It has been almost a year since the last annual Sohn Conference held in New York, and we thought it would be interesting to take a look at how some of the stock pitches presented there have performed since. Today, we are going to take a look at Light Street’s Glen Kacher’s best idea from 2018 Sohn Conference, but before we move on to the stock, let’s present the fund and its performance briefly.
Light Street Capital Management is a Palo Alto, California-based investment management firm that was launched nine years ago by Glen Kacher, who previously sharpened his investment skills at Tiger Management, where he was a consultant. Prior to Tiger Management, Glen Kacher was a managing director at Integral Capital Partners where he managed investments in technology sectors such as information security, internet, software, and computer services. Naturally, as he accumulated vast knowledge of the tech industry, his hedge fund, Light Street, mainly focuses on tech and media public companies. Glen Kacher earned his B.S. in Commerce with Distinction from the University of Virginia’s McIntire School of Commerce, an M.B.A. from Stanford University’s Graduate School of Business.
Since its inception in 2010 through December 2017, Light Street has posted annualized net returns of 19.8%. In 2017, it gained an amazing 38.6%, mostly thanks to its short picks, and last year through October it gained a fantastic 53%. Even though we couldn’t obtain the full year 2018 return figures for the fund, we managed to find a few sources that say the fund posted positive double-digit returns once again and in spite of 2018 very volatile market environment. However, we have tracked the data that its Light Street Mercury Master fund had lost 9.2% in October, due to the Nasdaq 100 Index losing 8.7% in the same month and consequently taking down technology stocks with it. The same fund also posted gains of 10% last year through October. According to a few sources, Light Street Capital managed around $1.1 billion in assets in October 2017.
At the Sohn Conference held in April 2018, Glen Kacher presented Palo Alto Networks (NYSE:PANW) as his best stock pitch at the time. This is a Sant Clara, California-based multinational cybersecurity company that offers its professional solutions in the form of firewalls and cloud-based extensions for the purpose of covering different security aspects. Glen Kacher shared his opinion that this was an attractive investment opportunity not only because the company was performing well, but also because of a growing need for cybersecurity companies. Namely, cybercrime is on the rise, mainly because of the countries that are in the need of money and are actually praising its cyberhackers, which is why type of companies like Palo Alto are expected to further prosper. Glen Kacher also said that because the IT industry is constantly moving forward and expanding, and it is facing a shift from “traditional enterprise on-premise setups, to hybrid cloud and enterprise computing networks where data travels over a lot of different clients and a lot of different kinds of networks”, Palo Alto, which is one of the best in this business has the opportunity to broaden its franchise to the cloud model and the hybrid enterprise.
He also stated that even though cybercrime is on the rise, we are not too late and that huge progress in dealing with this type of crime has been made in the last 5 years. More specifically, the time it usually takes for the businesses or governments to catch the hackers when they have first got into their network and to stop them has been reduced to 100 days, instead of 400. Nevertheless, as Glen Kacher said in spite of the evidenced progress, “100 days for criminals to be in your computer network is 100 days too many”, and that is why companies like Palo Alto are expected to thrive in the future.
So, how much Palo Alto’s stock has gained since the conference?
Before we check that, you may want to look at the Glen Kacher interview for more details on his presentation in the video below.
Insider Monkey was at this Sohn Conference, but we weren’t much impressed with Glen Kacher’s stock pick, instead, we were rather more intrigued by another stock that was presented by EcoR1 Capital’s Oleg Nodelman - Ascendis Pharma A/S (NASDAQ:ASND), a clinical stage biopharmaceutical company. After the conference, we recommended this stock to our premium subscribers and then once again in October (when the stock price was still low) in a free sample issue of our monthly newsletter. What happened since then? Well, Palo Alto Networks (PANW) gained 26.13% since the conference, having a closing price of $242.52 on April 10th, which even though it is not bad at all, it is still much lower than 90.5% Ascendis Pharma A/S (ASND) gained in the same period.
Our mission is to identify promising (and also terrible) hedge fund stock pitches and share them with our subscribers, which we managed to perform once again. We launched a long activist investing strategy in our monthly newsletter 2 years ago. This strategy’s stock picks returned 61% in 2 short years, vs. a gain of 21% for the S&P 500 Index ETF (SPY).
We have also been very successful at identifying stocks that will decline even in a bull market. We launched our short strategy a little more than 2 years ago and share our short stock picks in our quarterly newsletter. This strategy’s picks lost 27.5% since then, vs. a gain of 25% for the S&P 500 Index. This means our short strategy actually outperformed the market by 52.5 percentage points (let us know if you don’t understand how the outperformance for a short strategy is calculated).
Three weeks ago our monthly newsletter identified another undervalued stock that is expected to increase its earnings by more than 10% annually and trades at only 10 times its 2019 earnings. We expect this stock to return 60% in the next 12-24 months (it already returned 9% in 3 weeks). Email us if you are interested in this stock or subscribe here. We take a closer look at hedge funds like Light Street in order to identify their best and worst ideas.
This article was originally published at Insider Monkey.