Helsinki-based HCP Focus, which has a slim portfolio of only 12 “high-conviction” stocks, has 16 percent of its funds invested in Tinder-operator Match Group Inc. The owner of subscription-based online dating websites and applications has risen 93 percent so far this year, with a surge in new Tinder subscribers boosting second-quarter revenue and fueling a record gain on August 7.

HCP entered the stock at the beginning of 2017. "If you’re a heterosexual single guy, you don’t really care about the technical details," Ernst Grönblom, portfolio manager at Helsinki Capital Partners, said by phone on last Thursday. “When a dating platform has reached critical mass, it’s very, very hard to dislodge it. If a competing platform tries to enter the market, it’s very hard to convince people to create accounts on
several dating platforms.”

HCP Focus manages about EUR 70m and was the top long-only equity fund over the three years through the first quarter, according to BarclayHedge. It returned an average 22 percent a year in the past five years through July. Match is its biggest holding, followed by Amazon.com Inc., which has been one of the main holdings since the start of the fund.

“It’s not overvalued,” he said. “But I don’t see an explosive upside in it anymore because it’s so huge. It has the potential to give a reasonably good return for quite some time.” Grönblom focuses on companies with network effects that can create “natural monopolies”. He also holds PayPal Holdings Inc., Alibaba Group Holding Ltd and Facebook Inc., which has the strongest network effects “of any big company on the planet,” he said.

Zeroing in on just 12 stocks is the “sweet spot” for Grönblom, giving enough diversification to keep volatility in check yet concentrated enough to give the full benefits of stock-picking, he said.

That’s a strategy that has outperformed in recent years, but it faces risks in the short term from a global bear market. “Most of my portfolio companies are highly valued, at least according to traditional metrics,” he said. “If there’s a panic in the market these companies will typically suffer more severe losses than regular companies.“

Helsinki Capital Partners decides to hold on to Facebook following the deletion of fake accounts