Stephen Mandel's Lone Pine Capital Still Likes Qualcomm, Visa: 13F Filing Q1 2009 ~ market folly

Wednesday, May 20, 2009

Stephen Mandel's Lone Pine Capital Still Likes Qualcomm, Visa: 13F Filing Q1 2009

This is the 1st Quarter 2009 edition of our ongoing hedge fund portfolio tracking series. Before reading this update, make sure you check out the Hedge Fund 13F filings series preface.

The third fund we're covering is Lone Pine Capital, managed by Stephen Mandel Jr. His $7 Billion fund has returned over 25% annually since its inception in 1997. The term 'lone pine' comes from Mandel's days at Dartmouth College, where the school has a historical lone pine tree. Although Mandel has a solid track record, last year was rough on them (and many others), as noted in our list of 2008 year end hedge fund performance numbers. Why is Mandel worth following you might ask? Well, he served as a consumer/retail analyst for Tiger Management back in the day for legendary investor Julian Robertson. (Robertson's proteges/right-hand men have been nicknamed the "Tiger Cubs" and many have started their own funds).

So, not only has Mandel learned from one of the best, but he has put up some very solid returns himself. Mandel is well versed in the ways of finding undervalued companies and his funds typically like to sniff out solid companies with good management that are trading below their intrinsic value. We've already covered another one of the Tiger Cubs for Q1 2009 in Andreas Halvorsen's Viking Global. And, below, you'll definitely see some similarities between their two portfolios.

Recently, Lone Pine was named to Alpha's 2009 hedge fund rankings list, where they were ranked 21st for 2009, slipping from being 18th the year prior. Lone pine was pretty busy filing 13G's back in March of this year, where they disclosed positions in Strayer, Deckers, and Ctrip. All three of these positions are also now reflected in their filing below.

The following were their long equity, note, and options holdings as of March 31st, 2009 as filed with the SEC. We have not detailed the changes to every single position in this update, but we have covered all the major moves. All holdings are common stock unless otherwise denoted.

Some New Positions (Brand new positions that they initiated in the last quarter):
Apollo Group (APOL)
Coca Cola (KO)
Deckers (DECK)
Mead Johnson Nutrision (MJN)
Medco Health (MHS)
Philip Morris International (PM)
PepsiCo (PEP)
Strayer (STRA)
VistaPrint (VPRT)

Some Increased Positions (A few positions they already owned but added shares to)
Fomento Economico (FMX): Increased by 380%
Las Vegas Sands (LVS): Increased by 67.8%
SPDR Gold Trust (GLD): Increased by 50%
Coach (COH): Increased by 42%
JPMorgan Chase (JPM): Increased by 26%
Carnival Paired CTF (CVC1): Increased by 7%

Some Reduced Positions (Some positions they sold some shares of - note not all sales listed)
Sears (SHLD) Puts: Reduced by 84%
Activision Blizzard (ATVI): Reduced by 67.8%
Dolby Labs (DLB): Reduced by 56.7%
MSC (MSM): Reduced by 38.9%
XTO Energy (XTO): Reduced by 32.2%
Google (GOOG): Reduced by 29.9%
Precision Cast Parts (PCP): Reduced by 27.9%
Mastercard (MA): Reduced by 28%
Priceline (PCLN): Reduced by 27.8%
America Movil (AMX): Reduced by 22%

Removed Positions (Positions they sold out of completely)
Abercrombie & Fitch (ANF)
Bunge (BG) Puts
Lorillard (LO)
Teradata (TDC)

Top 15 Holdings (by % of portfolio)

  1. Qualcomm (QCOM): 11.07% of portfolio
  2. Visa (V): 7.7% of portfolio
  3. America Movil (AMX): 7.68% of portfolio
  4. JPMorgan Chase (JPM): 6.3% of portfolio
  5. Monsanto (MON): 5.5% of portfolio
  6. Philip Morris International (PM): 5.45% of portfolio
  7. Mastercard (MA): 5.35
  8. Union Pacific (UNP): 4.5% of portfolio
  9. Medco Health (MHS): 3.74% of portfolio
  10. SPDR Gold Trust (GLD) Calls: 3.64% of portfolio
  11. Google (GOOG): 3.13% of portfolio
  12. Priceline (PCLN): 3.11% of portfolio
  13. Fomento Economico (FMX): 3% of portfolio
  14. PepsiCo (PEP): 2.8% of portfolio
  15. Carnival (CVC1) Paired CTF: 2.79% of portfolio

Mandel and Lone Pine definitely show their Tiger Cub background with many of these holdings. They share numerous holdings with other Tiger Cubs, including Andreas Halvorsen's Viking Global. Viking likes both MA and V, and so does Lone Pine. Lone Pine clearly favors V as they brought it up to be their 2nd largest position. Additionally, many of the Cubs hold paired CTF's in Carnival. What is unique about Lone Pine's portfolio compared to other Tiger Cubs is the fact that they still hold AMX. Many other funds used to have large stakes in the name, but they all sold out. Lone Pine, on the other hand, stands by the name and continues to be invested in a big way. So, while all the Tiger Cubs definitely have some similar positions, they each also bring their own unique style and research to their portfolios.

While it is only his 10th largest holding, it is also interesting to note that Mandel has a stake in gold through GLD (via calls). A plethora of prominent hedge fund managers now have positions in this name. Just yesterday, we detailed how John Paulson has built up a large gold position. Another interesting move was Mandel's addition to his LVS position. Even though it is only 1.43% of his portfolio, you have to consider he was looking at this prominent Vegas name as a great value play when it was under $2 a share in March. In terms of positions they dumped, they no longer own Lorillard or Teradata. This is intriguing simply because over the past few quarters, numerous value oriented hedge funds had been accumulating these names. Lone Pine apparently does not see value anymore and has sold completely out of both. It will be interesting to see what the other value players have done with their positions in these names.

Assets from the collective holdings reported to the SEC via 13F filing were $6.1 billion last quarter and were boosted up to $6.5 billion this quarter. This is just one of the 40+ prominent funds that we'll be covering in our hedge fund Q1 2009 portfolio series. Check back each day as we cover new fund portfolios. We've already covered Andreas Halvorsen's Viking Global and Paulson & Co (John Paulson).

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