Tiger cub Light Street Capital posted a profit last year despite suffering a sharp loss in the fourth quarter as stocks dropped.
The hedge fund firm founded by Glen Kacher — a former analyst at Julian Robertson Jr.’s Tiger Management — lost 14.5 percent during the final three months of last year, according to a person with knowledge of the performance. However, thanks to the firm's hedging and short-selling prowess, its main long-short fund, Light Street Halogen, was able to mitigate the damage.
The upshot: Light Street finished the year up 3.5 percent, the person said.
Light Street Halogen is loaded up with tech, internet and media companies that are benefitting from disruptive technologies — and short the victims of it. The fund was down 1.9 percent for the month of December while stock indexes were off between 9 percent and 12 percent, according to the person.
The firm's short book produced a 12.3 percent return on capital last year, the person said. On a gross basis, the person added, Light Street’s long attribution to performance was 6 percent while shorts kicked in 2.9 percent.
Light Street declined to comment.
The San Francisco-based hedge fund firm has made money on its shorts in four of its nine years of existence, the person said, while producing alpha on the short side in seven years since it was founded in 2010. This performance stands out as many short sellers have struggled in the bull market.
December was much better than October, when Light Street's concentrated short theme did not do well, the person said, declining to name the specific stocks the hedge fund is shorting.
Interestingly, Light Street’s two biggest losers in the fourth quarter — both on the long side — were its biggest winners for the year. They are e-commerce giant Amazon.com, up about 28 percent last year, and home goods e-commerce specialist Wayfair, up about 12 percent in 2018.
Light Street bought the dips in a number of stocks during the fourth-quarter volatility, including Wayfair, according to the person. The firm also took a new position in MongoDB, a database provider, and Just Eat, a London-based food delivery company, the person said.
The firm owned Just Eat at its IPO and sold it after the stock surged, according to the person. The hedge fund got back in when the shares sank in the fourth quarter, the person said, adding that it's now one of its five largest positions.
In its third quarter letter, Light Street told investors that the sharing economy “and its carefully choreographed combination of e-commerce, mobile technology and cloud computing” is a growing area of focus for the fund and “the most addressable segment of the sharing/on-demand economy in the public market is food delivery.”
Light Street also bought a sizable stake in World Wrestling Entertainment in October and November as the stock plunged, according to the person. Shares of the media and entertainment company, which is embarking on a content rights renewal cycle, are up significantly since its trough in the fourth quarter.
Light Street also took a large position in streaming media giant Netflix near its bottom in December, according to the person. Since its December 24 low, the stock has surged about 39 percent to close at $325.16 on Tuesday.
