In the convergence of media and technology, there are investing opportunities that are occurring as a structural shift is underway. The potential to catch the next big stock that becomes a household content provider – finding the equivalent of the next ABC, CBS or NBC broadcasting network – amid a reasonably fragmented technology landscape that includes mobile, social, cloud computing and Internet of Things convergence is a challenge that could lead to significant wins and losses. It is in this realm that Light Street Capital, manager of the Light Street Halogen fund, is off to one of its best starts in history.

Amazon largest Light Street holding

Light Street Portfolio Manager Glen Kacher has a long history in value investing. Starting at Tiger Management 23 years ago and working at Integral Capital Partners for 13 years, he made a name for himself as a premium technology value investor. According to a letter to investors reviewed by ValueWalk, Kacher is up 28.5% year to date – the numbers are a testament to his stock selection methodology.

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Light Street Capital

 

Kacher and his team like shifting market environments where macro technological changes are impacting and reshaping business models. To that end, the fund’s focus is on the intersection of technology and media, where disruption and Long / Short opportunities offer significant returns potential.

Among the stocks the fund has been buying include Microsoft, its 17th largest portfolio holding as of the end of 2016 and Amazon, a stock whose exposure was reduced to end 2016. Amazon is nonetheless a major holding, the fund’s third largest, with nearly $56 million in exposure.

Shorts cost Light Street Capital small amount in 2017 with long exposure the big winner

With nearly $930 million under management, currently has a portfolio tilt towards the eCommerce sector, which represents 35.6% of holdings, while social media represents 19.4%. Mobile and Cloud computer sectors represent mid-teen allocations for the fund that typically runs its Long / Short ratio net long by 20% to 60%.

The number of long stocks is generally equal to the number of shorts, meaning that the short concentration is diffuse, pointing to a portfolio management schism. Some Long / Short practitioners maintain that accurately finding short stock picks is much more difficult amid a beta market bull run and prefer to concentrate their holdings. Light Street disagrees.

To date shorts have cost the portfolio a relatively modest -3% of performance given that long exposure is up 39.8%.