2 Tech Stocks Loved By This Tiger Cub
In the world of hedge funds, which is not as secretive as it seems, millionaire money managers place bets on a variety of stocks, and we would be lying if it weren’t a bit overwhelming to follow them all. One strategy that can be used by time-strapped investors is to mimic the holdings of one specific fund, focusing on a few top stock picks. A great fund to follow is Chase Coleman’s Tiger Global Management, which has returned an average of 21 percent per year since 2001. Even though he is only in his mid-thirties, Coleman has gathered quite the following, managing just under $6 billion in assets. One interesting fact about Coleman is that he is considered the most successful of the “tiger cubs” – protégés of Julian Robertson’s Tiger Management fund. Another tidbit: Coleman also has a penchant for technology stocks, particularly the two mentioned below.
Yandex NV (NASDAQ: YNDX)
With 60 percent of the Russian search engine market share, Yandex serves a community of 56 million dedicated users, and is the most popular website in the country. Here’s a great walkthrough of their site. On a global scale, the company is the fifth largest of its kind, behind the likes of Yahoo (NASDAQ: YHOO) and Google (NASDAQ: GOOG). One advantage that the company does have over these two titans is its algorithms are able to recognize distinctive inflections in the Russian language that American systems are simply unable to understand. Since its U.S. IPO last spring, the stock has been quite the bear, shedding around 28 percent of its value.
Despite this decline, Yandex has grown its annualized revenues (50.7%) and earnings (64.0%) quite nicely post-recession, while making a bevy of in-house and acquisitive innovations. The most notable is the company’s venture into the streaming music market, which we’ve covered heavily in the past. Yandex has also recently joined forces with its Russian competitor Rambler – a move that should help out in the advertising arena.
From a valuation standpoint, YNDX is trading at a Price-to-Earnings Growth ratio of 0.6, which is below GOOG (0.8) and YHOO (1.7). Traditionally, any figure below 1.0 signals undervaluation, and to be below analogous competitors is an added bonus. In the first quarter of this year, Yandex beat the Street’s earnings expectations, reporting a 53 percent jump year-over-year. By the end of 2012, analysts are forecasting an EPS of $0.79 a share, up from the $0.57 it reported in 2011. If this consensus holds, shares of YNDX should eclipse $25 by year’s end; they currently trade in the $18 range.
Priceline.com (NASDAQ: PCLN)
Priceline.com is a globally focused online travel booking company that has seen its shares skyrocket in recent months, returning 38.2 percent year-to-date. Due to recent growth in the Asian and European leisure industries, PCLN has a clear advantage over its primary competitor Expedia (NASDAQ: EXPE), and even in a slowed economic recovery, Priceline sports impressive 3-year average annual revenue (32.2%) and EPS (76.7%) growth rates. Now, there are a few concerns regarding its valuation. Currently, shares of PCLN are trading at P/E (29.2X) and P/CF (26.5X) ratios way above the industry averages of 19.8X and 9.4X respectively. When delving a little deeper, however, we can see that the company is trading at undervalued PEG (0.9) and PCFG (0.2) ratios. The computation of the PCFG ratio – aka Price-to-Cash Flow Growth – is exactly the same as the PEG. Here’s a refresher course on these types of metrics.
So, with Priceline we have a stock that has seen its fundaments experience ridiculous growth in recent years, and it appears that investors have yet to “catch up” to that growth. If the company hits on its year-end earnings target of $29.94 a share, it should place more upward momentum on the stock, meaning a breakout above $750 is very possible. The stock currently trades near $650 after flirting with this price range in April. WealthLift’s Sentiment Index also rates PCLN as a strong buy, with 88.89 percent of the community’s users placing an “overperform” rating on the stock.
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Disclosure: The author has no holdings in the stocks mentioned in this article and has no plans to initiate any positions within the next 72 hours. He does, however, have the intention of rating these stocks on WealthLift.com, a social media website where investment ideas are shared openly and free.