Viking Global, founded by Andreas Halvorsen, closed its Viking Long Fund to new investments this year. The fund managed a $4.6 billion fund until the end of Q1. Halvorsen, who previously worked with Julian Robertson at Tiger Management, has not had equal luck in his long and short portfolio this year. Viking Long Fund was up 12.6% in the first half of the year whereas Viking Long/Short Fund managed only +7.2% in the same period.
Viking Global’s short investment thesis
In making short picks, Viking Global’s investment process consists of finding companies that are endangered by extinction, meaning that their technology is getting old. The fund also looks for companies which have uncompetitive cost structures and inferior products. In Viking’s investment thesis, the fund states that poor managements and a weak business strategy also put companies on their bearish radar.
Some of the short positions of the fund that are known to us are Germany-based K S AG (ETR:SDF) (FRA:SDF), which is a chemicals company with exposure in foods, pharmaceuticals and most importantly fertilizers. K+S processes magnesium and potassium based salts and is currently facing serious heat from the potential breakup of the potash trade network. Like others, Viking did not jump aboard the shorting bandwagon when the potash industry came under pressure, although the fund disclosed a short in the company in April of this year. Viking’s short bet in K+S equals 4.2% of outstanding shares, the stock is down 47% to date.
Shorts in Nokia, Kone Corp
Viking Global was also betting against Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) for a long time, but exited the position after the Finnish company announced its sale of the handset business Microsoft Corporation (NASDAQ:MSFT). There was of course no reason to stay short on Nokia once the basic bearish thesis went out of the equation, so Viking exited the short bet in the beginning of September and from the looks of it lost on this one.
The fund is also betting against another Finnish company, KONE Corporation (HEL:KNEBV), which makes escalators. Viking’s short amounts to 1.2% of the company’s shares. The hedge fund recently decided to step up its direct or indirect short exposure in China. Kone has active contracts in China and recently won another contract in Kyle Field Stadium in College Station, Texas to install escalators. Shares of Kone are up 14% to date.
While picking stocks to short, Halvorsen also looks for companies that are actually cyclicals but perceived as growth companies. Viking Global also noted that companies whose business is eroding due to competition that they cannot handle and are facing material slowdown can also be targets of short positions.
Viking Global’s long investment process
In making long investments, Viking Global picks up companies that show consistent earnings growth and have an edge in the business against competitors. The fund also likes companies that are undergoing a restructuring plan and are in the process of turning around their business under focused management. The fund also looks for companies that have consistent cash flow and engage in acquisitions and share buybacks.
Viking Global’s largest publicly disclosed holdings are in Time Warner Inc (NYSE:TWX), up 50% year to date, Capital One Financial Corp. (NYSE:COF) up 23%, Comcast Corporation (NASDAQ:CMCSA) (NASDAQ:CMCSK) up 30%, Intuitive Surgical, Inc. (NASDAQ:ISRG) down 22% and Michael Kors Holdings Ltd (NYSE:KORS), which has gained 57% through the year.