Legendary fund managers or gurus, such as Warren Buffet, George Soros, Carl Icahn, Steven Cohen and Mario Gabelli, are well-known for their savvy pickings of 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 companies that they are most bullish and bearish about.
Taken together, these guru managers are bullish on the social media group in general, adding a net $1.33 billion in Q4 to their $5.94 billion prior quarter holdings in the group. The following are the social media group companies that guru fund managers are bullish about, and that are also trading at a discount to their peers in the group (see Table):
Google Inc. (GOOG): GOOG is the Internet's premier search engine. Guru funds together added $1.12 billion to their $3.60 billion prior quarter position in Q4, and taken together guru funds hold 2.3% of the outstanding shares. The top guru fund buyer was Chase Coleman's hedge fund Tiger Global Management ($414 million), and the top guru fund holder was Tiger cub Stephen Mandel's hedge fund Lone Pine Capital ($846 million).
GOOG currently trades within striking range of its all-time highs, and at 12-13 forward P/E and 3.5 P/B, a discount compared with averages of 16 and 1.4 for its closest peer Yahoo! Inc. (YHOO), while earnings are projected to grow at a stellar (for a company this size) 18.0% annual rate from $36.06 in 2011, to $50.17 in 2013, compared with the sub-10% annual earnings growth rate for YHOO. The stock has been an excellent long-term performer, up almost six-fold since its IPO in 2004. Given its market leadership, strong growth, and attractive valuation, It is likely that it will continue outperforming the market going forward.
Netease Inc. (NTES): NTES is a Chinese provider of an interactive online gaming community, internet portal and wireless value-added services. Guru funds together added $127 million to their $409 million prior quarter position in Q4, and taken together guru funds hold 7.3% of the outstanding shares. The top guru fund buyer was Tiger cub Stephen Mandel's hedge fund Lone Pine Capital ($61 million), also the top holder at $419 million.
NTES shares are up strongly since it reported a good Q4 in mid-February, beating analyst earnings ($1.09 v/s $1.04) and revenue estimates ($341 million v/s $321 million). Its shares currently trade near all-time highs, at a current 14.2 P/E on a TTM basis, and at 3.6 P/B, compared to averages of 23.4 and 2.1 for its peers in the internet content group.
TripAdvisor Inc. (TRIP): TRIP is an online travel research company, aggregating reviews and opinions of members about destinations and accommodations such as hotels, resorts, restaurants, vacation packages and travel guides. Guru funds together added a new $90 million position in Q4, and taken together guru funds hold 1.9% of the outstanding shares. The top guru fund buyer was Columbia Wanger Asset Management ($50 million).
TRIP was spun-off from online travel services company Expedia in December of last year, when Expedia split into two companies, with the baseline online travel services business remaining under the Expedia name, and the TripAdvisor being spun-off as the only publicly traded, pure-play travel advertising services company. The baseline Expedia business was growing in single-digits, while TripAdvisor growth rates have been above 30% and are expected to continue being high for the foreseeable future - given that the stock is currently attractively priced at 21 forward P/E compared to the average of 26.1 for its peers in the internet content group, and the expected 20%-30% growth going forward.
We wrote about TRIP in February, shortly after it reported a disappointing Q4 that took it down into the mid-$20s, opining that investors may want to look at the pullback as an opportunity to load up on this high growth name at discount prices before growth and prices ramp up again. TRIP prices have since appreciated over 20% in the last two months since that time.
The following are some additional Social Media stocks that guru funds accumulated in Q4 (see Table):
- LinkedIn Corp. (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, in which guru funds together added a net $135 million in Q4 to their $68 million prior quarter position in the company;
- Zynga Inc (ZNGA), that develops, markets and operates online social games such as CityVille, FarmVille, FrontierVille and others, making them available worldwide on various platforms, including Facebook, MySpace and Yahoo, as well as the iPad, iPhone and Android devices, in which guru funds together initiated a new $6 million position in Q4; and
- Groupon Inc. (GRPN), a provider of discount deals from local retailers that went public in Q4, in which guru funds together initiated a new $2 million position in Q4;
The following are the social media group companies that guru fund managers are most bearish about (see Table):
- Sina Corp. (SINA), a Chinese internet portal offering media content and services for China and global Chinese communities, in which guru funds together cut a net $93 million in Q4 from their $344 million prior quarter position in the company;
- Yandex NV (YNDX), a Russian provider of internet search and web content, including news, mail and maps, in which guru funds cut a net $30 million in Q4 from their $1.44 billion prior quarter position;
- Renren Inc. (RENN), often called the Facebook of China, a Chinese operator of a social networking platform that enables users to communicate and share information via Renren.com, in which guru funds cut out completely in Q4 their $26 million prior quarter position in the company;
- Real estate information marketplace Zillow Inc. (Z), in which guru funds cut out completely in Q4 their $3 million prior quarter position; and
- Leading nationwide ISP United Online Inc. (UNTD), that is also a provider of online social networking, in which guru funds cut a net $1 million in Q4 from their $10 million prior quarter position.
General Methodology and Background Information: The latest available institutional 13-F filings of over 85+ legendary or guru hedge fund and mutual fund managers, such as Warren Buffet, George Soros, Carl Icahn, Steven Cohen and Mario Gabelli, were analyzed to determine their capital allocation from among different industry groupings, and to determine their favorite picks and pans in each group. The hedge fund and mutual fund managers included in this select group include only high profile names who by virtue of their long-term market-beating returns have earned their standing in the investment community and are worthy of our attention. They include well-known names such as those mentioned above, as well as perhaps relatively lesser-known names that also have a stellar long-term history of beating the markets, such as Seth Klarman, John Griffin, Prem Watsa, Robert Karr and Lee Ainslie. Each guru has been carefully selected based on their long-term performance and standing in the investment community. Furthermore, the credentials of most of the 85-odd guru funds that justify their inclusion in this elite group were detailed in our previous articles that can be accessed from our author page
These legendary or guru fund managers number less than one percent of all funds and yet they control over ten percent of the U.S. equity discretionary fund assets. The argument is that institutional investors have the resources and the access to information, knowledge and expertise to conduct extensive due diligence in informing their investment decisions. When high alpha generating or guru Institutional Investors by virtue of their fund performance, low volatility and elite reputation in the investment community, 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 or even go as far as constructing a model diversified portfolio based on the guru funds best picks.
This article is part of a series on institutional holdings in various industry groups and sectors, and other articles in the series for this and prior quarters can be accessed from our author page.
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.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.