Investor's guide to Blue Ridge Capital's positions in 3Q 2013

Investor's guide to Blue Ridge Capital's positions in 3Q 2013 (Part 1 of 11)

Must-know: Why did Blue Ridge capital buy a position in Zulily?

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According to 13Gs Blue Ridge Capital filed last month, the hedge fund disclosed new positions in Zulily (ZU) and PBF Energy (PBF). The filings stated that Blue Ridge currently owns 6.05% in Zulily, with 799,811 shares, and a 7.82% stake in PBF, with 3,095,000 shares.

A November 13G filing showed that Blue Ridge increased its position in Avis Budget Group (CAR) and at present owns a 6.17% stake, with 6,613,700 shares.

For more information on Blue Ridge Capital and its investment strategy, please see the last part of this series.

Blue Ridge Capital’s top new buys in 3Q 2013 per its 13F filing were American Homes 4 Rent (AMH), Tesla Motors Inc. (TSLA), Cliffs Natural Resources (CLF), and BlackBerry Ltd. (BBRY). The hedge fund exited its positions in Owens Corning (OC), Equinix Inc. (EQIX), and Realogy Holdings Corp. (RLGY).

Blue Ridge Capital’s two largest stock holdings are Priceline.com Inc. (PCLN) and American International Group Inc. (AIG), which account for 4.88% and 4.52% of the hedge fund’s portfolio, respectively.

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Why buy Zulily (ZU)?

Blue Ridge revealed a passive 6.05% stake in Zulily, which describes itself as one of the largest standalone e-commerce companies in the U.S. The daily deals site sells products via its desktop and mobile websites and mobile applications that mainly target mothers.

The Seattle-based company went public last month and had priced its IPO at $22 per share. Zulily saw shares jump 71% on the first day of trading and ended the day with a market capitalization of approximately $4.6 billion. The company had aimed to raised $140 million from the listing. Zulily reported $272 million in net sales for the six months ended June 30, 2013, indicating growth of 114.2% from 1H 2012. The company saw a net income of $2.4 million in 1H 2013 compared to a net loss for the similar period in 2012.

With its debut, Zulily joins a host of other e-commerce sites such as RetailMeNot and ChannelAdvisor, which saw successful listings last year. The company’s larger competitors include Amazon (AMZN) and eBay (EBAY), the e-commerce platforms of big traditional retailers like Walmart, Toys”R”Us, and Target.

Zulily believes that women’s and children’s boutique brands are highly fragmented, and that over 65% of its U.S. product sales in 2012 came from vendors, generally emerging brands, and smaller boutique vendors, selling less than $50,000 of product per event. The company has mainly targeted mothers because they’re an influential customer demographic and are increasingly using e-commerce as a form of entertainment in addition to satisfying specific product needs.

The company offers a selection of over 4,000 product styles through various flash sales events, which are limited-time curated online sales of selected products launched each day. Zulily said in its IPO filing that since inception through June 30, 2013, it has worked with over 10,000 brands, featured over 1.6 million product styles, and sold over 42 million items to over 2.9 million customers across its platform.

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