Hedge fund manager Philippe Laffont has made some intriguing trades in the fourth-quarter by adding a new position in controversial automaker Tesla Inc (NASDAQ:TSLA) and dramatically upping his Fitbit Inc (NYSE:FIT) position. “Tiger cub” Laffont (so named because he is one of several big names who once worked for the legendary Julian Robertson’s Tiger Management fund) also initiated a new position in Apple Inc. (NASDAQ:AAPL), the world’s largest tech company by total assets.
Laffont is founder and CEO of the $8.44 billion fund Coatue Management LLC. The fund has been generating striking returns in recent years with a very impressive 30.32% return in 2016 and an annualized return over the last three years of 18.48%. In fact, if we look at the fund’s measured performance (89.1%) we can see that the fund has outperformed both the S&P 500 (81.8%) and the average hedge fund portfolio (51.7%). All of this adds up to give Laffont a four-star ranking on financial accountability engine TipRanks.
So what is driving the fund’s success? The fund utilizes a long/short strategy with 54% of the fund invested in the tech sector: Facebook, Nvidia and Alphabet are three of the fund’s biggest holdings. All of these stocks have driven high returns, with chipmaker Nvidia’s stock price shooting up from $31 back in February 2016 to its share price of $110 today. Similarly FB, which is now trading at $136 has added about $30 to its stock price over the year.
Bearing this in mind let’s now delve into three of Laffont’s key Q4 trades, as revealed by 13F forms filed with the SEC:
Laffont initiated a new position in electrical carmaker Tesla with the purchase of 39,643 shares which have a reported value of $8.47 million. Since the last filing TSLA share prices have soared 27.99%. However the consensus analyst rating on the stock is hold with the average analyst price target now representing a -21.56% downside from the current share price of $273.51. Analysts are concerned that the rally in shares was overblown as, according to top UBS analyst Colin Langan there was “no fundamental reason for the run-up.” He reiterated his sell rating with a $160 price target on Feb 16 saying that “We remain cautious with expected accelerated cash burn ahead of the Model 3 launch … [and] negative earnings revisions with the inclusion of SolarCity.”
Tesla has just announced that its mass-market Model 3 sedan is on track for volume production by September of this year. CEO Elon Musk said that no capital needs to be raised for the Model 3 but “it may get very close to the edge.”
Laffont made a substantial addition of 230% to the fund’s position in wearable device maker Fitbit. His 8.2 million shares have a reported value of $60.5 million. However, since the last filing the shares have dropped by -19%. The market is also cautious on the outlook for Fitbit with an analyst consensus rating of hold although the price target represents a slightly more positive 7.65% upside from the current share price of $5.88.
Fitbit, which develops fitness trackers, saw a disappointing holiday season capped off with weak projections for the year ahead. The company reported its first a fourth-quarter loss on low sales and is now predicting a full year loss of between 22 cents and 44 cents per share on revenue of $1.5 billion to $1.7 billion.
As part of the earnings release, Fitbit revealed that it paid $15 million for Vector Watch and $23 million for smartwatch startup Pebble. This was much lower than the $34-40 million that the market had expected. Pebble ran a record-breaking crowdfunding campaign but was forced to sell at a low price once banks lost confidence, according to Business Insider.
In Q4, Laffont added a new position in Apple with 3.19 million shares worth close to $370 million. The shares have already gained 18.9% since the last filing. Laffont isn’t the only hedge fund manager who has made a move to Apple; in Q4 Warren Buffett, the “Oracle of Omaha” added 276% to his now $6 billion AAPL position. Not surprisingly therefore the hedge fund sentiment on Apple is very positive with hedge funds increasing their Apple holdings by 41.8 million shares in the last quarter. This also mirrors the bullish strong buy outlook on Apple from analysts who are confident that demand for the much-hyped iPhone 8 will take Apple to new heights.
On February 21, 4-star Morgan Stanley analyst Kathryn Huberty rated Apple a buy with a $154 price target based on strong predicted iPhone sales in China of $260 million. In fact, the analyst anticipates China will “contribute outsized growth” in the fiscal year of 2018 due to 1) a larger base of users requiring upgrades and 2) Apple taking users from local Chinese smartphone brands.