In the hedge fund world, Stephen Mandel is one of its most meteoric managers. His Lone Pine Capital has over $18 billion in assets under management, and his group of hedge funds returned over 20% net of fees in 2012. Because it’s important to track the activity of the best hedge funds, we’ll take a look at Mandel and Lone Pine’s top trio of stock picks from last quarter.
According to the firm’s 13F filing with the SEC, Priceline.com Inc (NASDAQ:PCLN) was the hedgie’s No. 1 pick, with a $1.4 billion position, worth nearly 7% of his entire equity portfolio. Priceline continues to make its journey toward the vaunted $1,000 mark, and post-Kayak Software acquisition, the synergies should help it get there. Shares of Priceline.com Inc (NASDAQ:PCLN) are up 15.4% over the last three months, and still trade at decent valuation multiples (1.6 PEG, <20 P/E).
Cognizant Technology Solutions Corp (NASDAQ:CTSH), meanwhile, sits in the No. 2 spot of Stephen Mandel’s equity portfolio. A year ago, Mandel upped his stake in the IT services company by nearly 50%, and in Q3 2012, another 25%. It’s clear that he is confident that Cognizant can build off of its robust history, in which EPS has grown by nearly 25% a year over the past five years.
In third, we can’t forget Google Inc (NASDAQ:GOOG). Mandel actually made Google his No. 1 holding at the end of 2012, and at the conclusion of 2011, he upped his stake by almost 50%. The point is, that Stephen Mandel views Google as a long-term investment, and like Priceline, he likely thinks it can surpass $1,000 a share.
Interestingly, Google isn’t particularly expensive at current levels, with a price-to-book multiple near 3.6 and a forward P/E near 17.0x. It’s difficult to say just what future Mandel envisions for Google Inc (NASDAQ:GOOG), though we expect it’s founded upon the belief that a dominance in search will continue. Whether or not it’s Google Glass or self-driving cars that carry the company into 2020 and beyond is up for grabs, but it’s important that Google at least has that innovation on the table. That’s a fact Apple cannot say for itself, for example.
In a similar light, Priceline.com Inc (NASDAQ:PCLN)’s potential for international expansion is far and away the best in its industry, and the addition of Kayak (who was a formidable travel player in its own right) only boost its prospects. The $1,000 club is hard to join, but assuming no stock splits are in the near future, it’s possible that both Priceline and Google Inc (NASDAQ:GOOG) could make the cut. That’d probably make 2013-2014 a very good period for Stephen Mandel and Lone Pine.