Laffont Sees Tough 2019 as Tech Stocks Faced `Brutal' October

(Bloomberg) -- Coatue Management founder Philippe Laffont is battening down the hatches for 2019.

After riding technology stocks to a gain of more than 24 percent in 2017, Laffont says he’s cut exposure amid rising volatility and the specter of threats to the U.S. economy and a trade war in China. His main hedge fund lost 5.8 percent in the third quarter, paring this year’s gains to about 2 percent. It has $8.7 billion in assets.

“We plan to build up our portfolio for all weather sailing," he wrote in a quarterly letter dated Tuesday that was seen by Bloomberg. “So far, October has been brutal for tech.”

Laffont said the firm, which mainly trades stocks, had too much exposure to large global Internet platforms like Tencent Holdings Ltd., Facebook Inc. and Alibaba Group Holding Ltd. and had spent too little time investing in software companies.

He also disclosed several new buys in his letter:

  • The hedge fund took a position in Qualcomm Inc., an “attractively priced" company poised to benefit from the transition to the fifth generation of mobile communications networks, better known as 5G.
  • Coatue added shares of Roku Inc., a company that makes devices and software allowing users to stream video onto their televisions. “We believe there is huge monetization upside as TV advertising moves from contextual-based demographics to highly targeted IP-based ads," Laffont wrote.
  • The firm also bought into Motorola Solutions Inc., which Laffont describes as “techifying" video surveillance in the U.S. and Western Europe.

Looking forward, Laffont said he sees many challenges.

“We are concerned about the trade war with China,” he wrote. “If the two largest economies decouple, this will not be good for long-term growth, and it will force many companies to either replicate their infrastructure in both countries, or do less business in one of the two continents. It also seems governments are scrutinizing large companies and invoking national security concerns more frequently.”

©2018 Bloomberg L.P.