Joho Capital Gives In to Yelp's Dip, as Competition for the Tech Stock Lies Ahead

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As stock of online search and review site Yelp ( YELP ) slacked on Monday after news circulated about a new-found rivalry in the update of Facebook ( FB )'s "Nearby" feature, hedge fund firm Joho Capital saw light in the opportunity and pursued Yelp as a new buy.

New York-based Joho, which was founded by Guru investor Robert Karr , is now 5.26 percent owner of Yelp. Though the tech stock's slight price slum only veered about $1 off from its Friday closing price, Joho proceeded to take on a new holding of 894,795 shares.

This morning, Yelp trades around $18, about the same range as yesterday's price; its stock is down 0.85 percent.

YELP data by GuruFocus.com

With a market cap of $1.15 billion, San Francisco-based Yelp establishes online communities that actively review local businesses, serving as a word-of-mouth centered guide for users. Yelp has boomed in major metros across the U.S., Canada, UK, Ireland, France, Germany, Austria, the Netherlands, Spain, Italy, Switzerland, Belgium, Australia, Sweden, Denmark, Norway, Finland, Singapore and Poland, according to the site's investor relations section.

Just earlier this month, the company announced a new fully established Yelp community in Turkey.

In its third quarter financial results, Yelp reported an increase in net revenue by 63 percent compared to year-over-year data. The site's average number of monthly unique visitors grew 37 percent, and its active local business accounts grew 82 percent, both compared to the same period last year.


Yelp Chief Financial Officer, Robert Krolik, who sold shares of the company on Dec. 12, said in a news release that Yelp's record numbers in revenue and adjusted EBITDA are ahead of the company's expectations.

"These results demonstrate that our playbook continues to deliver growth across our markets," he said. "Additionally, our recent acquisition of [Europe's largest local reviews site] Qype will accelerate our expansion into key international markets such as Germany and the UK."

Though Yelp's third quarter gave its executive board much to be proud of, Yelp's market value has shriveled by at least 20 percent year to date.

The cutthroat competition between local discovery applications, such as TripAdvisor and Foursquare, has placed unavoidable pressure on Yelp for years. Monday's Facebook feature update announcement bears no difference, and actually heats up the rivalry even further, given that Facebook provides the advantage of seeing actual reviews from friends, compared to reading reviews from complete strangers.

In Facebook's press release announcing the feature update, details conveyed that users of the Nearby application will be able to "find local spots your friends have recommended, checked into, or liked...[and] When you find a place that looks interesting, tap to see info like friends who've been there and business hours."

Yelp has garnered the appeal of other Gurus besides Karr. Steven Cohen presented the stock as a new buy in the third quarter. Tom Russo, on the other hand, purchased shares in the second quarter and sold out by the third.

Yelp is one of 11 stocks in Joho Capital's ultra-concentrated portfolio. With a total value of $628 million, the firm predominantly invests in the technology, automobile, machinery, retail, consumer goods, basic materials and financial services sectors.

Its top five holdings are Google Inc. ( GOOG ), Estee Lauder Cos Inc. ( EL ), Mead Johnson Nutrition Company ( MJN ), New Oriental Education & Technology Group Inc. ( EDU ) and SINA Corp. ( SINA ).

To view Robert Karr's recent trades, visit his latest stock picks. Also view his undervalued stocks, high-yield companies and top growth stocks.


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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing

Referenced Stocks: EL , FB , GOOG , MJN , YELP

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