Tiger Global management isn’t trying to hide from their firm’s poor first quarter performance. In their quarterly letter to investors dated April 29, which was reviewed by ValueWalk, they start out their discussion of the firm’s portfolio’s with this simple sentence: “Tiger Global had a very poor first quarter.” Of course they’re not alone in this respect as the first quarter was absolutely brutal to most major hedge funds, and Derek Jeter could not help Chase Coleman escape a similar fate.
Tiger Global funds’ losses all in the double digit percentages YTD
Tiger Global’s flagship Onshore fund declined 22% (gross) in the first quarter and is now down 22% for the year, although the fund has posted a compound annual growth rate of 23.5% since inception. The Offshore fund declined 22% (gross) in the first quarter and is down 16.3% so far year to date, although it has a 20.1% compound annual growth rate since inception.
The Tiger Global Long Opportunities Onshore fund tumbled 14.4% in the first quarter and is down 14.4% year to date, although it has a 7.3% compound annual growth rate since inception. The firm’s Offshore Long Opportunities fund declined 14.4% in the first quarter and is down 13% year to date but has a compound annual growth rate of 7.1% since inception.
“Mistakes in exposure management and stock selection contributed to our underperformance, as did a number of material stock price moves against us where we believe our theses will ultimately play out over the long term,” Tiger Global’s first quarter letter reads.
Shorts, longs both perform poorly
[drizzle]The firm said it let ride a number of longs like Amazon and JD.com which performed very well in the fourth quarter even though there were some areas in which the companies became less attractive. They added a number of new positions during the first quarter as well, with The Priceline Group being the largest addition. That turned out to be a horrible choice today as the company’s stock tumbled on the back of the weak guidance in its earnings report this morning.
They added that they added more short exposure than long during the quarter, resulting in more gross exposure but less net exposure. Their short positions increased while their longs declined, and because of the higher average gross exposure, Tiger Global sustained a bigger quarterly loss.
The firm’s management also lamented their decision to invest in Tableau Software, which tumbled following its fourth quarter earnings report.
“The company’s growth rate decelerated significantly faster than we thought possible amidst sales force execution issues and a tougher competitive and capital spending environment,” the firm said. “In hindsight, it is not clear we were being offered good enough odds given the volatility of the business to warrant the exposure we had.”
Tiger Global remains committed to investment themes
The firm continues to favor consumer Internet stocks for longs and said this theme makes up about a third of its equity holdings. Among Tiger Global’s holdings here are Amazon, JD.com, and Netflix, in addition to Priceline. The firm also likes payment processing stocks as longs with positions including Fleetcor, and Internet service providers like Charter Communications.
For shorts, Tiger Global likes “retail and consumer, technology, frauds and fads.”
“While several of our shorts went against us during this period, we believe the resulting divergence between stock prices and fundamentals has put us in a position to profit in the future,” the firm’s letter states. “In fact, we have increased our exposure in several ideas as the reward-to-risk ratio has improved.”
Specifically regarding shorts the firm stated:
On the short side, we continue to see compelling opportunities in a number of areas, including retail and consumer, technology, frauds and fads. The sharp sell-off in January and February was followed by a substantial reduction in short exposure in the broader markets. While several of our shorts went against us during this period, we believe the resulting divergence between stock prices and fundamentals has put us in a position to profit in the future. In fact, we have increased our exposure in several ideas as the reward-to-risk ratio has improved.
Retail and consumer stocks are their most-shorted theme, particularly retailers affected by mall foot traffic.