A gaggle of top hedge fund managers got together in Manhattan yesterday to offer some of their best stock picks. Tech was noticeably absent, but that’s probably a good thing.
The annual Ira Sohn gathering raises money for pediatric cancer research while also giving investors plenty of food for thought. The lineup of famous names never fails to entertain, but the track record of the touted stocks often leaves much to be desired.
So it may be a good thing that none of the investing stars recommended buying any real tech stocks of note. The managers generally only publicize positions after they’ve finished buying. No point in driving up the price while still accumulating a position.
Or, as Jim Grant of Grant’s Interest Rate Observer quipped: Successful investing is about having people agree with you … later.
Investors won’t always admit to the lengths they go to keep their real picks secret, but David Einhorn, one of the speakers at the Sohn event and the manager of Greenlight Capital, recently pressed the Securities and Exchange Commission to keep secret a position in Micron Technologies (MU) he was required to disclose under current law.
“Mirror trading by ‘copycats’ could lead to unwarranted volatility and inflated prices in the security,” Greenlight told the SEC in a November 14, 2013, letter, which was obtained by the New York Times via a Freedom of Information Act request. A week after making the request, Einhorn disclosed the pick at another charity hedge fund event.
At past Sohn conferences, Einhorn has favored buying big tech stocks such as Apple (AAPL), Microsoft (MSFT) and Micron. But this year, he was all about betting against overvalued stocks, especially so-called cloud service providers. He singled out Athenahealth (ATHN), a medical records cloud services provider, as a good short candidate. Proving the power of his words, as he had told the SEC, Athenahealth shares dropped 13% on Tuesday.
Another of tech’s biggest hedge fund investors had even less to say.
Philippe Laffont, who runs the $9 billion firm Coatue Management, was one of the biggest investors in high-flying tech stocks last year. He ended 2013 with positions in Amazon (AMZN), Baidu (BIDU), Facebook (FB), LinkedIn (LNKD), Netflix (NFLX), Pandora (P), Tesla Motors (TSLA), Workday (WDAY) and Yelp (YELP). This was a superb strategy for last year and a horrible one for the past two months.
There’s no one way to know if Laffont sold out of his tech stocks, but he wasn’t even willing to discuss them Monday, saying he wouldn’t have time to defend high-growth stocks in his allotted 15-minute segment. Instead, Laffont touted Liberty Global (LBTYA), a European telecomminucations company owned by U.S. cable pioneer John Malone. The stock has risen only 13% over the past year. “You have an awesome business at an attractive price,” he said.
Chris Shumway, another manager like Laffont who got his start working for legendary manager Julian Robertson, referred obliquely to the tech carnage. Shumway, who booted outside investors from his fund a few years back, no longer discloses his positions. The former high-flyers fell "because they have no short-term valuation support," he said. "They have long-term valuation support."
But there were no more details and no names. What was left unsaid may have been more telling.