Following the departure of its CIO, the hedge fund manager failed to outperform the market in Q4'17. I take a closer look at Viking Global's $16.3 billion portfolio and trading activity below.
From Norway To Wall Street
Ole Andreas Halvorsen is the CEO and co-founder of Viking Global Investors. He was born in Norway where he attended the Norwegian Naval Academy, after which he attended Williams College and Stanford Business School. One of his professors at Stanford described him as one of his “brightest students ever.”
He began his investment career with Morgan Stanley where he worked on mergers and acquisitions. In 1992 he joined Julian Robertson’s hedge fund, Tiger Management Corporation. He served on Tiger’s advisory board and on the supervisory board of the firm’s largest fund.
In 1999, Halvorsen and two other fund managers at Tiger Management, David Ott and Brian Olson, left to start Viking Global Investors. Viking manages long-short global equities funds, a long only fund, and a fund that invests in illiquid stocks and private companies. The firm is based in Greenwich, Connecticut and as of 2017, manages close to $24 billion.
Halvorsen has built a personal fortune of $3.3 billion and uses that money to support causes he believes in. He is a trustee of the Halvorsen Family Foundation and the Sterling and Francine Clark Art Institute.
A Bottom-up Stock Picker
Andreas Halvorsen is a bottom up stock picker and looks for fundamental factors and catalysts when selecting stocks. He encourages analysts to become industry specialists and to get to understand the companies they cover intimately.
In a 2013 interview, Halvorsen said that good management teams “are extremely underappreciated” for their ability to grow market share. He said that when analysing a company, he likes to speak to competitors and suppliers to understand the competitive landscape. He then speaks to the management team to see if their understanding of the competitive environment is similar to his.
His analysts cover about 75 percent of the world’s stocks that average at least $50 million a day in trading volumes. The firm is happy to invest in any sector, though technology, retail and pharmaceutical stocks seem to come up most often. Over the last decade the company has held large positions in most of the large tech stocks like Alphabet Inc Class A (NASDAQ: GOOGL), Facebook, Inc. Common Stock (NASDAQ: FB), JD.Com Inc (ADR) (NASDAQ: JD) and Apple Inc. (NASDAQ: AAPL).
The firm did experiment with credit investing, but reassigned the credit team after its positions dragged the fund's performance down in 2008.
In the case of the long-short funds, long exposure is usually around 150 to 170 percent, while short exposure is 40 to 50 percent. The overall exposure of the portfolio is based on the individual positions, and not on a top-down market view. Viking typically holds much bigger positions in their highest conviction ideas, with the largest ten holdings making up around 40 percent of the fund as seen in my portfolio review below.
Like many hedge funds, Viking struggled between 2015 and 2017 when it was difficult to find stocks to sell short. In 2016, Viking’s long-short fund posted a 4 percent loss, its worst year ever. The long only fund returned 3.9 percent, but also lagged the MSCI world index by 5 percent, also making it the fund’s worst year since inception.
In 2017, Viking returned $8 billion to investors when its CIO, Daniel Sundheim, left the firm. Sundheim personally managed a large portion of the flagship fund, and Halvorsen decided it would smooth the transition if this money was returned to investors rather than being reallocated.
Ben Jacobs and Ning Jin have since taken over as co-CIOs upon Sundheim's departure. Both are long-time portfolio managers at the hedge fund. I take a closer look below at Viking Global's trading activity in Q4'17 while under new leadership.
Viking Global's Largest Holdings
On February 14th, Andreas Halvorsen's firm filed its quarterly Form 13F regulatory filing. I reviewed the filing to gain a glimpse into Viking Global's large portfolio.
Viking Global's stock portfolio totals $16.3 billion according to the latest filing. The list value of stock holdings is up 5.3% when compared to the last quarter. As a benchmark, the S&P 500 was up 6.1% over the same period.
Quarter-over-Quarter Turnover (QoQ Turnover) measures the level of trading activity in a portfolio. The hedge fund's QoQ Turnover for the latest quarter was 27.6%, so the firm was trading a significant percent of its portfolio in Q4'17.
The Ideas section of finbox.io tracks top investors and trending investment themes. You can get the latest data on the holdings discussed below at the Viking Global page. The following table summarizes the firm's largest holdings reported in the last filing:
|Ticker||Name||Holding ($mil)||% Of Portfolio|
|UTX||UNITED TECHNOLOGIES CORP||$760.7||4.7%|
The seven positions above represent 37.4% of the fund's total portfolio. It was not surprising to see the majority of its top holdings in the tech space.
