We track quarterly 13F filings from hundreds of hedge funds, including billionaire and Tiger Cub Stephen Mandel’s Lone Pine Capital, as part of our work developing investment strategies (we have found, for example, that the most popular small cap stocks among hedge funds earn an average excess return of 18 percentage points per year). It can also be useful to go through filings from individual managers looking for trends and potential investment ideas; when we were going through Lone Pine’s top picks, we noticed a number of consumer stocks among its top picks. Here are our thoughts on Mandel’s five largest positions in consumer stocks as of the end of March (or see the full list of stocks Lone Pine reported owning):
The fund owned over 14 million shares of Dollar General Corp. (NYSE:DG) per the filing. With a beta of 0.2, Dollar General Corp. (NYSE:DG) - as might be expected for a dollar store- trades more or less independent of broader economic conditions. The first quarter of its fiscal year ended in early May, with revenue up 9% versus a year earlier but net income only rising at a 3% rate. With a trailing earnings multiple of 17 we’d be somewhat concerned with the valuation. Fellow Tiger Cub fund Tiger Global Management initiated a position of 5.3 million shares last quarter (check out Tiger Global's stock picks).
Also among Mandel’s five largest holdings overall was The Gap Inc. (NYSE:GPS), which has risen over 60% in the last year on excellent growth numbers for such a large company (the current market cap is over $19 billion). With improvement continuing in recent reports, and with the stock trading at 16 times trailing earnings, it is not quite a pure value stock but may well qualify for “growth at a reasonable price” status. Billionaire Eddie Lampert’s ESL Investments (Lampert also serves as the CEO of Sears Holdings Corp (NASDAQ:SHLD) ) owned almost 14 million shares of Gap according to its own 13F (research more stocks ESL owns).