Harriet Lefton

About the Author Harriet Lefton

Harriet originates from the UK where she worked as a journalist specializing in the metal markets. She graduated from the University of Cambridge before becoming a qualified UK lawyer.

Enigmatic Hedge Fund Billionaire Louis Moore Bacon Takes Profits on Apple Inc. (AAPL) and Amazon.com, Inc. (AMZN), Adds Alphabet Inc (GOOGL)

One of the World’s Most Powerful Fund Managers Displayed a Mixed Sentiment on Stock Giants

Louis Moore Bacon of the $3.25 billion Moore Capital Management fund, has made some key portfolio shifts in the last quarter. From 13F forms filed with the SEC, we can see that Bacon slashed the fund’s holdings in Apple Inc.(NASDAQ:AAPL) and Amazon.com, Inc. (NASDAQ:AMZN) but snapped up shares in Alphabet Inc (NASDAQ:GOOGL).

Bacon himself is one of Forbes 400 wealthiest people on the 2017 list with a personal wealth of $1.8 billion. Most notably, Bacon worked with hedge fund guru George Soros on dumping the pound before the 1992 currency crisis. He also correctly anticipated the 1987 stock market crash. Now Bacon donates his money to American campaigns (Republicans and Democrats) and various environmental charities including the Moore Charity Foundation.

He developed an interest in finance at a young age- starting his own trading career while still at college. This didn’t stop Bacon from receiving an MBA from the prestigious Columbia Business School. Following his studies, he quickly ascended the trading ranks of Shearman Lehman Brothers to become senior vice president. From here the obvious place was to launch his own fund, Moore Capital, in 1989- which shocked the market with its impressive 85% return in its first trading year. As Bacon once famously said, Moore Capital will deal in “anything that trades”. But the fund saw much lower returns in 2000 of apparently just 2% after Bacon wrongly thought that inflation would increase.

Unfortunately for someone who seeks privacy, Bacon has also been involved in a very public and bitter dispute with clothing tycoon Peter Nygard in the Bahamas. Over 16 legal actions have been filed which according to Vanity Fair include “allegations of activities that include vandalism, bribery, insider trading, arson, murder, destruction of the fragile seabed, and having a close association with the Ku Klux Klan.” In 2010, Business Insider reported that the body of house manager Dan Tuckfield was found in Bacon’s hot tub in the Bahamas. The police concluded that Tuckfield died of natural causes.

Now let’s delve deeper into three of Bacon’s key Q2 stock moves:

Apple Inc.

In Q2, Bacon showed that he isn’t taking any chances with Apple. He slashed the fund’s holding of this key stock from a huge 55%. The reduced Apple holding has a reported value of just $16.56 million. So far these remaining shares have performed well since the last filing date, with a 13.5% gain to-date.

Perhaps Bacon was worried that the stock is looking overvalued. Apple shares have been rising steadily over the year and are now trading at record highs of over $163. The stock is building momentum ahead of the launch of the much-hyped iPhone 8 model. The Wall Street Journal has now reported that the date of the launch has been scheduled for September 12. According to people familiar with the matter, Apple will launch a product-announcement event on this date. The event will feature the iPhone 8 as well as two updated versions of the current iPhone 7.

Research firm IDC has also helped build excitement with its release of a bullish estimates for the new phones. IDC says it expects iPhone shipments to reach 9.1% in 2018 following the release of iPhone 8, 7S and 7S Plus models. According to the research firm, this will be the biggest iPhone shipment growth for the last 2 years. Similarly, Canaccord Genuity’s Michael Walkley says “Our surveys indicate strong consumer interest in and anticipation for new iPhones anticipated to launch in September.” He has a buy rating and bullish $180 price target on the stock.

Interestingly the stock has a Moderate Buy consensus rating from the Street. In the last three months, this breaks down into 25 buy ratings and 9 hold ratings. Meanwhile the average analyst price target of $170.42 stands at a fairly limited upside of 4.6% from the current share price.

Amazon.com, Inc.

Bacon also displaced a surprisingly bearish sentiment on this e-commerce giant. In Q2, Bacon sliced the fund’s Amazon holding by 8.05%. The new holding has a reported value of $52 million. Since the last filing date, the remaining shares have moved slightly lower by 1.44%.

Top RBC Capital analyst Mark Mahaney sees no reason to be bearish. He reiterated his buy rating on AMZN on August 30 with a $1,100 price target (14.5% upside). Mahaney has been busy conducting actual in-store checks after Amazon announced price cuts on select Whole Foods goods. He says the checks reveal that Amazon has kept its word following the closure of the $13.7bn takeover deal: “Amazon didn’t waste any time. In-store price checks… indicate that Amazon is lowering prices on average by 20%-25% across (so far) selected items. Given our sense that WFM typically charges 20%-30% premiums for its produce, we think we’ll see a lot of price-cutting in the near-, medium- and long-term.”

At the same time, Mahaney updated his estimates for the stock in light of the deal closure: “AMZN ’18 Revenue estimate increases 8% to $224B, our ’18 Operating Profit estimate increases 10% to $9.0B & our ’18 GAAP EPS estimate increases 4% to $9.79.” However he does add that one challenge going forward is likely to be limited disclosure by AMZN of WFM’s financial impact.

Overall Amazon has a very bullish outlook according to the Street. The stock has a Strong Buy analyst consensus rating with a $1,170 price target. This translates into impressive upside potential of just over 22% from the current share price. Over the last three months, 31 analysts have published buy ratings on the stock with just 2 hold ratings.

Alphabet Inc

In Q2, Bacon revealed that he is placing his faith in the fortunes of tech giant GOOGL. He ramped up the fund’s holding of the stock by 63% to a holding worth $150 million.

Google has just revealed that it is releasing its own tools for developers to create augmented reality (AR) mobile apps. Augmented reality enables users to visualize virtual objects in the physical world on a screen. These apps will be designed for the Android operating system and place it in direct competition with arch rival Apple. Apple has also been developing its own AR-building tools, called ARKit, which will feature on ‘hundreds of millions’ of iPhones this fall.

Meanwhile Google’s ARCore offering will be released initially on just the Samsung Galaxy S8 and Google’s own Pixel phone. Google says it wants ARCore to be available to a minimum of 100 million users, but did not set a date for a wider release.

We can see from TipRanks that GOOGL has a Strong Buy analyst consensus rating. In the last three months, 30 analysts have published buy ratings on the stock with just 3 analysts going for a hold rating. The average analyst price target of $1,098 translates into a 17.44% upside from the current share price.