Viking Global's 7 Largest Purchases
I also used finbox.io to find Viking Global's largest buys last quarter. Here's the list of the biggest stock purchases determined by comparing the last two filings:
|Ticker||Name||Purchased ($mil)||% Of Portfolio|
|TWX||TIME WARNER INC||$420.4||2.6%|
|DPZ||DOMINOS PIZZA INC||$321.2||2.4%|
|PE||PARSLEY ENERGY INC||$301.6||3.3%|
|UTX||UNITED TECHNOLOGIES CORP||$227.6||4.7%|
The largest stock purchase for the quarter was Time Warner Inc (NYSE: TWX). Viking Global purchased a new $420.4 million position in the company. The stock now represents 2.6% of the firm's portfolio.
The next largest stock purchase was Anthem Inc (NYSE: ANTM). The investment manager increased its position in the company by $374.4 million with the stock now representing 3.5% of the firm's portfolio.
The third largest stock purchase was NetEase Inc (ADR) (Nasdaq: NTES) which was also a new position. Halvorsen's firm added 983.1K shares worth $339.2 million.
Viking Global's 7 Biggest Sells
Here's the list of biggest position reductions determined by comparing the last two filings:
|Ticker||Name||Sold ($mil)||% Of Portfolio|
|DE||DEERE & CO||$385.7||2.5%|
|FOXA||TWENTY FIRST CENTY FOX INC||$270.2||1.7%|
|RICE||RICE ENERGY INC||$210.4||1.4%|
|BAC||BANK AMER CORP||$185.9||1.2%|
The largest stock sale for the quarter was Alphabet (Nasdaq: GOOGL). Viking Global reduced its position in the company by $508.4 million and the stock now represents 6.4% of the firm's portfolio.
The second largest stock sale was Deere & Company (NYSE: DE). Viking Global exited its $385.7 million position in the company.
Viking Global's Best 1-Month Performance Stocks
To find stocks in the firm's portfolio that may be popular at the moment or have tailwinds moving forward, I ranked the firm's holdings by price appreciation. The ranking table below lists the stocks in Viking Global’s portfolio by stock price performance over the last 30 days.
|Ticker||Name||Price 1-mo Ago||Current Price||% Change 1-mo|
|PE||PARSLEY ENERGY INC||$23.36||$26.82||14.8%|
|CRM||SALESFORCE COM INC||$109.57||$124.34||13.5%|
|PGR||PROGRESSIVE CORP OHIO||$52.87||$58.59||10.8%|
|RSPP||RSP PERMIAN INC||$37.57||$40.97||9.0%|
|EDIT||EDITAS MEDICINE INC||$35.07||$38.15||8.8%|
Shares of Netflix, Inc. (Nasdaq: NFLX) have increased by 22.4% over the last month. Investors may want to take a closer look at the stock, especially with 'smart money' backing it.
Managers with more than $100 million in qualifying assets under management are required to disclose their holdings to the SEC each quarter via 13F filings. Qualifying assets include long positions in U.S. equities and ADRs, call/put options, and convertible debt securities. Shorts, cash positions, foreign investments and other assets are not included. It is important to note that these filings are due 45 days after the quarter end date. Therefore, Viking Global's holdings above represent positions held as of December 31st and not necessarily reflective of the fund's current stock holdings.
However, most can agree that with thousands of stocks traded on U.S. exchanges, doing thorough research on each one is nearly impossible for smaller investors. Leveraging the resources of the largest hedge funds on Wall Street can be a powerful way to narrow down the list.
Author: Andy Pai
Expertise: financial modeling, mergers & acquisitions
Andy is also a founder at finbox.io, where he's focused on building tools that make it faster and easier for investors to do investment research. Andy's background is in investment banking where he led the analysis on over 50 board advisory engagements involving mergers and acquisitions, fairness opinions and solvency opinions. Some of his board advisory highlights:
- Sears Holdings Corp.'s $620 mm spin-off via rights offering of Sears Outlet, Hometown Stores and Sears Hardware Stores.
- Cerberus Capital Management's $3.3 bn acquisition of SUPERVALU Inc.'s New Albertsons, Inc. assets.
Andy can be reached at email@example.com.
As of this writing, I did not hold a position in any of the aforementioned securities and this is not a buy or sell recommendation on any security mentioned.