Coatue Management's Philippe Laffont on Facebook, Apple, Equinix, Virgin Media & His Portfolio ~ market folly

Friday, May 18, 2012

Coatue Management's Philippe Laffont on Facebook, Apple, Equinix, Virgin Media & His Portfolio

Coatue Management's hedge fund founder Philippe Laffont gave his first-ever interview to Bloomberg Television yesterday and talked about Facebook (FB), Apple (AAPL), Equinix (EQIX), Virgin Media (VMED) and his portfolio in general.

On Facebook's IPO (FB)

"It is clearly an incredible company and it also has an incredible management team. One of the things to respect about Mark [Zuckerberg] is that he has surrounded himself with great executives. The tough part about an investment is you are looking for good businesses, good management team, but it is different if you buy a stock at 30 or at 100." 

"I would like to get as many shares as possible. That's what probably everyone wants to do.  I'm sure the stock is incredibly oversubscribed. The real decision is what will happen.  We have lots of previous examples (of risks), both in the year 2000, 1999, but even as recently as LinkedIn. LinkedIn had a small float. The stock started at a low IPO price. The stock moved all the way up, came all the way back down, and in a few months later it's back to where it started. It is possible the same happens to Facebook. I do not know.  It is a great business. Not only do they have the potential to grow their advertising a lot, but in addition they are making money with mobile games. They have a lot of new potential growth products."

On Apple (AAPL)

"[We invested in Apple] 2003. When we got involved with Apple, the stock was at $10. We did not get involved until maybe it was at $100. We missed the whole iPod. When the iPhone came in, we thought it would be a repeat of the iPod. Today you still have the iPhone 5 coming out, which I think will be an incredible product and then potentially Apple TV. This is an amazing company. They have so much growth going on. They represent 5-10% of the market and they can get a much bigger market share."

On His Concentrated Portfolio

"Concentration is a problem over the short-run, but it sort of goes away over the long run. We try to invest over the long-run and are willing to take the volatility. The less concentrated you are, the more your returns will look like the S&P or the Nasdaq. If you want to try to outperform, you have to focus on your best ideas. it is something we transmitted to investors from day one. They understand the risk. It puts a premium on being right."

On Equinix (EQIX)

"We pitched it at the Ira Sohn conference yesterday Equinix. It's a great story.  Basically, if I am Bloomberg, I want to get my news feeds from the NASDAQ and the New York Stock Exchange very close to me so I have the prices immediately.  By putting my servers right next to them, I can get those prices and send them out to all of my customers. Bloomberg needs to have their servers right next to the servers of these other companies, and that is what Equinix allows you to do." 

"I think the demand for the internet will continue to grow. We are in the early innings.  The company is growing 25-30% revenues and EBITDA. It should continue to do that…We started buying it years ago really and have just been adding on to the position. I think right now we might be the largest shareholder of the company."

MarketFolly note: What's interesting here is how Laffont mentions "we started buying it years ago really and have just been adding on to the position."  However, EQIX has only just now shown up as a 'new' position for them in the first quarter of 2012.  They did not disclose owning a stake in the fourth quarter of 2011.  

So, we searched through their previous 13F's filed with the SEC.  Going back a few years, we found that the last time they disclosed owning a stake in Equinix was in the first & second quarters of 2010.  EQIX then disappeared from their filings in the third quarter of 2010 as they apparently sold the stake.  And it hasn't shown back up in their 13F's. Until now.  

As such, Laffont's statement is a bit puzzling as his filings show they just re-entered the position.  The reason we bring this up is because there's a big difference between buying a position "years ago" versus establishing an entire stake in the first quarter.  

Maybe he simply meant to say that they've been involved in the name in the past and have recently acquired it again.  We've asked Coatue for clarification and will update if there's a response.

On Virgin Media (VMED)

"Virgin Media, whereas Equinix solves the problem at the core, Virgin Media solves the problem at the edge. Right now wifi enables many people to share the internet together in a household. Virgin Media has that pipe from the home back to the core back to Equinix.  It's the fastest pipe out there and with HD streaming and online games, you just need to have this fast pipe."

Coatue's Current Exposure

"Right now we have a conservative exposure to the market. It's sort of hard to dissociate. We have great equity valuations in the U.S. in some of the big tech names. But I can't ignore what is going on in Europe and China and elsewhere. I would say we are reasonably conservatively positioned.  It would be done though a combination that just in the way that we're looking for winners, we are also looking for losers, and we're hoping that our portfolio of winners and losers balances itself out. We also have some options of tail risk protection."

Embedded below is the video from Bloomberg TV's interview with Laffont:

For more from this manager, be sure to check out Laffont's presentation from Ira Sohn Conference two days ago.

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