Legendary fund managers or gurus such as Warren Buffet, George Soros, Carl Icahn, Steven Cohen and Mario Gabelli, are well-known for their savvy in picking winning stocks year after year. Generally, their investment horizon and holding periods stretches into many quarters and years, sometimes even decades. In this article, we examine based on our research of their latest available Q3 institutional 13-F filings the social media stocks that they are most bullish and bearish about.
Most of the information is based on the latest available Q3 filings, but when Q4 filings are available, as in the case of one guru fund that has filed its Q4 to-date (Yacktman Asset Management), we have instead used the more recent Q4 data. Taken together, these guru managers were bullish on the social media group, adding a net $1.17 billion in Q3 to their $6.64 billion prior quarter holdings in the group. However, taking out Google Inc. (GOOG), which dominates the group due to its size, guru funds were still bullish on the group, adding a net $786 million (ex-Google) to their $4.30 billion prior quarter position in the group (for more general information on these guru funds, please look at the end of the article).
The following are the social media group companies that guru fund managers are bullish about (see Table):
Google Inc.: GOOG is the Internet's premier search engine. Its social media businesses include video-sharing site YouTube and the new Google+ social networking service that is basically GOOG's answer to the Facebook threat. Although currently a small part of GOOG's revenues, social media should garner an increasing share going forward. Guru funds added a net $383 million in Q3 to their $2.34 billion prior quarter position, and together they hold 1.4% of outstanding shares, less than their 1.8% weighting in the group. The top guru fund buyers in Q3 were First Eagle Investment Management ($107 million) and Platinum Investment Management ($105 million), and the top holders were Lone Pine Capital ($571 million), Ruane Cunniff & Goldfarb ($445 million) and Fisher Asset Management ($428 million).
GOOG has been an excellent long-term performer, up almost six-fold since its IPO in 2004. The stock is currently recovering from a sharp sell-off that occurred just over two weeks ago, after the company reported a disappointing Q4 in which it missed on both revenue and earnings estimates. However, the stock is still within striking distance of its all-time highs, and trades at 12-13 forward P/E and 3.3 P/B, a discount compared to averages of 17 and 1.6 for its closes peer Yahoo! Inc. (YHOO), while earnings are projected to grow at a stellar (for a company this size) 17.5% annual rate from $36.06 in 2011 to $49.74 in 2013 compared to the sub-10% annual earnings growth rate for YHOO.
Sina Corp. (SINA): SINA is a Chinese internet portal offering media content and services for China and global Chinese communities. Guru funds are extremely bullish on SINA, almost tripling its $118 million prior quarter position by adding a net $215 million in Q3. The top guru fund buyers were Viking Global Investors ($103 million), Maverick Capital ($48 million) and Tiger Global Management ($37 million), and the top holder was Viking Global Investors ($103 million). SINA trades at a premium 49-50 forward P/E and 4.8 P/B compared to averages of 26.1 and 3.3 for its peers in the internet content group.
Renren Inc. (RENN): RENN, often called the Facebook of China, is a Chinese operator of a social networking platform that enables users to communicate and share information via Renren.com. Guru funds added a net $5 million in Q3 to their $17 million prior quarter position, with SAC Capital Advisors being the only buyer ($5 million), and the top the top holders were Joho Capital ($18 million) and SAC Capital ($5 million). RENN is currently flirting near break-even, reporting 1c in earnings for the last two quarters, and it trades at 1.7 P/B and 24.6 PSR.
The following are the social media group companies that guru fund managers are most bearish about (see Table):
LinkedIn Corp. (LNKD): LNKD operates an online professional network via its proprietary social networking platform that enables members to create, manage and share their professional identities online, build and engage with their professional network, access shared knowledge and insights, and find business opportunities. Guru funds cut a net $1 million from their $25 million prior quarter position, with SAC Capital ($1 million) being the only seller. LNKD is scheduled to report its Q4 this week, on Thursday after the market-close. The stock has been rallying strongly since the beginning of the year, up over 25% YTD, and it trades at a premium of 140 forward P/E compared to the 28.2 average for its peers in the internet services group. However, growth is also extremely strong, with revenues currently growing at over 100% and earnings projected to almost double from 31c in 2011 to 57c in 2012.
Pandora Media Inc. (P): Pandora is a premier provider of internet radio in the U.S., offering listeners a streaming music based on analysis of user listening behavior. Its services are offered on traditional computers, and on smartphones such as Android phones, Blackberries and the iPhone. Guru funds completely dropped out of their $10 million prior quarter position in the company, with the top sellers being RS Investment Management ($5 million) and Kingdon Capital Management ($5 million). Pandora currently generating losses, and its shares trade at 20.7 P/B and 8.9 PSR.
General Methodology and Background Information: The latest available institutional 13-F filings of over 30+ mega hedge fund and mutual fund managers were analyzed to determine their capital allocation among different industry groupings, and to determine their favorite picks and pans in each group. These mega fund managers number less than one percent of all funds and yet they control almost half of the U.S. equity discretionary fund assets.
The argument is that mega institutional investors have the resources and the access to information, knowledge and expertise to conduct extensive due diligence in informing their investment decisions. When mega Institutional Investors invest and maybe even converge on a specific investment idea, the idea deserves consideration for further investigation. The savvy investor may then leverage this information either as a starting point to conduct his own due diligence.
Credit: Historical fundamentals including operating metrics and stock ownership information were derived using SEC filings data, I-Metrix® by Edgar Online®, Zacks Investment Research, Thomson Reuters and Briefing.com. The information and data is believed to be accurate, but no guarantees or representations are made.
Disclaimer: Material presented here is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities. Before buying or selling any stock you should do your own research and reach your own conclusion. Further, these are our 'opinions' and we may be wrong. We may have positions in securities mentioned in this article. You should take this into consideration before acting on any advice given in this article. If this makes you uncomfortable, then do not listen to our thoughts and opinions. The contents of this article do not take into consideration your individual investment objectives so consult with your own financial adviser before making an investment decision. Investing includes certain risks including loss of principal.