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Julian Robertson's Top 1st-Quarter Trades

Julian Robertson (Trades, Portfolio)'s Tiger Management recently disclosed its portfolio updates for the first quarter of 2020, which ended on March 31.


Often called the "father of the hedge fund," Julian Robertson (Trades, Portfolio) founded Tiger Management in 1980, turning an initial $8 million into over $22 billion by the late 1990s. After losing 4% in 1998 and 19% in 1999 as rivals rode the dot-com bubble to its peak, he shut down the fund in 2000, and Tiger Management now only manages money from internal sources (mainly Robertson's personal wealth). Robertson's long-short strategy is based on investing in the best companies and shorting the worst companies, and he is known for "betting the farm" on his best ideas. Robertson also mentored a group of young hedge fund managers known as the "Tiger Cubs," a group that includes Andreas Halvorsen (Trades, Portfolio), Chase Coleman (Trades, Portfolio), Philippe Laffont (Trades, Portfolio), John Griffin (Trades, Portfolio), Lee Ainslie (Trades, Portfolio) and Steve Mandel (Trades, Portfolio).

Robertson's top buys for the quarter were AerCap Holdings NV (NYSE:AER) and Salesforce.com Inc. (NYSE:CRM), while his top sells were Qualcomm Inc. (NASDAQ:QCOM) and Adobe Inc. (NASDAQ:ADBE). The overall turnover rate was 20%.

AerCap Holdings

Robertson invested in 1,094,800 shares of AerCap Holdings NV, impacting the equity portfolio by 8.38%. During the quarter, shares traded for an average price of $49.94.

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AerCap Holdings is the largest independent aircraft leasing company in the world. Based in Dublin, Ireland, the company leases over 1,000 aircraft to 200-plus customers in approximately 80 countries. Airlines are able to lease the company's planes at a lower upfront cost than buying a new aircraft.

On May 26, shares of AerCap Holdings traded around $30.57 for a market cap of $3.96 billion and a price-earnings ratio of 3.43. According to the Peter Lynch chart, the stock is trading below its intrinsic value.

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GuruFocus gives the company a financial strength rating of 3 out of 10 and a profitability rating of 8 out of 10. The Altman Z-Score of 0.74 indicates that the company could be in danger of bankruptcy within the next two years, but the interest coverage ratio of 1.93 and current ratio of 3.31 suggest sufficient short-term liquidity. The operating margin of 52.68% is higher than 98.27% of competitors. The three-year revenue growth rate of 10.3% suggests steady top-line growth.

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Salesforce.com Inc.

The investor established a new 57,500-share holding in Salesforce.com after selling out of a previous investment in the company in the fourth quarter of 2018. The trade had a 2.78% impact on the equity portfolio. Shares traded for an average price of $171.77 during the quarter.

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Salesforce.com is a business software company based in San Francisco. Its namesake platform provides customer relationship management, support, marketing automation, analytics and application development tools to customers.

On May 26, shares of Salesforce.com traded around $176.52 for a market cap of $159.1 billion and a price-earnings ratio of 882.6. The Peter Lynch chart shows that this valuation is extremely high compared to recent earnings, but is in line with the median historical valuation for 2019 earnings.

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GuruFocus gives the company a financial strength rating of 7 out of 10 and a profitability rating of 5 out of 10. The cash-debt ratio of 1.35 is lower than the industry median of 2.26, but the Altman Z-Score of 4.94 indicates that the company is likely safe from bankruptcy. The operating margin of 2.71% is lower than the industry median of 4.84%, while the weighted average cost of capital is higher than the return on invested capital, indicating low profitability.

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Qualcomm

The guru sold out of the firm's 188,300-share investment in Qualcomm, which had a -4.72% impact on the equity portfolio. During the quarter, shares traded for an average price of $82.41.

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Qualcomm is a multinational semiconductor company based in San Diego. Its main focus is on communications technology, particularly for use in smartphones, 5G and artificial intelligence. It is perhaps best known for its widely used cellular modems.

On May 26, shares of Qualcomm traded around $78.02 for a market cap of $87.77 billion and a price-earnings ratio of 23.08. According to the Peter Lynch chart, the stock is trading slightly above its intrinsic value.

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GuruFocus gives the company a financial strength rating of 5 out of 10 and a profitability rating of 8 out of 10. The cash-debt ratio of 0.62 is lower than 67.14% of competitors, but the Altman Z-Score of 3.81 indicates that the company is not in danger of bankruptcy. The operating margin of 32.49% is higher than 95.70% of competitors, and the ROIC surpassed the WACC again in the most recent full fiscal year, indicating overall profitability.

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Adobe

Robertson reduced the position in Adobe by 33,700 shares, or 93.09%, leaving a total holding of 2,500 shares. The trade had a -3.16% impact on the equity portfolio. Share traded for an average price of $342.56 during the quarter.

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Adobe is a San Jose, California-based computer software company. It offers a suite of creative design-focused software products for photo editing, vector graphic illustration, website design, video editing, 3D modelling, social media, etc.

On May 26, shares of Adobe traded around $376.63 for a market cap of $181.71 billion and a price-earnings ratio of 57.06.

GuruFocus gives the company a financial strength rating of 7 out of 10 and a profitability rating of 9 out of 10. The interest coverage ratio of 23.46 is only slightly lower than the median of 25.26%, while the Altman Z-Score of 12.55 indicates that the company is safe from bankruptcy. With a high operating margin of 30.1%, the company has grown its revenue and net income significantly in recent years.

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Portfolio overview

As of the quarter's end, Tiger Management held shares of 46 stocks in an equity portfolio valued at $298 million. The top holdings were Adaptive Biotechnologies Corp. (ADPT) with a 10.41% portfolio weight, Blackstone Group Inc. (BX) with 9.11% and Microsoft Corp. (MSFT) with 9.03%.

In terms of sector weighting, the firm was most invested in technology, communication services and financial services.

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Disclosure: Author owns no shares in any of the stocks mentioned. The mention of stocks in this article does not at any point constitute an investment recommendation. Portfolio updates reflect only common stock positions as per the regulatory filings for the quarter in question and may not include changes made after the quarter ended.

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This article first appeared on GuruFocus.