Q3 crash: Hedge funds pick up Facebook

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.

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 Sept. 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 Although the filings reflect holdings as of Sept. 30 and might be outdated, many investors look to the portfolios of long-term stock pickers such as Coleman and Halvorsen for guidance.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.

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