In the fourth-quarter hedge fund guru David Blood initiated new positions in Facebook Inc (NASDAQ:FB) and Amazon.com, Inc. (NASDAQ:AMZN) while reducing his position in SPDR S&P 500 ETF Trust (NYSEARCA:SPY). Along with Al Gore, Blood is co-founder of sustainable investment fund Generation Investment Management LLP which has a portfolio value of $8.74 billion and is generating extremely impressive returns. Over the last three years the fund has made an annualized return of 21.41%, with a 24.66% return in 2016.
The fund’s innovative investment approach is based on integrating key drivers of global change for example, climate change, poverty and migration into a traditional long-term investing strategy. And it seems to be working: the fund has a measured performance of 104% well above both the S&P 500 (81%) and the average hedge fund portfolio (51%), which is particularly interesting given that most hedge funds have lagged the S&P 500 in recent years.
So let’s take a closer look at some of Blood’s most interesting Q4 trades:
Blood added a new position in Facebook with close to 2 million shares that have a reported value of $230 million, about 2.6% of the total portfolio. Since the last filing, the shares have already risen by 16% in value. And Blood isn’t the only one who is bullish on the social media giant- in general hedge funds increased their holdings in FB by 4.8 million shares in the last quarter.
TipRanks registers a strong buy rating for FB with an average price target that translates into 20.15% potential upside from the current share price of $133.72. Most recently five-star Needham analyst Laura Martin reiterated her buy rating on the stock as she is confident that Facebook’s broad approach (the company is keen to attract users from markets which do not necessarily have high-speed internet or high-end mobiles) “suggests a longer growth runway and upside revenue potential from all countries globally”.
In Q4 Blood also initiated a $120m position in e-commerce retailer Amazon. Amazon is impressing the market with strong demand and acceleration for AWS, Amazon’s cloud service, and its leadership position. Indeed, four-star analyst Rob Sanderson from MKM Partners recently highlighted the stock’s potential when he said “We see very significant growth headroom as AMZN drives to transition to online commerce and extends its competitive moat.” He concluded that, if you compare Amazon to its competitors, it is “the best long term growth story available to investors today.”
Over the weekend, Amazon reduced the minimum free-shipping spend from $49 to $35 to match Walmart’s free shipping push. Walmart has been trying to break into the e-commerce market with attractive shipping offers which include a two-day delivery policy.
Out of the 30 analysts polled in the past 3 months, 29 rate Amazon stock a Buy, while only one rates the stock a Hold. With a return potential of nearly 10%, the stock’s consensus target price stands at $940.81.
SPDR S&P 500 ETF
Blood slashed the fund’s SPY holding in Q4 by -42%. The remaining holding of 160,850 shares is now worth just under $40 million. The S&P 500 has already hit the average year-end price target of $2,3564 after the index reached $2,366.24 on intraday trading on Feb 21. This is only the second time since 1999 that the index has managed to hit its year-end target in just the second month of the year- perhaps because the analyst forecast of a 5.2% gain was the lowest predicted gain in the last 12 years. Analysts are now predicting that the gains will fall back slightly in the second half of the year as positive sentiment wears off.