In Q2, hedge fund guru Noam Gottesman made some intriguing portfolio shifts to GLG Partners’ holdings. The fund, which has assets under management of over $30 billion, showed a bullish attitude to volatile semiconductor stock Advanced Micro Devices Inc (NASDAQ:AMD), while swapping Amazon.com Inc (NASDAQ:AMZN) for Chinese rival Alibaba Group Holding Ltd (NYSE:BABA).
Gottesman, who has a personal wealth of over $2 billion, co-founded GLG Partners back in 1995. In fact, the fund was initially part of the now defunct Lehman Brothers but was spun off completely in 2000. Following a degree at Colombia University, Gottesman climbed the ladder at Goldman Sachs until he reached the top position of Executive Director of Goldman Sachs International. Following the sale of GLG Partners to the Man Group for $1.6 billion in 2010, Gottesman became non-exec chairman of the GLG fund which describes itself as “a leading discretionary investment manager offering absolute return and long-only strategies across asset classes, sectors & regions.”
Interestingly, Gottesman, who also heads investment firm Toms Capital, has now become something of a consumer goods tycoon. He owns a diverse range of food-related businesses, including Michelin-star restaurants, over 200 Burger King franchises and now Europe’s largest frozen foods business- Iglo Foods. His company, Nomad Foods, picked up Iglo for a cool £1.9bn two years ago. The famously private Israeli-American, an ex of actress Lucy Liu, famously sold his London mansion to Lakshmi Mittal for £117m during the financial crisis.
Now let’s dig down and look at these three key portfolio moves:
Advanced Micro Devices Inc
In Q2, Gottesman placed his faith in AMD- increasing the fund’s holding by a whopping 184%. GLG Partners now has 960,639 AMD shares valued at $11.989 million.
AMD has just launched its long-anticipated Radeon RX Vega series graphics cards on August 15. The $499 cards, designed for extreme gamers, has so far received very positive reviews. However, Digitimes has now reported that retailers are struggling to get their hands on the cards because of low packaging yield rates.
According to sources from the upstream supply chain, “Vega’s design of integrating high bandwidth memory (HBM) into the GPU has significantly raised the difficulty of the related packaging process.” As a result, vendors are seeing shortages that could last until October. Interestingly this shortage gives AMD rival Nvidia some breathing space, and as a result Nvidia has now allegedly rescheduled its mass shipments of its Volta-based GPUs from the end of 2017 to Q1 2018.
Meanwhile, the stock has a cautiously optimistic outlook from the Street. In the last three months, AMD has received 9 buy, 9 hold and 3 sell ratings- giving it a Moderate Buy analyst consensus rating. We can also see that AMD has a 12-month average analyst price target of $14.37 which translates into 15.61% upside from the current share price.
Alibaba Group Holding
Gottesman demonstrated confidence in the future of this Chinese e-commerce stock. He ramped up the fund’s BABA holding in Q2 by 69% to 202,715 shares.
Fast-growing Alibaba is the hot stock of the moment for hedge fund managers. Based on the activity of 40 hedge funds in the last quarter, the stock demonstrates a Very Positive hedge fund sentiment. Indeed, TipRanks shows that hedge funds increased BABA holdings in Q2 by a net total of 20.2 million shares. Hedge fund guru Frank Sands has the biggest Alibaba position at $2.3bn – followed closely by Theofanis Kolokotrones.
And Alibaba’s popularity certainly makes sense if you listen to top MKM Partners analyst and managing director Rob Sanderson. Sanderson believes that Alibaba is the “top pick among Internet mega-caps” with “the best fundamentals of the group.” He has just reiterated his BABA buy rating with a new $220 price target- 28% upside from the current share price. The $43 price-target raise is to reflect a “50 percent organic growth in the segment, strong secular trends, dominant market position and [a] 60-percent margin while funding significant investments” according to Sanderson.
Like the ‘Smart Money’ the Street is also bullish on Alibaba- in fact the stock has received 17 back-to-back buy ratings in the last three months. The average analyst price target of $186.56 comes in at an 8.63% upside from the current share price of $171.74.
In with Alibaba, but out with Amazon… In Q2, Gottesman showed a bearish sentiment towards e-commerce giant Amazon. He slashed the fund’s holding in AMZN by 21% to 30,657 shares. The holding, which is valued at $29.6 million is now equivalent to about 1.64% of the total portfolio.
In fact, Gottesman isn’t the only one feeling slightly skeptical. Five-star Raymond James analyst Aaron Kessler reiterated a rare Amazon hold rating on August 25. Kessler says he is “positive on Amazon’s growth outlook,” but maintains that the shares are “fairly valued at current levels.” Amazon stock is trading at $945 up from $771 year-to-date.
The rating came as a response to the announcement that Amazon’s $13.5 billion acquisition of Whole Foods has been approved by the Federal Trade Commission. Amazon says it will now slash grocery prices for selected ‘best-selling staples’ in Whole Food stores. Kessler, who says that these announcements are ‘in-line with our expectations’ has a strong track record on Amazon stock with a 79% success rate and 17% average return spread across his 19 AMZN ratings.
Overall the Street is very positive on Amazon. The stock has a Strong Buy analyst consensus rating with 30 buy ratings and just 2 hold ratings in the last three months. In terms of price target, analysts are predicting on average sizeable upside potential of 25% for Amazon over the next 12 months.