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The financial markets were crushed by the European debt crisis last summer. As a result, many hedge funds suffered big losses in 2011. In contrast, John Thaler’s JAT Capital Management did quite well. It generated a 38% return at its peak in early September. Though it suffered some losses in the fourth quarter because of its bets on Netflix Inc (NASDAQ:NFLX), JAT Capital still gained 14% through mid-December. Before Thaler established JAT in 2007, he spent five years at Shumway Capital Partners focusing on technology, media and telecom sectors. JAT Capital also has a tilt toward technology, media and telecommunication companies.

In this article, we are going to focus on the stocks with high upside potential that Thaler is bullish about. All companies have at least $10 billion market cap and their analyst recommendation scores are lower than 2.5 (5=strong sell, 4=sell, 3=hold, 2=buy, 1=strong buy). The market data is sourced from Finviz.

Company Name

Ticker

Value

Activity

Analyst Recom

PRICELINE COM INC

PCLN

236696

28%

2

LAS VEGAS SANDS

LVS

171468

542%

1.9

QUALCOMM INC

QCOM

92487

244%

1.9

LIBERTY GLOBAL

LBTYA

78256

New

1.9

DOLLAR GENERAL

DG

75661

New

1.9

SALESFORCE COM

CRM

51555

New

2.2

C B S CORP NEW

CBS

38398

New

2.1

WYNN RESORTS LTD

WYNN

36441

-65%

2.4

During the third quarter, JAT Capital boosted its stakes in Priceline.com Inc (NASDAQ:PCLN) by 28%. At the end of September, the fund disclosed to own $237 million worth of PCLN shares. The stock has a market cap of $23.7B and a P/E ratio of 25.19. The average analyst recommendation score for PCLN is 2. Since the end of September, PCLN returned 5.92%, versus 13.86% for SPY in the same period. The stock is also quite popular among hedge funds. As of September 30, 2011, there are 46 hedge funds with PCLN positions in their 13F portfolios. Besides JAT Capital, Stephen Mandel’s Lone Pine Capital, Jim Simons’ Renaissance Technologies, and Chase Coleman’s Tiger Global Management LLC all invested $200+ million in PCLN.

JAT Capital also largely increased its stakes in Las Vegas Sands Corp (NYSE:LVS) and Qualcomm Inc (NASDAQ:QCOM). The fund boosted its LVS stakes by 542% to $171 million and its position in QCOM by 244% to $92.5 million over the third quarter. Both stocks’ analyst recommendation scores are 1.9. LVS returned 10.17% and QCOM gained 15.42% since the end of the third quarter. There are 42 hedge funds reported to own LVS and 66 hedge funds disclosed owning QCOM at the end of September. Tiger cub Stephen Mandel is bullish about both stocks. As of September 30, 2011, his Lone Pine Capital had $282 million invested in LVS and another $351 million invested in QCOM.

Other stocks with high upside potential that Thaler loves include Liberty Global Inc (NASDAQ:LBTYA), Dollar General Corp (NYSE:DG), Salesforce.com Inc (NYSE:CRM), CBS Corp (NYSE:CBS), and Wynn Resorts Ltd (NASDAQ:WYNN). We like Thaler. His experience at a private equity firm focusing on technology, media and telecom is invaluable for a hedge fund focusing on these sectors. We believe that by focusing on Thaler’s stock picks, especially those with high upside potential, investors are more likely to outperform the market in the long term.

Source: JAT Capital's Stock Picks With High Upside Potential