JAT Capital position summary
John Thaler’s JAT Capital Management’s top new positions for the quarter ending in June were Amazon.com, Inc. (AMZN), Ctrip.com International, Ltd. (CTRP), and Zillow Inc. (Z). The fund also added to its positions in CBS Corporation (CBS), Yahoo! Inc. (YHOO), Twitter Inc. (TWTR), and Apple Inc. (AAPL), while it reduced its stakes in Time Warner Cable Inc. (TWC) and Qihoo 360 Technology Co Ltd. (QIHU). JAT Capital sold its position in Vipshop Holdings Ltd. (VIPS).
JAT Capital also took an activist position in The Madison Square Garden Company (MSG), according to the fund’s 13D filing in September.
JAT Capital added to its position in Yahoo! Inc. (YHOO). The stock accounted for 13.25% of the fund’s portfolio for the quarter ending in June.
Overview of Yahoo
Yahoo! Inc., or Yahoo, together with its consolidated subsidiaries, is a global technology company that provides a variety of products and services. Many of these products and services are personalized, including search, content, and communications tools on the Web and on mobile devices. The company earns revenue primarily by advertising to its 800 million monthly users via various products and platforms.
As discussed earlier in Market Realist’s series on Internet industry’s 3Q 2014 earnings, Alibaba’s (BABA) initial public offering (or IPO) at $25 billion dominated media headlines as the biggest IPO ever. Yahoo, which had a stake of 23% in Alibaba before the IPO, sold 122 million shares and saw an after-tax windfall of $5.1 billion.
Yahoo faces activist investor Starboard Value
Last month, activist investor Starboard Value sent a letter to Yahoo’s CEO, Marissa Mayer, asking her to consider acquiring AOL, Inc. (AOL) with the remaining cash balance. Starboard gave Yahoo the rationale that the combined entity could better challenge Google’s and Facebook Inc.’s (FB) dominance in the digital advertising market.
Starboard also suggested the merger could mean “monetization of Yahoo’s non-core minority equity investments in a tax-efficient manner.” The fund hinted at a potential separation of Yahoo’s core and non-core businesses to unlock value.
Analysts believe such a merger could create synergies in video and content, but feel it would still be a slow-growing entity.
Third-quarter revenue and earnings beat estimates
Recently, Yahoo shares climbed higher on third-quarter earnings and revenue that beat analyst estimates. Third-quarter profit rose to $6.77 billion, helped by a $6.3 billion gain from the sale of its stake in Alibaba Group. GAAP (generally accepted accounting principles) net earnings per diluted share were $6.70 compared to $0.28 in the third quarter of 2013.
GAAP revenue was up 1% to $1.14 billion for the third quarter of 2014. Mayer noted, “We achieved this revenue growth through strong growth in our new areas of investment mobile, social, native and video – despite industry headwinds in some of our large, legacy businesses.”
Yahoo acquired Flurry
Yahoo completed the acquisition of Flurry—a mobile data analytics company that optimizes mobile experiences for developers, marketers, and consumers. Yahoo and Flurry’s combined scale is expected to create more personalized and inspiring app experiences for users. It should also enable more effective mobile advertising solutions for brands seeking to reach audiences and gain unique cross-device insights.
The next segment of this series reviews JAT Capital’s position reductions during the 2Q.