market folly

Late last week, Chase Coleman's hedge fund Tiger Global took a 1% stake in LinkedIn, a professional networking site for $20 million. This is a private investment and was made with existing shareholders. Last week we also highlighted how Tiger Global bought a stake in Russian travel portal Anywayanyday.com. Given this recent wave of private investment activity, we wanted to closely examine the themes at play here.

As we mentioned last week, part of Coleman's portfolio allocation allows him to invest in private companies given his roots as a technology analyst and his focus on the space. Tiger Global was seeded by legendary fund manager Julian Robertson. Prior to being seeded, Coleman was a technology analyst at Robertson's Tiger Management. It seems Coleman and his team have identified a few secular themes in the online space judging by their investments. Loosely speaking, it appears as though he is targeting two themes: 1. Online search/portals for travel and 2. Social media/networking.

Firstly, he is focused on portals and online travel, by no means a new business. Companies such as Priceline (PCLN), Expedia (EXPE), and Orbitz (OWW) are all publicly traded and numerous hedge funds have held positions in these stocks off and on. The fact that these companies are all publicly traded also could provide a hint as to part of Coleman's motivation here. The intriguing aspect of all this is that the private companies he's investing in more than likely will be strong candidates for IPO's. He's essentially getting in on the ground floor (or as close as he can).

Tiger has taken this investment one step further by focusing on emerging markets. While Coleman has stakes in some US based companies, he has also purchased stakes in the following: Anywayanyday.com (a Russian travel portal), Yandex (a Russian search/portal company), makemytrip.com (an Indian travel site which recently filed to go public, as well as Maktoob (an Arabic portal site that was acquired by Yahoo). You can already see evidence of the 'going public cycle' with makemytrip.com filing for an IPO.

The second theme Tiger Global is playing here is social media/networking and who can blame them. Social networking is currently the adrenaline in the online world and Web 2.0 is the adrenal gland pumping it out. The hedge fund's investment in LinkedIn is just the latest example. Consider that they also bought a stake in Zynga Game Network in December, a social gaming site. Additionally, we've highlighted Tiger's position in Yonja, a Turkish social media site. And speaking of social media, we'd be remiss if we didn't mention you can follow @marketfolly on Twitter and find us on Facebook.

It's very clear that Coleman's hedge fund sees upside in these private companies. They are positioning themselves as best possible to ride the impending social media 'going public' wave. While the majority of hedge funds trade solely in public markets, the fact that Tiger Global has allocated some of their portfolio to private investments ala a venture capital firm gives them a leg up if this secular trend continues to gain steam.

For the rest of their investments, you can view Tiger Global's portfolio here.