Stephen Mandel's Lone Pine Capital Dumps Mastercard & Priceline: 13F Filing Analysis ~ market folly

Wednesday, February 17, 2010

Stephen Mandel's Lone Pine Capital Dumps Mastercard & Priceline: 13F Filing Analysis

(This post is part of our series on tracking hedge fund portfolios. If you're unfamiliar with tracking investments they disclose via SEC filings, check out our series preface on hedge fund 13F filings.)

Next up is notable stockpicker Stephen Mandel and his hedge fund Lone Pine Capital. Mandel's firm is named after a historical lone pine tree at his alma mater, Dartmouth College. Before founding his own firm, Mandel worked at Julian Robertson's legendary Tiger Management. Lone Pine seeks to identify companies with good management teams that are trading below intrinsic value. Lone Pine's main fund, Lone Cypress, was up 17.7% for 2009 as noted in our 2009 hedge fund performance numbers post. Additionally, their Lone Kauri was up 12.1%, Lone Cascade up 44.4%, and Lone Dragon Pine up 72.9%

In terms of recent coverage, we got a glimpse that Lone Pine is bullish on education plays. Additionally, Mandel's hedge fund is focused on investments in outsourcing, smartphones, emerging market consumer-driven companies, national and global financial service leaders and internet-enabled business disrupters. Conversely, they are shorting companies that have been hurt by technological obsolescence and companies in industries with global overcapacity. In the past, we've also taken a brief look at Lone Pine's UK positions too.

The positions listed below were Lone Pine's long equity, note, and options holdings as of December 31st, 2009 as filed with the SEC. Note that we are only covering the major portfolio maneuvers. All holdings are common stock unless otherwise denoted.

Brand New Positions
Baxter International (BAX)
HSBC Holdings (HBC)
Accenture (ACN)
Wells Fargo (WFC)
Walt Disney (DIS)
YUM Brands (YUM)
Bank of America (BAC)
eBay (EBAY)
CVS Caremark (CVS)
Staples (SPLS)
Autodesk (ADSK)
Mead Johnson (MJN)
Marvel Entertainment (MVL)
Cninsure (CISG)

Increased Positions
Dr. Pepper Snapple (DPS): Increased by 335.6%
Estee Lauder (EL): Increased by 310%
Citrix (CTXS): Increased by 176%
Goodrich (GR): Increased by 96.1%
Walgreen (WAG): Increased by 88.4%
Popular (BPOP): Increased by 80.6%
New Oriental Education (EDU): Increased by 66.37% ~ we previously noted Lone Pine's addition to EDU shares
FLIR Systems (FLIR): Increased by 32.9%
Visa (V): Increased by 23.9%
McDonald's (MCD): Increased by 19.8%
Discovery Communications (DISCA): Increased by 11.7%

Reduced Positions
Vistaprint (VPRT): Reduced by 64.8%
Southwestern Energy (SWN): Reduced by 60.6%
Melco Crown (MPEL): Reduced by 48.9%
Mindray Medical (MR): Reduced by 34.6%
Smithfield Foods (SFD): Reduced by 32.8%
Apple (AAPL): Reduced by 18.3%
Hewlett-Packard (HPQ): Reduced by 13.4%

Removed Positions (Sold out completely): (PCLN)
Mastercard (MA)
America Movil (AMX)
Coca Cola (KO)
Cmex (CX)
Liberty Media (LMDIA)
Walter Energy (WLT)
Coach (COH)
Philip Morris International (PM)
Fomento Economico Mexicano (FMX)
Huntington Bancshares (HBAN)

Top 15 Holdings by percentage of assets reported on 13F filing

  1. JPMorgan Chase (JPM): 7.43%
  2. Monsanto (MON): 6.82%
  3. Baxter International (BX): 6.25%
  4. Qualcomm (QCOM): 5.78%
  5. Apple (AAPL): 5.43%
  6. Visa (V): 4.88%
  7. McDonald's (MCD): 4.85%
  8. Hewlett-Packard (HPQ): 4.48%
  9. HSBC Holdings (HBC): 3.89%
  10. Accenture (ACN): 3.69%
  11. Green Mountain Coffee Roasters (GMCR): 3.16%
  12. Wells Fargo (WFC): 3.02%
  13. Strayer Education (STRA): 2.93%
  14. Walgreens (WAG): 2.88%
  15. Goodrich (GR): 2.70%

Lone Pine started new positions in HSBC, Accenture, Baxter, and Wells Fargo and they are all now top fifteen holdings. One of the biggest moves in Lone Pine's portfolio from a core holding standpoint was their sale of longstanding position America Movil (AMX). In previous quarters we had noted other hedge funds were selling this name while Lone Pine held. That is not the case anymore as they have finally sound completely out of AMX.

We also make strong note that they dumped Mastercard (MA) from their portfolio, normally a perennial hedge fund favorite holding. Instead, it seems they prefer Visa in the payment processing space. Typically, we've seen hedge funds hold both of the payment giants, but now it seems more managers select one or the other. Lastly, Lone Pine sold out of Priceline, also a previously large position for them. Overall though, Lone Pine still holds many of the most popular stocks held by hedge funds.
Lone Pine still also holds on to their positions in Monsanto and Strayer Education. We highlight this because former Lone Piner David Stemerman and his new hedge fund Conatus Capital sold out of those positions. And, in fact, we're starting to see more divergences between their portfolios and just found that dynamic interesting.

Remember that Stephen Mandel's hedge fund is a part of the Tiger Cub portfolio that was created with Alphaclone where you can easily replicate a portfolio of top hedge fund holdings. Assets from the collective holdings reported to the SEC via 13F filing were $9.8 billion this quarter compared to $8 billion last quarter, so they invested almost $2 billion more on the long side in US equities. Remember that these filings are not representative of the hedge fund's entire base of assets under management. Therefore, the figures above represent the percentage of their reported 13F assets, not their entire portfolio.

We'll be tracking 40+ prominent funds in our fourth quarter 2009 hedge fund portfolio tracking series. We've already covered Seth Klarman's Baupost Group, Mohnish Pabrai's Investment Fund, Carl Icahn's hedge fund Icahn Partners, and David Einhorn's Greenlight Capital. Check back daily for our new updates.

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