Fund Focus – Whale Rock Capital
Founded: 2006
Manager: Alex Sacerdote
Alex Sacerdote received his BA from Hamilton College in 1994 and MBA from Harvard Business School in 1999. Prior to founding Whale Rock, Alex spent two years as an investment banking analyst in Smith Barney’s Technology, Media, and Telecom group and one year as VP of Finance at Interactive Imaginations, a New York based Internet advertising start-up. Alex was with Fidelity Investments (1999-2006) as an equity analyst and Sector Portfolio Manager, focusing primarily on technology. In four of the six years, Alex ran equity funds including a large cap and a small/mid cap technology portfolio.
Fund Profile – Whale Rock Capital is a Boston-based global long/short equity fund focused on the Technology, Media, and Telecom (TMT) sectors. Whale Rock is a growth-oriented manager seeking to benefit from the innovation and disruption inherent in the TMT space. They invest in all companies of all capitalization ranges and subsectors including internet, software, hardware, services, and social media. They look across the globe seeking to identify the most attractive opportunities on the long and short side. The firm utilizes a distinctive S-Curve based investment approach.
In a typical year, the team at Whale Rock conducts over one thousand face to face meetings with TMT companies in the United States, Asia, and Europe. In addition to financial modeling and analysis, the team meets private companies, venture capitalists, customers, competitors, and suppliers to gain an in-depth understanding of market dynamics.
Investment Philosophy – Whale Rock’s investment philosophy is specifically designed for the unique characteristics of the technology space with the goal of isolating the best opportunities for wealth creation while reducing risk. While technology is subject to rapid change and extreme competition, their focus on understanding technology adoption cycles and identifying companies with very strong competitive advantages is key. Also, while many are focused on near-term results, they seek to identify long-term underappreciated earnings power which often allows them to invest in great companies at attractive valuations.
Here are their 3 Key Drivers to their Investments:
According to Insider Monkey, here are some of the changes within Whale Rock’s latest filings:
Initiated a New Position:
• Gigamon (GIMO)
• ARRIS International (ARRS)
• Apple (AAPL)
• YY Inc. (YY) Call Option
• Applied Optoelectronics (AAOI)
Increased Stake:
• Microsoft (MSFT)
• Yelp (YELP)
• NetEase (NTES)
• Shopify (SHOP)
• Oclaro (OCLR)
Decreased Stake:
• Salesforce (CRM)
• NVIDIA (NVDA)
• MaxLinear (MXL)
• Zendesk (ZEN)
• Ellie Mae (ELLI)
Lastly, in one of the only interviews I came across, Columbia Business School had the opportunity to sit down with Alex in 2015 and ask him a few questions. Here are a couple excerpts from the interview in which he talks about some of his holdings:
NetEase (NTES) – Has a very high-quality management team. The CEO, William Ding, owns 50% of the company. He does not spend time talking with sell-side analysts, but rather is very focused and has essentially built the Activision of China. The company has grown their net income from $50M to $700M in PC Gaming. Their PC gaming revenue is an attractive base of recurring revenue supported by long duration franchise games. We are also highly appreciative of their mobile gaming business. NetEase recently launched a mobile game, Fantasy Westward Journey Mobile. Our interns on the ground in China have been visiting internet cafes and their research suggests it is the number one game in China. They think it will generate $1B in revenue. We think NetEase is still the best opportunity for playing the mobile-gaming S-Curve.
Facebook (FB) – We think Mark Zuckerberg is underappreciated as a businessman. He saw earlier than anyone else how valuable Instagram and WhatsApp would be. He also moved quickly on virtual reality. He found a management structure enabling him to focus on the long term future of technology while Sheryl Sandberg and other incredibly talented professional management can focus on the business.