“Since we believe in owning as many promising stocks as possible, we generally buy on margin.” With that goal-oriented approach in mind, Gilder Gagnon Howe & Co. has returned +72% YTD until September in its Margin Portfolio.
The Margin Portfolio applies a long/short strategy and is up 30% in Q3 alone. The investment managers enlists $4.2 billion in assets under management according to the ADV form, but since the portfolio is highly leveraged, the bulk of these holdings might not be actual assets. GGHC’s Cash Portfolio, which uses a long-only strategy, has gained 53% through the three quarters after adding +22% return in the last quarter.
According to the quarterly letter, parts of which were seen by ValueWalk, GGHC has long positions in Amazon.com, Inc. (AMZN), Netflix, Inc. (NFLX), Tripadvisor Inc (TRIP) and none other than Tesla Motors Inc (TSLA), which the letter says is the fund’s largest holding.
Tesla has unique model in autos
GGHC is impressed with Tesla Motors Inc (TSLA)’s business model and adds that the company’s ability to make electric vehicles gives it an easier distribution system. The fund believes that Tesla does not need large showrooms like traditional companies and can get the products marketed and sold with just a few online stores. In this regard, the letter also mentions Best Buy Co., Inc. (BBY)’s vision to sell electric cars like it sells other electric products online.
Tesla makes up 9.4% of GGHC’s equity exposure. Shares of the carmaker gained 80% in the last quarter.
Among non-U.S equities, the fund holds ASOS plc (ASC), a U.K.-based online fashion retailer. Asos was also a short position of funds like Jim Chanos’ Kynikos Associates and D.E.Shaw. However, all short positions have been covered now as shares of ASOS have gained 115% YTD, effectively butchering bearish bets.
Exposure to emerging markets
GGHC also holds Mercadolibre Inc (MELI), an Argentina-based company that provides online e-commerce related services. Mercadolibre is among the fund’s top ten positions and has raked in a 44% gain on market YTD. GGHC also owns equities in Sri Lanka, Kenya and South Africa.
Best performance in biotech
The letter discusses a position in Alnylam Pharmaceuticals, Inc. (ALNY), a biotechnology company that is experiencing successful clinical trials these days. The pharmaceutical company is focused on utilizing a new advancement, RNA interference, in its drug technology. Alnylam is the fund’s third-largest position, making up 5.8% of its equity exposure. The biotech company was the fund’s best performing holding, as shares rose 106% in Q3.
Gilder Gagnon Howe & Co was beaten severely on its short position in Ctrip.com International, Ltd. (CTRP), a Chinese travel company. The company gained 73% in third quarter with a new mobile business strategy. The fund exited the bet as its thesis proved incorrect.
UPDATED: A prior version of this article referred to Gilder Gagnon Howe & Co as a hedge fund. GGHC is a brokerage firm and an investment adviser, with several money managers. The returns listed in this article represent those of a single manager.