November 14, 2012 / 11:23 PM / 8 years ago

Top hedge funds pick up Facebook amid 3rd-quarter crash

(Reuters) - Facebook’s disastrous second-quarter earnings report, which sent the shares of the social network down 32 percent in a week, has attracted some of the top hedge fund stock pickers.

The Facebook logo is seen on a screen inside at the Nasdaq Marketsite in New York in this May 18, 2012 file photograph. REUTERS/Shannon Stapleton/Files

Andreas Halvorsen’s Viking Global Management took a liking, buying 4.1 million shares in the third quarter, while Philippe Laffont’s Coatue Management acquired 1.4 million. Chase Coleman’s Tiger Global Management sharply increased its Facebook stake to 11.7 million shares from just 2 million three months earlier and Patrick McCormack’s Tiger Consumer Management increased its stake slightly to 1.8 million shares.

Investors have been debating the fair stock market value of Facebook Inc since even before it went public at $38 a share in May, leading to considerable volatility.

In its first few months of trading, the stock dropped to around $30. But the biggest decline started in the middle of the third quarter, on July 26, when Facebook reported a drastic slowdown in revenue growth and failed to offer financial forecasts to quell fears about its ability to boost advertising growth.

The shares plummeted 32 percent over the next week and subsequently dropped to an all-time closing low of $17.73 on September 4.

The share price has since crept higher. On Wednesday, the stock jumped almost 13 percent to close at $22.36 as investors breathed a sigh of relief that expiring trading restrictions on a huge block of shares failed to trigger an immediate wave of insider selling.

Third quarter holdings of Facebook were revealed in quarterly securities filings made by the hedge funds on Tuesday and Wednesday this week. Although the filings reflect holdings as of September 30 and might be outdated, many investors look to the portfolios of long-term stock pickers such as Coleman and Halvorsen for guidance.

The well-regarded $10 billion endowment of the Massachusetts Institute of Technology also added a position in Facebook of 411,000 shares in the quarter. The school is located just a few miles away from Harvard University, where Facebook CEO Mark Zuckerberg famously dropped out in 2004 to found the company.

Another beaten-down tech company also got some hedge fund attention in the third quarter: Yahoo Inc, which nabbed Marissa Mayer to head the company from rival Google Inc.

Coleman’s Tiger Global opened a new position of 25 million shares, David Einhorn’s Greenlight Capital built a 5 million share new position and Dan Loeb’s Third Point, already a major Yahoo investor, raised its stake to 73 million shares from 70.5 million three month earlier. And Boaz Weinstein’s Saba Capital Management added call options covering 1 million Yahoo shares during the quarter.

Yahoo shares have gained 14 percent since Mayer was appointed chief executive officer on July 16. On Wednesday, the shares lost 2 cents, or 0.1 percent, to close at $17.83.

Reporting by Aaron Pressman. Additional reporting by Svea Herbst in Boston and Sam Forgione, Manuela Badawy and Katya Wachtel in New York. Editing by Andre Grenon

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