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Billionaire Stephen Mandel’s Top 10 positions Returned 24% YTD

Prior to joining Julian Robertson’s Tiger Management as a consumer analyst, Tiger Cub Stephen Mandel gained experience working as a consultant at Mars & Co and a consumer-retail analyst Goldman Sachs. Then, in 1997, he went out on his own and launched Lone Pine Capital. Today, the fund has approximately $20 billion AUM and Mandel has an estimated personal wealth of about $1.5 billion, making him the 303th richest person in the United States.


Lone Pine Capital finished last year slightly down after fees, but Mandel’s performance this year is quite strong. The top 10 positions in his 13F portfolio have returned 24% so far this year, versus 9.76% for the S&P 500 index. Overall his 13F portfolio is up by about 20.2% since the beginning of 2012.

Table 1: Top 10 positions in Lone Pine Capital’s 13F portfolio as of December 31, 2011

Company Name Ticker Value (Millions) YTD Return
APPLE INC AAPL 871 49.44%
GOOGLE INC GOOG 870 -3.30%
VISA INC V 487 21.53%

The best-performing of Mandel’s top picks is (PCLN). Since the beginning of the year, Priceline has returned over 57%, outperforming the market by over 47 percentage points. Amongst the 350+ hedge fund managers tracked by us, Mandel is the most bullish about Priceline. During the fourth quarter last year, he boosted his Priceline stakes by 127%. As of December 31, 2011, his Lone Pine Capital reported owning $686 million worth of Priceline shares. Priceline is quite popular among other hedge fund managers as well, especially Tiger Cubs. Chase Coleman, John Griffin, and Andreas Halvorsen owned positions in Priceline at the end of last year.

Priceline’s revenue in the most recent quarter increased by 35.5% compared with the same quarter in last year, beating its industry’s average growth of 24.7%. The strong revenue growth helped boost Priceline’s EPS, continuing its upward trend over the past couple years. We expect such strong growth will continue in the future. Priceline is estimated to make $30.03 per share in 2012 and $37.05 per share in 2013, versus $22.33 per share for the trailing 12-month. The stock is currently trading at around $705 a share, making its forward P/E ratio about 23.5. Over the long term, analysts expect Priceline’s earnings to grow at a rate of 22% per year. Priceline also has strong liquidity, high margins, and healthy cash flows. We think the company is relatively undervalued and we recommend investors to buy this stock.

The largest position in Mandel’s portfolio as of the end of the fourth quarter 2011 was Apple Inc (AAPL). It also generated attractive returns this year. It is up 49.44% since the beginning of 2012, beating the market by 40 percentage points. Apple’s price reached its peak of about $640 per share on April 10, but the stock has lost over 5% since then, closing at $605.23 per share on April 13. Despite its weak performance in recent days, we are still bullish about Apple over the long term.

The company’s expected sales growth is about 40% and its expected earnings growth is over 20%, but this level of strong growth is not reflected in its current price. The stock is trading at a current P/E ratio of 17, indicating that investors are still able to purchase the stock at a relatively inexpensive price. Apple is also the most popular stock amongst the hedge funds we track. There were 127 hedge funds with positions in Apple at the end of 2011. Big names include Chase Coleman’s Tiger Global Management, David Einhorn’s Greenlight Capital, Andreas Halvorsen’s Viking Global, Jim Simons’ Renaissance Technologies, and Lee Ainslie’s Maverick Capital.

A few other positions in Mandel’s top 10 with stunning returns this year include Ralph Lauren Corp (RL) and Express Scripts Inc (ESRX). They both returned over 25% since the beginning of this year. We like Express Scripts. The company has a forward P/E ratio of 12.72, versus 15.10 for its industry average. Express Scripts also has strong growth potential. Analysts expect its earnings to increase at a rate of 16.4% annually. We also like Ralph Lauren. Its forward P/E ratio of 20.66 is also relatively lower than its industry average of 24.34, and it too boasts a double-digit earnings growth expectation, of 12% per year. Tiger Cub Patrick McCormack, who is specialized in the consumer sector, is also bullish about both Ralph Lauren and Express Scripts. His Tiger Consumer Management had $50 million invested in Ralph Lauren and another $53 million invested in Express Scripts at the end of the fourth quarter 2011.

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