Tiger Global’s hot potato trade

Last year almost everything Tiger Global touched turned to dust, with Chase Coleman’s hedge fund racking up one of the biggest dollar losses in the industry’s history. But there was one spud-shaped bright light.

Last year we noted a weird new position in Tiger’s portfolio of once-hot private companies, bombed-out technology stocks and de-growthing growth stocks: 179,784 shares in Lamb Weston — one of the world’s biggest producers of frozen potato products (it ships 80mn portions of french fries a day).

It turns out that the potato punt was well-timed. Lamb Weston’s shares are up 37 per cent since the end of the second quarter of 2022, when Tiger’s stake was first disclosed. It has jumped almost 10 per cent just this year.

Unfortunately for Tiger, its $13.9mn position was far too small to ameliorate the pain elsewhere (the flagship hedge fund lost 56 per cent in 2022, according to the WSJ).

The hedge fund’s 13F filing for the third quarter of 2022 indicates that Tiger didn’t add to the position then at least, and it will be some time before we see a year-end snapshot.

Lamb Weston’s performance is interesting though. Roaring potato prices doesn’t seem to have hurt the company, nor weaker demand for frozen fries from US restaurants (footfall remains below the pre-pandemic level): Lamb Weston reported impressive earnings and improved guidance earlier this month.

Crucially, it seems the company has been able to pass on its own cost pressures to customers. Here’s Lamb Weston’s CEO Thomas Werner talking to analysts on an earnings call on Jan 5.

. . . We expect the impacts of ongoing commodity shortages, the onboarding of recently hired production team members and adjustments to optimize business mix to continue to pressure volume performance, and our ability to meet customer demand through the remainder of fiscal 2023 and until our capacity investments in China, Idaho and Argentina become available over the next couple of years.

. . . With respect to pricing, we continue to drive pricing actions across our portfolio to counter input cost inflation. The environment remains generally favorable as a result of the solid category demand that I just described, coupled with constrained industry supply. Our Global segment led the way in the quarter with strong pricing through a combination of inflation-driven price escalators, new pricing structures for customer contract renewals, working with certain customers to accelerate pricing actions for contracts up for renewal in the coming years and improvements in customer mix.

“Sizzling fries”, as FTAV’s new favourite publication Potato News Today commented. Shame it is too little, too late for Tiger.