million worth of BIDU at the end of September. Since September 30, BIDU returned 22.63%, beating the SPY by approximately 15 percentage points. Thaler also significantly increased his stake in Las Vegas Sands Corp (LVS) by 483% to $171 million. LVS returned 19.51% since the end of the third quarter, also outperforming the market.
Thaler opened a new position in Carmax Inc (KMX). The stock returned 16.86% since the end of the third quarter, versus 7.92% for SPY during the same period. Thaler also opened new positions in Liberty Global Inc (LBTYB), Dollar General (DG), and Deckers Outdoor Corp (DECK).
Thaler is also bullish about Qualcomm Inc (QCOM). JAT Capital reported to own $92.5 million worth of QCOM shares at the end of September, up 195% from the end of June. QCOM returned 15.94% since the end of the third quarter, beating the SPY by eight percentage points.
John Thaler’s return topped 38% in early September but he made some mistakes, which brought down his returns. Thaler had $300 million in Netflix (NFLX) at the end of September. As Netflix started to go down he increased his stake to 4 million shares in October (read the story here). Netflix lost 31% since the end of September. Thaler’s second biggest mistake was his 5 million share position in Molycorp (MCP). His $167 million position in this once high flying company lost 13.7% since the end of third quarter. Thaler also had $77 million in Green Mountain (GMCR) and $52 million in Salesforce.com (CRM). GMCR lost 46% and CRM lost 1% since September. Nevertheless his bigger bets in other momentum stocks like Priceline (PCLN) gained 11% during the same time period. Fellow hedge funder Whitney Tilson is short GMCR but he is bullish about NFLX.
Overall we like Thaler. We wouldn’t want to imitate his picks in broken momentum stocks but his other stock picks are fine. He outperformed most hedge funds this year and we believe he will continue to do so.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.