Hedge Fund Lone Pine Capital's UK Positions ~ market folly

Tuesday, August 4, 2009

Hedge Fund Lone Pine Capital's UK Positions

We're excited to report that Market Folly is now expanding its coverage to positions that hedge funds hold in foreign markets. Typically, the positions we cover in our hedge fund portfolio tracking series are restricted to long equity, options, and note positions in U.S. markets. Since the hedge funds are filing the 13F's, 13D's, and 13G's with the American regulatory body (the SEC), they are only required to disclose positions in those markets. There are really only 2 major ways for us to find out their holdings in other markets. Firstly, the manager could reveal the positions via investor letter (as David Einhorn of Greenlight Capital has done before). Secondly, one can find the positions by thoroughly searching through each separate country's regulatory body. And, with many thanks to a reader's help for transcribing the information below, we are now prepared to delve into the positions that major hedge funds hold in the UK markets.

The bad news for the ‘would be’ investor in UK companies is that most of the US hedge funds that are tracked here on Market Folly are not all that active in the UK. The good news, however, is that a handful are involved with UK listed companies (including a few of the brightest managers). It’s exciting to report that Stephen Mandel's Lone Pine Capital is an active participant in the London market. Just yesterday, in U.S. market news, we revealed that Lone Pine had significantly boosted its stake in Vistaprint (VPRT). Today, we'll take a look at some of their UK positions.

Why get excited you might ask? Well, as we've pointed out before, Lone Pine has returned over 25 percent annually since its inception in 1997. Before setting up Lone Pine, Mandel worked as a consumer/retail analyst for Tiger Management under the leadership of Julian Robertson. Mandel has a reputation for the quality of his investment research. Seth Klarman recently singled Mandel out for praise in an interview as someone who does exceptionally detailed and high quality work on companies. Mandel looks for undervalued companies but tends to favor high quality businesses with good management. Once Mandel commits to buying stock in a company, he tends to hold onto his investment for a relatively long period of time. And, for these very reasons, Lone Pine is an excellent candidate for hedge fund portfolio cloning with the Alphaclone replication tool.

Lone Pine currently has six disclosed long positions in UK companies:

1. Intertek Group Plc (ITRK)
Intertek is Lone Pine's biggest position at nearly 38 percent of its total UK portfolio. Lone Pine holds 12 percent of Intertek's total equity. (American readers, please note that the date column listed on the tables below is in European format. European readers: everything is normal for you, carry on).

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Intertek provides testing, inspection and safety services to a range of companies involved in consumer goods, building, telecoms, autos, oil, chemicals, pharmaceuticals, mining and agriculture. It also provides trade services to public standards bodies and governments.

2. Autonomy (AU.)
Autonomy is Lone Pine's most recent purchase in the UK with the last two disclosures coming on the 1st and 20th of July 2009. Lone Pine holds 4.26 percent of Autonomy’s equity. Autonomy makes up 22 percent of Lone Pine's UK portfolio.

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Founded in 1996, Autonomy is a dramatic growth story. The company has a market cap of $4 billion, the second largest pure software company in Europe. Autonomy is a market leader in corporate search software which is capable of capturing information from the workplace in the form of documents, presentations, videos, phone conversations and emails. Autonomy’s software aims to help enterprises to understand and extract the value from this sea of data. Their software can also help companies meet reporting obligations and prepare for legal investigations. Autonomy has been profitable in every quarter for over six years and has no net debt. It has a global presence with dual headquarters in Cambridge, UK and San Francisco and offices throughout the world including North America, Western Europe, Australia, Asia Pacific, Japan and China.

3. Ashmore Group Plc (ASHM)
Lone Pine holds 6.2 percent of Ashmore's total equity. Ashmore makes up 16 percent of Lone Pine's UK portfolio.

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Ashmore is an investment manager that specializes in emerging markets. It is involved with emerging market external debt, local currency, special situations, corporate high yield and equity. As of June 2009 it managed $24.9 billion in pooled funds, segregated accounts and structured products.

4. Michael Page Plc (MPI)
Lone Pine holds 6 percent of Michael Page’s equity. MPI constitutes 10 percent of Lone Pine’s UK portfolio.

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Michael Page is a recruitment consultancy. Its specialist areas include accounting, tax, banking and financial services, strategy and change, engineering and manufacturing, healthcare, human resources, information technology, legal, marketing, oil and gas, procurement, property and construction, retail and hospitality, sales and secretarial. The Company has 163 offices in 28 countries.

5. Rightmove (RMV)
Lone Pine holds 10 percent of Rightmove’s stock. RMV constitutes 8.72 percent of Lone Pine's UK portfolio.

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Rightmove’s principal business is the operation of the Rightmove.co.uk website which provides residential home buyers with properties to search online. Its customers include estate agents, letting agents, new homes developers and overseas homes agents who pay fees for the right to display properties on the website. The company provides data to property professionals and property related businesses. It also provides support services including property valuation for lending purposes.

6. Ishaan Real Estate (ISH)
Lone Pine holds a very large stake in Ishaan at 39 percent of Ishaan’s equity. Ishaan constitutes 4.5 per cent percent of Lone Pine’s UK portfolio.

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Ishaan is a real estate investment company invests in development projects in southern and western India. It holds interests in real estate projects in and around the cities of Mumbai, Hyderabad, Pune and Bangalore.

That about sums up Lone Pine's larger long positions in UK markets. The data that has been provided here on Lone Pine’s holdings comes from the London Stock Exchange (LSE). The initial trigger point for a disclosure to be made in the UK occurs when a fund acquires 3 percent of a company’s stock. Given that Mandel is a long term investor, Lone Pine may have additional unseen holdings including holdings that represent less than 3 percent of a company’s equity. For American readers, this disclosure is most similar to a 13G filing in which a company acquires a large amount of shares in a company, breaching a threshold. In the UK's case, that threshold is 3% of the company's shares. In the U.S., the threshold is 5%. We've covered numerous 13G filings here on the blog, including Lone Pine's most recent 13G filing.

Our many thanks again to a reader for diving into this information and helping Market Folly continue our hedge fund portfolio tracking efforts. For more on Stephen Mandel's Lone Pine Capital, you can check out their U.S. portfolio here. However, be advised that new portfolio filings are due in only a couple of weeks time and their portfolio has most likely been shifted around a bit.

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