Tiger Cubs Trading Strategy & Philosophy
The Tiger Cubs are a group of hedge fund managers who were all trained by Julian Robertson at Tiger Management.
They’re known for their aggressive, growth-oriented investment style, which has been very successful over the long term.
Key Takeaways – Tiger Cubs Trading Strategy & Philosophy
- Deep Research – Tiger Cubs prioritize fundamental analysis to identify undervalued companies with long-term growth potential.
- High Conviction – They often make concentrated investments in their best ideas and hold positions for extended periods.
- Growth Focus – They often target companies in disruptive industries, looking for the growth associated with innovation and market inefficiencies.
- VC and PE – Tiger Cubs have gone into venture capital and private equity for higher returns and access to companies not available in public markets.
Core Principles
The Tiger Cubs share several core principles, including:
Fundamental Research
They believe that deep, fundamental research is essential to identifying undervalued companies.
Long-Term Focus
They are not afraid to hold stocks and investments for the long term, even if they experience short-term volatility.
High Conviction Investing
They tend to invest in a small number of companies that they believe have significant upside potential.
Julian Robertson once made the remark of “going long the best 50 stocks and short the worst 50 stocks.”
Still a lot of positions, but something that can be managed by large investment teams.
Risk Management
They are disciplined risk managers and use a variety of techniques to protect their capital (e.g., diversification, options, prudent position sizing).
Many Tiger Cubs hold more concentrated positions, but diversification is still part of it. At the same time, not to the extent of traditional quant trading, which tends to want to squeeze out extra performance through large amounts of diversification.
Investment Strategy
The Tiger Cubs typically invest in small- to mid-cap companies that are growing rapidly.
They look for companies with strong management teams, a competitive advantage, and a history of profitability.
They’re also willing to invest in companies that are out of favor with the market.
Some of the common investment strategies used by the Tiger Cubs include:
- Value Investing – They look for companies that are trading at a discount to their intrinsic value.
- Growth Investing – They invest in companies that are expected to grow their earnings at a rapid pace. These could be public or private.
- Special Situations Investing – They invest in companies that are undergoing a significant change, such as a merger or acquisition and try to understand it better than the market.
- Venture and Private Equity – Venture capital allows them to get in on upstart firms that could be worth a lot down the line. If they’re wrong they don’t lose much. Private equity can offer better deals that what are available in public markets.
Philosophy
The Tiger Cubs’ investment philosophy varies as they’ve branched out, but it’s essentially based on the belief that markets are inefficient in that they’re all hedge funds of investment firms doing active investing/trading.
They believe that there are always opportunities to find undervalued companies, and they are willing to do the work to find them.
They are also patient investors and aren’t afraid to wait for the market to recognize the value of their investments.
Some of the key elements of the Tiger Cubs’ philosophy include:
Independent Thinking
They’re not afraid to go against the crowd and make their own investment decisions.
Return on Time
With Chase Coleman of Tiger Global, this refers to maximizing the effectiveness and impact of their time spent on activities, similar to how they seek to maximize financial returns on their investments.
They relentlessly prioritize tasks and opportunities, always seeking the highest “yield” from their limited time to achieve their goals.
This even includes things as minute as, without exaggerating, secretaries speaking faster when talking with investment team members.
Notable Tiger Cubs
Some of the most notable Tiger Cubs include:
- Chase Coleman – Founder of Tiger Global Management
- Philippe Laffont – Founder of Coatue Management
- Lee Ainslie – Founder of Maverick Capital
- Stephen Mandel – Founder of Lone Pine Capital
These hedge fund managers have all achieved significant success in the investment and hedge fund industry.
Chase Coleman (Tiger Global Management)
Coleman’s philosophy centers on identifying exceptional growth companies, often in the technology sector, that are disrupting traditional industries.
His strategy blends fundamental analysis with a focus on long-term trends.
For example, this allowed him to make concentrated bets on companies like Facebook and JD.com in their early days.
Initially focused on public equities, Tiger Global evolved to include venture capital investments, leveraging a “private market crossover” approach to take advantage of rapid growth in both public and private markets.
Philippe Laffont (Coatue Management)
Laffont emphasizes deep understanding of companies and industries.
He focuses on technology, media, and telecom, but has diversified into healthcare and consumer sectors.
Coatue’s strategy involves identifying long-term secular trends and investing in companies positioned to benefit, with a flexible approach that allows for both long and short positions.
Laffont is known for his rigorous due diligence and emphasis on understanding competitive landscapes.
Lee Ainslie (Maverick Capital)
Ainslie follows a classic long-short equity strategy, trying to identify undervalued and overvalued companies through intensive fundamental research.
Accordingly, he’s one of the closest philosophically to Robertson.
He maintains a diversified portfolio across sectors and geographies, with a focus on downside protection and capital preservation.
Ainslie is known for his approach to risk management and his ability to navigate market cycles.
Stephen Mandel (Lone Pine Capital)
Mandel’s philosophy is based in deep fundamental research, looking to identify companies with sustainable competitive advantages and long-term growth potential.
He favors concentrated investments in high-quality businesses across various sectors, holding positions for extended periods.
Mandel is known for his intellectual curiosity and his ability to identify undervalued companies that are undergoing change or facing temporary challenges, as his way of taking advantage of market inefficiencies.