The Liontrust GF Tortoise Fund, which describes itself as a value-focused hedge fund, is buying shares on the decline in Meta, going against the grain of what anyone else might think about the profitability of big tech companies.
Meta’s shares, like those of its US tech peers, have taken a hit this year with rising interest rates and an induced slowdown in economic activity.
Instead, Tortoise Fund is betting on the shares of Facebook – Meta Platforms Inc. which have fallen 152.29% in the last year. At the time of writing this article, they were trading on the market at $111.41. This is $213.05 less than its price a year ago.
The high-yield hedge fund often chases cheap stocks of companies with a long-term growth profile. But Meta shares are not assets that usually appear in their portfolios.
This strategy of the London-based $600 million fund has allowed it to position itself as a leader in the long and short equity fund sector. It has thus managed to outperform 99% of rival funds.
Tortoise Fund returns sit at about 22%, according to Bloomberg data. Its most recent loss has been 17% on the MSCI All-Country World Index and 12% on the Bloomberg Equity Long/Short Hedge Fund Index.
“We are value managers but parts of tech are actually value stocks now,” Tortoise Fund manager Tom Morris said.
The executive points out that the time has come to be “sensibly contrary.”
Morris explained that this year the firm has held “relatively large” short positions in both the S&P 500 and the Nasdaq. It has also acquired shares of US technology companies.
Its long positions have been in commodities and medical services companies. But then, starting in April, it shifted its stock portfolio back to other economic sectors, Morris said. He said his executives have been moving to a “cautiously optimistic stance” this year.
After the plunge in tech stocks across the board, Meta shares have lost about 70% of their value this year. Meta and the other technology companies are trading at 10 and 11 times earnings, levels not seen in recent years.
So far the pricey Silicon Valley company has seen no improvement in its price. The signals sent by the Federal Reserve about a possible reduction in the rate of interest have not benefited it, but the same is true of other technology companies.
However, Morris maintains that the company has high levels of cash that will be key to weathering the challenges of next year. The company also maintains a high user count and, with the latest long-term cost cuts, it should improve its performance.
The Tortoise Fund is also long in other technology companies such as IBM Corp., Intel Corp., and Micron Technology Inc. It recently unwound some shorted shares in semiconductor makers Nvidia Corp. and Advanced Micro Devices Inc. and in cryptocurrency exchange Coinbase Global Inc.
The company’s success is attributed by Morris to its strategy. The firm maintains a total of approximately 60 positions, but instead of operating with high leverage like other funds, it moves with its own funds and avoids maintaining illiquid positions.
“We’ve got a long book of companies who we think are too cheap and a short book of companies who we think are too expensive,” Morris says.
Unlike other long and short equity hedge funds, the Liontrust GF Tortoise Fund has managed to not only steer clear of losses but has turned in generous returns.
Compiled by Metacrunch. Metacrunch is a news complier and aggregator platform which aims to spread awareness and updates on Metaverse, Web 3.0 Technology, Blockchain, Cryptocurrency, NFTs, Airdrops and many more.
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