Billionaire Stephen Mandel's Recent Stock Picks
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Stephen Mandel founded Lone Pine Capital in 1997 and has successfully grown the fund from a humble $8 million to today’s mega fund with $20 billion in assets under management. It’s evident that Mandel remains confident in his hedge fund’s portfolio—nine out of the funds top ten holdings increased quarter-over-quarter. Nine out of the funds top ten holdings, including among others Apple (NASDAQ: AAPL), Google (GOOG), Gap (GPS), Monsanto (MON), Priceline.com (NASDAQ: PCLN), and newly purchased eBay (NASDAQ: EBAY), account for 40.54% of the portfolio’s value. Relative to the S&P, the portfolio is over weighted in the services sector and under weighted in the non-discretionary, energy, and financial sectors.
It may be too early for Mandel and various other Tiger “cubs,” whose hedge funds were seeded by billionaire Julian Robertson, to book a profit on what they believed was a soaring growth stock for 2012. Most believe that Lone Pine’s success stems from Mandel’s philosophy of “bottom-up” investing that dismisses macroeconomic effects, and views the fundamentals of a business with a magnifying glass. Sound companies with exposure in European countries, like Priceline.com, seem to fit Mandel’s bill. While many would prefer an elective root canal over just the thought of investing in consumer discretionary stocks with exposure in Europe, Mandel continues to reinvest in stocks like Priceline.
Many investors headed for the hills and sold their shares of Priceline when the online travel agent witnessed deceleration in booking volume and revenue growth in the second quarter. After Priceline’s 2Q were released, shares plummeted $117.50 to $562.32. Sticking to his investing strategy, Mandel didn’t sell a single PCLN share; instead he wagered another $26.56 million and purchased 47,100 shares. The deceleration in PCLN’s revenue and booking volume stemmed mainly from heavy exposure in European economies amid a deepening recession. Gross bookings were still within management’s low end of guidance and grew a 26.8% year-over-year; this marked a drastic slowdown from 69% in the prior year’s quarter. Revenues grew 20.3% to $1.3 billion, down from 43.7% in the same quarter last year. Questions remain surrounding Europe’s outlook, but instead of beating himself up over questions only time will tell, Mandel is most likely focusing on stock fundamentals. Priceline still improved their year-over-year operating profits and EBITDA by solid 41% and 42%.
Lone Pine liquidated its casino exposure by liquidating both casino companies Wynn (NASDAQ: WYNN) and Las Vegas Sands (NYSE: LVS). Mandel had $314 million interest in LVS and $69 million interest in WYNN, a total of 2.25% of his portfolio. Both casinos fundamentals are weakening in China, Singapore, and the Las Vegas gaming markets. About 85 percent of LSV’s gaming revenue is derived from the wealthy “whale” gamblers in China. These high rollers mimicked the country’s economic slowdown. The economic slowdown and allegations of LVS illegally attempting to accelerate apartment sales in China were enough to make Long Pine Capital tap out of this company.
In Lone Pine’s 13F filed for the period through June 30, eBay was the largest addition to the portfolio, equal to $584 million, or 3.68 percent of the portfolio. The online auction service has one of the most efficient capital models in e-commerce and has developed a sustainable competitive advantage by having two segments that are both gaining market share. The leading auction business has seen fluctuating growth in recent years caused by an uncertain future for the world economy, but PayPal, an online payment system, has consistently grown and now boasts more accounts than Discover and American Express, though it is facing increasing competition from Google Wallet and Apple’s upcoming service for iOS6.
Mandel tends to move his portfolio around frequently. In 2006 he had 3 million Apple shares with a market value of $255 million. Between April and June of 2007, he sold 1.5 million shares leaving $105 million in market value in his portfolio. When shares reached $150 he sold another quarter million shares and only had 1.25 million shares remaining. Shares continued to rise, reaching $200, and Mandel then sold another 600,000 shares. When shares dropped in 2008, Mandel surprised many by adding roughly 2.3 million shares to his portfolio. Mandel continued to adjust the amount of shares he kept in his portfolio. The 13F just released shows that Mandel owns just over 1.4 million shares of AAPL, comprising of 5.24% of his portfolio. This is his largest single holding.
Mandel has a unique style of investing that involves heavy fundamental analysis, blindness to macro-events, and constant maneuvering of his holdings. This mythology has worked wonders for Lone Pine and often can help his followers view stocks in a perspective that is commonly overlook.
This article is written by Mike Pate and edited by Meena Krishnamsetty. Meena has long positions in Apple and Google. The Motley Fool owns shares of Apple and Priceline.com. Motley Fool newsletter services recommend Apple, eBay, and Priceline.com. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.