Earlier in August, billionaire and Tiger Cub Stephen Mandel’s Lone Pine Capital filed its 13F for the second quarter of 2013 with the SEC, disclosing many of its long equity positions as of the end of June. While the primary reason why we track 13F filings is as part of our work developing investment strategies- for example, the most popular small cap stocks among hedge funds tend to outperform the S&P 500 by 18 percentage points per year, with a model portfolio following this strategy beating the market by 33 percentage points in the last 11 months (learn more about our small cap strategy)– they’re also useful as a source of investment ideas.
For example, we also track insider purchasing activity having noticed that there tends to be a small outperformance effect for stocks bought by insiders (read our analysis of studies on insider trading). Using these databases we can look for stocks which Lone Pine owned according to its most recent filing and which at least one insider has purchased in the last three months. Here are four of the fund’s holdings satisfying this criteria (or see the full list of Mandel’s picks over time):
One of Lone Pine’s top picks was Cognizant Technology Solutions Corp (NASDAQ:CTSH), an IT consulting and outsourcing company; one of the company’s Board members was buying the stock in June. The company’s revenue and earnings each rose close to 20% last quarter compared to the second quarter of 2012. The trailing P/E is 19, but certainly if Cognizant can continue these decent numbers it may prove a good “growth at a reasonable price” stock. Maverick Capital, managed by fellow Tiger Cub Lee Ainslie, increased its stake in the company to a total of 7.4 million shares during Q2 (check out more stocks Ainslie has been buying).
Mandel and his team reported a position of 7.4 million shares in Mead Johnson Nutrition CO (NYSE:MJN), which provides infant formula and other children’s nutrition products. Investors have bid up the stock price to 26 times trailing earnings on speculation that China will relax its one-child policy (China is a critical market for the company). In addition, food companies generally trade at high multiples in the current environment. Renaissance Technologies, founded by billionaire Jim Simons, trimmed its holdings but still owned 1.3 million shares according to its own 13F (find Renaissance’s favorite stocks).