February 16, 2016 / 10:43 PM / 2 years ago

Some hedge funds avoid bite from 'FANG' stocks

BOSTON/NEW YORK (Reuters) - A number of hedge funds got out of a group of soaring technology stocks late last year just before they fell sharply to start 2016.

Among those to sell “FANG” stocks - as Facebook (FB.O), Amazon (AMZN.O), Netflix (NFLX.O), and Alphabet Inc (GOOGL.O) (formerly called Google) collectively have come to be known - in the fourth quarter were Senator Investment Group, Samlyn Capital and Nokota Management, new regulatory filings released on Tuesday show.

Earlier last year, gains in Facebook, Amazon, Netflix and Alphabet helped a handful of hedge funds put up positive numbers while many rivals were nursing double-digit losses. Amazon and Netflix each more than doubled while Google rose 47 percent and Facebook climbed 34 percent.

This year, many stock-focused hedge funds have lost significant sums as equity markets have been pushed down. FANG stocks have fallen with the broader market.

Several hedge fund managers managed to exit holdings in FANG stocks before they sank this year.

    Nokota, launched five years ago by Matthew Knauer and Mina Faltas, sold off all its 490,000 shares in Amazon during the fourth quarter, and Empire Capital also got out, selling a far smaller stake of 15,000 shares.

    Valiant Capital, which gained 4.9 percent last year, cut its Amazon stake by 18 percent to 168,800 shares. Former SAC Capital money manager Gabe Plotkin’s Melvin Capital, up 40 percent during its first year in business, slashed its Amazon holdings by 57 percent to 85,000 shares, and Fox Point Capital Management cut its stake in half to 12,500 shares, the filings show.

    “Managers who sold pointed to valuations and overall macro headwinds,” said John David Gardner, the founder of advisory firm Aptus Capital Advisors, adding that many funds also bought on the expectations that markets were going to favor a few select names. “Who is right? Time will tell,” he said.

    Stanley Druckenmiller’s Duquesne Capital Office, for example, nearly doubled its stake in Amazon to 190,000 shares. Sands Capital Management, Immersion Capital and Acadian Asset Management also raised their bets on Amazon.

    Investors and analysts have said that each of the FANG companies, whose stock prices had climbed, could justify its high price as they are seen disrupting their business segments.

    In the first weeks of 2016 those bets on Amazon, which has now lost 22 percent, may look as ill-timed as decisions to enter or add to positions in Netflix, which also lost 22 percent in early 2016.

    Tiger Global Management, which made no changes to its sizable Amazon and Netflix positions in late 2015, lost 14 percent during the first month of 2016, an investor said.

    But Soros Fund Management, which invests money for philanthropist and former hedge fund manager George Soros, may have gotten out in time, having exited its position in Netflix, by selling 317,534 shares during the fourth quarter.

    The data came from 13-F filings that detail what fund managers owned at the end of the last quarter. They do not show what investors own right now, but can sometimes shed light on investment trends.

        Facebook’s share price has held up relatively better than rivals, falling only 3.2 percent so far this year. Samlyn Capital exited its position with the sale of 629,600 shares. Coatue Management sold 893,128 shares to own 6.6 million at the end of the quarter. Arrowgrass cut its holdings in half to own 300,000 shares.

    On the flip side of the coin, Melvin Capital raised its Facebook stake by 52 percent to 650,000 shares and Aaron Cowen’s Suvretta Capital bought 1 million shares of Facebook.

    At Alphabet, Senator Investment Group Senvest Management and Polar Asset Management Partners both exited the stock but Coatue Management and Viking Global Investors each raised their holdings.

    Editing by Leslie Adler

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