Why do Tiger Cubs focus on Tech and Consumer Discretionary stocks so much?
I read a deep-dive analysis on Tiger Cub HFs from a few years ago that showed that over the years they have had the most exposure to Consumer Discretionary stocks and have generated the most alpha from Technology stocks.
As a generalist trying to develop sector-specific expertise and recruit for HF/IM, would it be good for me to focus on these two sectors as well, or is it a bad thing, considering the saturation of active investors in these sectors?
And a side question - how is the media sector for alpha-generation? It's a sector that I find interesting but I was wondering if it makes sense for me to choose it as a sector of focus personally.
My gut (not substantiated by much) is an understanding of technology will allow for more optionality in recruiting for all of these HF's that actively invest in technology companies. The saturation of investors here may be a good thing for recruiting and a tougher thing to find alpha.
Define saturation. Are there more TMT PMs ourt there than REIT or energy-focused? Yes. But on a $ of market cap per PM, TMT is arguably less crowded. There are tons of TMT names you can build a $100mm position in 1day. REITs, utilities etc, you'd need at least a week for most names. Etc.
On Tiger, they saw were the growth was and it has paid off massively for them. I would definitely recommend TMT, healthcare and similar growtjy sectors as areas to focus on.
Do you think some sectors lend themselves better to the MM model as opposed to SM like tiger cubs? Like healthcare for example, it seems that a lot of events are binary and to realize a small edge you need to take a lot of these over a longer duration than quarters to realize that edge. Curious if there's higher survivorship by different sectors.
I could be wrong but I think there are some incredible single manager funds in the healthcare sector. I think Healthcare, Tech, and Consumer are all sectors that allow for success under both the SM and MM models.
Definitely agree. Though in HC all the great managers that I know are under a SM model. Seems to me that they would have a risk profile that wouldn't fit on a MM model.
curious as well
I believe Chase's sector was Tech when he was at Tiger management and he just stuck with it as he progressed forward and that set the tone of his shop.
I think that media and REIT companies especially are just boring, and earnings beats are the primary things that produce alpha in that sector. I personally like Biotech stocks but they are very volatile and if your wrong it can pack a punch. Technology is always evolving and expanding into new customers. Consumer Discretionary, I'm starting to warm up to it and because people are always gonna want more than just the essentials.
My two cents:
The one thing I'll say against consumer discretionary is that this sector in particular has gotten incredibly competitive. Alternative data is widely deployed for these companies, making the earnings release broadly known ahead of time to the institutional investing community. The multi-manager pods have jumped all over this, as well as the quants. Moreover, I've also found there to be a lack of controversial ideas in the space. It's broadly viewed right now that discount retailers are longs and department stores are shorts. It's also widely known that CMG and WING are absolutely crushing it right now, for example. This creates all kinds of odd trading dynamics. Investing in this sector certainly feels like a bit of a race to the bottom in terms of trying to gauge sentiment of the management team, sell-side, other buy-side, etc.
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