There is a fund like this:

• As early as this year, Q1 bought Tesla, Inc.. Although Q2 has reduced its position, Q3 has greatly increased its position to the second largest stock.

• Q3 built a position for Buffett's "first new" Snowflake Inc.

• Q2 has bought Walt Disney Company at a low level.

• Earnings in the year to November are up 52%, well above the average of hedge fund peers who also focus on technology stocks.
  

This fund isCoatue manage is often translated as "Coteau Capital" in Chinese, and some people call it "the King of TMT hedge funds".

Many investors don't know much about the fund because it is as low-key as most hedge funds (except for Dario's bridge).

Its arrogance can be seen on the official website with only four office addresses, one mailbox and a few words indicating that the products are not solicited and sold.

The mysterious hedge fund has a long history.

Hedge funds, also known as "hedge funds" and "arbitrage funds", combine financial futures, financial options and other financial derivatives with financial organizations for the purpose of profitability. the commonly used investment strategies include "shortselling" and capital leverage (leverage), which originated in the United States in the early 1950s.

Perhaps the most famous hedge funds are George Soros's quantum fund and Julian Robertson's Tiger Fund, both of which have generated compound annual returns of 40 to 50 per cent.

Philippe Laffont, the founder of the coatue fund we want to know, used to work for Julian Robertson's Tiger Fund.

Wall Street mogul Julian Robertson made some bad investment decisions at the end of the 20th century and the beginning of the 21st century and lost a lot of money. He instead provided seed money and incubated funds from former subordinates.

Coatue, a member of the Tiger Cub, also known as Tiger Cub, was founded in 1999 with an initial size of about $45 million.

Coatue manage has several funds, the largest of which is the $3.5 billion coatue growth fund IV LP.

And in addition to the five funds shown on Bloomberg, we found that Coatue FinTech Fund I LP and Coatue Smart Transportation Fund I LP have also registered on SEC this year.

The king of Coaute:TMT hedge fund, with unique investment style

1. The total size has exceeded 19 billion US dollars. The top four positions in Q3 in 2020 are PayPal Holdings Inc, Tesla, Inc., Walt Disney Company and zoom.

Let's first take a look at coatue's latest disclosure of Q3 positions in 2020:

The total size reached US $19 billion, with the top 10 holding shares accounting for 51.01%, and the top 20 holding shares for about 6.1 quarters.

In terms of industry configuration, the most preferred information technology stocks accounted for 37.31%, communications media stocks accounted for 27.26%, and optional consumer stocks accounted for 20.71%.

The top 4 positions are PayPal Holdings Inc, Tesla, Inc., Walt Disney Company and zoom:

The top five buyers are Snowflake Inc, Tesla, Inc., household solar panel supplier sunrun, American solar company vivint solar, and financial technology services company global payments:

The top 5 sellers were Boeing Co, PayPal Holdings Inc, radio and cable TV providers liberty broadband corp-class C, Amazon.Com Inc, and SaaS smartsheet:

In a nutshell, coatue has a clear preference for technology stocks and communications media, and has made wise decisions on stocks such as Tesla, Inc., snow, solar panel maker sunrun and Walt Disney Company.

However, the fund's SEC 13F only needs to disclose long positions, not short positions, so we can learn more about coatue in combination with other public information.

2. Loyal to TMT

Basically consistent with the data we see at whalewisdom, Bloomberg's incomplete statistics show that most of the industries coatue invests in are technology, followed by communications, followed by non-essential consumer goods.

Coatue has been loyal to the TMT (technology, media and telecommunications) track since its inception, and more than 80 per cent of its historical positions have focused on technology and telecommunications.

This has something to do with the experience of founder Philippe Laffont, who earned a computer science degree from MIT, made a lot of money by investing in Microsoft Corp and Intel Corp in his early years, and majored in telecom stocks after entering tiger fund.

3. The head of heavy position and the weakness of shorting

There is obvious Matthew effect in TMT industry.It is believed that investors can feel the phenomenon of Hengqiang and winner-take-all among the technology giants in the Chinese and American markets.

This also makes the coatue style obvious: the top 10 companies usually occupy 50%, 70% of the positions, while shorting weak companies on the same track.

What is particularly interesting is that coatue's short selling is not just to offset risk, but also to pursue absolute return.

Historically, Coatue's short positions have been scattered, with an average of 60 stocks or related securities, with a single position of no more than 3% in principle and a holding period of no more than one year.

According to foreign media reportsCoatue made a handsome profit this year because of its success in shorting Tesla, Inc. and shorting Wirecard, a German payments giant that went bankrupt in a fraud scandal.

