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by Guan Wang

Thanks to the weak European market and a massively volatile stock market, many hedge funds had poor performance last year. However, as tough as last year may have been for some, John Thaler's JAT Capital Management didn't fall to the same fate. In fact, it generated double-digit returns over the past year. It was up 38% through early September. Though its return in the fourth quarter of the year was hurt by Thaler's large stakes in Netflix (NASDAQ:NFLX), JAT still finished 2011 strong, returning around 13%. Thaler's performance in 2012 is even better. So far this year, the largest 10 positions in his 13F portfolio returned a weighted-average of 20.39%, more than doubling the 9.68% for the S&P 500 index.

Table 1: Top 10 positions in JAT Capital's 13F portfolio as of December 31, 2011

Company Name

Ticker

Value (*1000)

YTD Return

LAS VEGAS SANDS CORP

(NYSE:LVS)

258713

38.48%

AKAMAI TECHNOLOGIES INC

(NASDAQ:AKAM)

232510

13.79%

LEAR CORP

(NYSE:LEA)

192267

9.02%

C B S CORP NEW

(NYSE:CBS)

131455

19.45%

BAIDU INC

(NASDAQ:BIDU)

129062

26.78%

RALPH LAUREN CORP

(NYSE:RL)

124076

23.77%

UNION PACIFIC CORP

(NYSE:UNP)

92023

2.57%

AMAZON COM INC

(NASDAQ:AMZN)

92003

7.16%

SEAGATE TECHNOLOGY

(NASDAQ:STX)

90222

75.55%

ELECTRONIC ARTS INC

(NASDAQ:EA)

90101

-26.17%

The best-performing position in Thaler's portfolio is Seagate Technology (STX). The stock has roared 75.55% since the beginning of this year, heavily beating the market by about 66 percentage points. Seagate is actually a new position in Thaler's portfolio. He initiated his $90 million position in the company during the fourth quarter 2011. Assuming Thaler has not increased or decreased his stake in Seagate since the end of last year, he made over $68 million from the position. Seagate is also quite popular amongst other hedge funds. At the end of last year, there were 34 hedge funds with Seagate in their 13F portfolios, up from 25 hedge funds at the end of September. Billionaire David Einhorn was the most bullish about Seagate. Einhorn's Greenlight Capital had over $200 million invested in this position at the end of last year. Einhorn's top 10 positions have also returned over 20% so far this year.

The second best-performing stock in the JAT Capital portfolio is Las Vegas Sands Corp (LVS). It is also the largest position in Thaler's latest 13F portfolio. Since the beginning of this year, Las Vegas Sands has returned 38.48%, outperforming the market by 29 percentage points. Thaler increased his stakes in this position by 35% over the fourth quarter last year. As of December 31, 2011, his JAT Capital disclosed owning $259 million worth of Las Vegas Sands shares. The stock is also quite popular amongst hedge funds. There were 41 hedge funds with positions in Las Vegas Sands at the end of 2011. Besides Thaler, Stephen Mandel, Lee Ainslie, Ken Griffin, and Steven Cohen were also bullish about Las Vegas Sands.

Las Vegas Sands' development in Asia should drive the company's overall performance. In 2010, Las Vegas Sands opened the first phase of a new integrated resort called Marina Bay Sands in Singapore. The company also restarted construction on a resort called Sands Cotai Central in Macau. About 3700 hotel rooms are scheduled to open in April this year and 6400 rooms are expected to open upon the completion of the project.

The company's sales are expected to grow at 31% per year and its earnings are expected to grow at about 37% annually over the next couple of years. Its strong growth potential is to some extent reflected in Las Vegas Sands' stock price. The stock has a current P/E ratio of 37.76, versus an average of 30 for its industry. Las Vegas Sands is expected to earn $2.57 per share in 2012 and $3.12 per share in 2013. Its forward P/E ratio is about 22.7, on par with 23.11 for its peers. Thanks to its robust growth, Las Vegas Sands might be a good investment for the long run, but investors should be aware of the relatively high risks of the company. Las Vegas Sands is largely dependent on its projects in Asia, but there exists some uncertainty in the regulatory changes related to these projects. The stock's high beta of 3.63 also indicates that it is much riskier than the market.

Baidu Inc (BIDU) and Ralph Lauren Corp (RL) also generated stunning returns this year. Both stocks are up over 20% since the beginning of 2012. Baidu has had especially strong growth. Its earnings are expected to roar at 45% a year in the next couple of years. Investors are able to gain exposure to the rapid-growing Chinese market by purchasing Baidu. Ralph Lauren also has double-digit growth. Its earnings are estimated to grow at 12% per year. Fund manager Stephen Mandel was bullish about both stocks. As of December 31, 2011, his Lone Pine Capital had $646 million invested in Ralph Lauren and another $279 million invested in Baidu.

Source: JAT Capital Management's Top 10 Positions Returned 20%