Billionaire Stephen Mandel has been one of the most successful hedge fund managers in recent times with his Lone Pine Capital ranking amongst the largest hedge funds in the world. His fund had a 13F portfolio value of $22 billion at the end of the third quarter. At Insider Monkey, we backtested a portfolio of five of his largest positions in large-cap stocks and calculated the returns thereof. These stocks returned an average of 0.70% each month from 1999-2012. During the same period S&P 500 Index returned just 0.32% per month. His large cap stock picks outperformed the market by 38 basis points per month, or 4.56% per year.
This may not sound like a big outperformance but you should keep in mind that the majority of active mutual funds underperform the S&P 500 Index which is why passive index funds became so popular in recent years. Investors investing in hedge funds have been underperforming in recent years as well mainly because of the large fees (thay take away 2 percentage points every year, plus 20% of each year’s return; so if a hedge fund has gross returns of 10%, its net return will be closer to 6%). However, if you were an investor imitating the top large-cap stock picks of Steve Mandel, you would have outpaced the S&P 500 Index by more than 4 percentage points a year. Given his strong large cap selection track record, we have analysed some of Stephen Mandel’s top large cap picks in the article below.
Hedge funds are actually pretty good at picking stocks. We follow over 700 hedge funds and other institutional investors and by analyzing their quarterly 13F filings, we identify stocks that they are collectively bullish on and develop investment strategies based on this data. One strategy that outperformed the market over the last year involves selecting the 100 best-performing funds and identifying the 30 mid-cap stocks that they are collectively the most bullish on. Over the past year, this strategy generated returns of 18%, topping the 8% gain registered by S&P 500 ETFs.
Charter Communications, Inc. (NASDAQ:CHTR) was the largest holding of Stephen Mandel’s Lone Pine Capital. The fund bought 457,698 shares of this stock worth $1.4 billion during the July-September period. This $74 billion is the second largest broadband provider in USA after its merger with Time Warner Cable Inc (NYSE:TWC) earlier this year. For the quarter ending September, Charter Communications, Inc. (NASDAQ:CHTR) reported an increase of 7.4% in revenues to $10 billion, when compared to the prior year period. Its network also reached to 49 million homes and businesses.
The stock has cheered investors by returning 48% over the last one year. The stock is trading very close to its 52 week high price and has been rated as a buy by most analysts. The other hedge funds from our system did not share Mandel’s thoughts as the number declined to 112 versus 13 in the second quarter. They held more than 79% of the company’s float at the end of September.