4. Driven by technology and data

Founder Philippe Laffont, who majored in computer science, is also said to be more keen on recruiting engineers, half of whom are engineers.

"this is a team of analysts and data scientists. He proudly predicted that in the future [hedge funds] would be data scientists and basic analysts sitting side by side, "to develop strong investment papers and be validated by data science".

5. The active layout of China's primary market is also the cornerstone of IPO for many Hong Kong and US stocks.

According to incomplete Bloomberg statistics, coatue invests in the Chinese market second only to the United States, investing in at least 14 companies in China.

Coatue officially entered China in 2014. Over the past six years, investors have been DiDi Global Inc., Hornet Nest, ofo, Jinri Toutiao, Xi Tea and other companies.

Technology-and data-driven hedge funds such as coatue may not have a great advantage in absolute information in China's secondary market, while investing in first-tier companies will help it gain an in-depth understanding of companies and industries, and "the information obtained is relatively private".

According to the 2020 Q3 position report, coatue holds Chinese stocks such as JD.com and BABA.

It can also be found in public information.

• XPeng Inc.According to the prospectus, coatue subscribed for $100m

• Coatue isSound netInvestors and one of the cornerstones of listing

• Coatue isNongfu SpringOne of the top five cornerstone investors.

In addition, Coatue's fund-raising is also aimed at China: ping an Trust and Yixin have invested in Coatue. More than one US dollar LP said that the reason why many foreign funds entering China, including Coatue, want to actively locate China, in addition to hoping to invest in high-quality targets earlier, but also to be more conducive to fund-raising.

For ordinary investors, the study of coatue mainly depends on which industries and companies the top hedge funds focus on, so as to take the lead in observing the development of China's new economy.

What can the king of tmt hedge funds tell us?

Since 1999, coatue has experienced two complete rounds of bulls and bears, and its scale has grown from US $45 million to US $19 billion. Its investment still serves as a reference for ordinary investors.

1. It is appropriate to keep an eye on the scenery for 5-10 years.

Philippe Laffont himself is very optimistic about technology and firmly believes that it is technology that will lead the future. Philippe Laffont once said, "I firmly believe that in every portfolio, you need to ask yourself, compared to today, what is the most important thing in 5 to 10 years? "

2. Earn through the money of an industry

No matter the volatility of the stock market, coatue has persevered in large positions in technology stocks and track head companies since he joined the industry.

At this point, I think of a friend of the TMT researcher I know. His style is quite similar to that of Philippe Laffont. Since graduation, he has been studying TMT, holding only a few TMT stocks, such as Apple Inc and Tesla, Inc., from which he has made a long-term profit.

He thinks it's good to be able to see through an industry and make money through an industry opportunity.

Of course, this investment strategy of heavy holdings in single industry stocks and low fault tolerance is not universal, but it also makes me reflect on my daily buying a little bit and buying a little bit, without continuous tracking and in-depth understanding of the investment behavior.

3. Shorting Fad, Fade and Fraud stocks, not just looking at valuations

Duan Yongping once said that it is not easy to short; what you need to understand is far more than what you need to understand to do more. Therefore, if investors want to adopt a short strategy, they may want to refer to the 3F logic of coatue, as well as spread their bets and limit the holding period.

There are three F's logic and one principle for coatue shorting technology stocks:

• The first F is Fad.People are always overly optimistic about the emerging technology, which is accidentally hyped into the top of the earth. The first Internet bubble, biotechnology and virtual reality (VR) have all experienced this stage.

• The second F is Fade (recession)Technology runways struggle with snakes, technology companies have to urinate blood one minute after coughing, and it's hard to recover, such as AOL, IBM and Nokia.

• The third F is Fraud (fraud)Shorting fraudulent companies is naturally the embodiment of justice, such as some ferocious chains or district know-how chains. Long Island Iced Tea Company is a good example.

• In addition to 3F, Coatue has a principle for shorting: never use overvaluation as the only basis for shorting. Because companies with high valuations are certainly not overvalued in vain.

Summary

Coatue was one of the best-performing large hedge funds in 2020, with earnings up 52 per cent in the year to November, surpassing the average return of technology-focused hedge funds of 17 per cent, according to the financial times. It also surpassed Gusong Capital (Lone Pine), which is worth US $8.8 billion and is also the "Little Tigers" but whose earnings increased by about 24% during the year.

Generally speaking, coatue's investment in China's primary market is not perfect, and its investment vision and bet speed in the secondary market are not far ahead, but it adheres to its own ability circle and style, and obtains rich returns and leads its peers by building a hedge portfolio, and still deserves to be the king of TMT hedge funds.