Priceline, Nike, Dollar Tree: Tiger Cub Stephen Mandel’s Most Trusted Consumer Stocks

Stephen Mandel‘s Lone Pine Capital recently filed its 13F for the June quarter, which showed a notable shift in the composition of the fund’s portfolio. In its first quarter letter to investors, Lone Pine talked up tech stocks, which accounted for the greatest percentage of the value of its portfolio, saying that “the internet remains the single most important and disruptive economic phenomenon in the world.” However, Lone Pine’s latest filing shows that consumer stocks have now eclipsed the fund’s tech stocks in value, taking a 39% stake of its portfolio’s value, up from 34% a quarter earlier, while tech stocks fell to 34% from 38%.

Coming off a rough first quarter in which its Cypress fund lost 8% partly due to the disastrous performance of Valeant Pharmaceuticals Intl Inc (NYSE:VRX), which it ditched at some point during the quarter, let’s see which consumer stocks the Tiger Cub and his team were looking to for a rebound heading into the summer months.

At Insider Monkey, we track around 750 hedge funds and institutional investors. Through extensive backtests, we have determined that imitating some of the stocks that these investors are collectively bullish on can help retail investors generate double digits of alpha per year. The key is to focus on the small-cap picks of these funds, which are usually less followed by the broader market and allow for larger price inefficiencies (see more details).

Yum! Brands, Inc. (NYSE:YUM)

– Shares Owned by Lone Pine Capital (as of June 30): 9.97 Million
– Value of Lone Pine Capital’s Holding (as of June 30): $826.90 Million

Lone Pine jump-started its Yum! Brands, Inc. (NYSE:YUM) holding by 559% during the second quarter, lifting it to just under 10 million shares. While Yum witnessed soft sales in the U.S. during the second quarter, the holding company’s three restaurant brands all delivered core operating profit growth, leading to Yum raising its full-year growth outlook on that front to 14% from 12%. Yum’s China division, which will be spun off into a separate company later this year, stopped the bleeding from a year-ago, as same-store sales were flat year-over-year. KFC is the leading Western fast-food restaurant in the country by a wide margin, so regaining Chinese consumers’ confidence in the brand following food safety concerns was vital. Yum shares are up by 23% this year, and have pushed their 52-week highs ever higher. Dan Loeb’s Third Point took some profit off the table from the stock’s first quarter run-up, selling 55% of its stake during the second quarter, which left it with 5.50 million shares on June 30.

Nike Inc. (NYSE:NKE)

– Shares Owned by Lone Pine Capital (as of June 30): 18.31 Million
– Value of Lone Pine Capital’s Holding (as of June 30): $1.01 Billion

Lone Pine added 6.31 million shares of Nike Inc. (NYSE:NKE) to its portfolio during the second quarter, pushing the value of the position above the $1 billion mark. Despite Fortune’s early report claiming that Nike had lost the Olympics to its burgeoning rivals, it appears that was anything but the case. Nike dominated the podium, particularly among medaling (as opposed to meddling) U.S. athletes, more than 50% of whom were sponsored by Nike or wore its apparel during their events. Nike Inc. (NYSE:NKE) shares have gained nearly 10% since we reported on insider buying at the firm on July 5. Nike was in the portfolios of 57 of the hedge funds in our database on June 30, down from 64 on March 31.

We’ll check out the three favorite consumer stocks of Stephen Mandel and his team on the next page.

Constellation Brands, Inc. (NYSE:STZ)

– Shares Owned by Lone Pine Capital (as of June 30): 6.67 Million
– Value of Lone Pine Capital’s Holding (as of June 30): $1.10 Billion

Billionaire Stephen Mandel’s firm raised its position in Constellation Brands, Inc. (NYSE:STZ) by an unlucky 13% during the second quarter to a rather ominous 6.66 million shares (6.67 million when rounded up, as we are wont to do). If you’re the superstitious type, you may have thought the holding cursed, but it has been anything but. Shares of the producer of alcoholic drinks have traded in a narrow, flat range in the third quarter after a big finish to the second quarter, and are up by 17% year-to-date. Constellation Brands inked a deal with the NFL’s Los Angeles Rams earlier this month which will see the company’s Corona Extra brand become an official partner of the team. One of the biggest benefits of the deal for Constellation Brands is gaining access to prominent in-stadium signage at Los Angeles Memorial Coliseum. Constellation Brands, Inc. (NYSE:STZ) was popular among the billionaire investors in our database during the second quarter, as 12 held its shares on June 30, up from ten at the end of March.

Dollar Tree, Inc. (NASDAQ:DLTR)

– Shares Owned by Lone Pine Capital (as of June 30): 13.36 Million
– Value of Lone Pine Capital’s Holding (as of June 30): $1.26 Billion

Lone Pine Capital’s Dollar Tree, Inc. (NASDAQ:DLTR) holding ranked as its second-largest overall on June 30, after the position was raised by 15% during the second quarter. In its first quarter investor letter, Lone Pine mentioned Dollar Tree as being the type of consumer stock that the fund likes, as it’s able to add value through acquisitions and is resistant to the encroachment of e-commerce and other headwinds that are troubling or will trouble other businesses in the years to come. Dollar Tree is scheduled to report its second quarter earnings right when this article is scheduled to be published (I blame those medaling U.S. athletes), so while I can’t say what it has announced, I can say that analysts are predicting big things of its quarter, in the form of $0.73 in EPS and $5.08 billion in sales. Dollar Tree continues to revamp the stable of Family Dollar stores that it purchased last year and recently announced the slashing of 370 jobs at the former headquarters of that formerly standalone company. Ken Heebner‘s Capital Growth Management snatched up a new stake of 365,000 shares of Dollar Tree, Inc. (NASDAQ:DLTR) in the second quarter.

Priceline Group Inc (NASDAQ:PCLN)

– Shares Owned by Lone Pine Capital (as of June 30): 1.12 Million
– Value of Lone Pine Capital’s Holding (as of June 30): $1.40 Billion

Lastly is Lone Pine’s top consumer stock pick and top overall pick, Priceline Group Inc (NASDAQ:PCLN), in which it buffed its stake by 41% during the second quarter, lifting the holding to a rather pricey line of $1.40 billion. Fellow Tiger Cub Chase Coleman is also a big fan of Priceline, with it ranking as Tiger Global’s third-most valuable public equity position on June 30. Tiger Global explained some of the reasons for its bullishness on the stock in its second quarter letter to investors, saying:

“The company benefits from low supplier concentration given the extremely fragmented hotel market globally and its relationships with over 800,000 hotels, vacation homes and urban residences. Superior customer conversion enables the company to spend more per click in paid marketing channels, further extending its dominant market share in online accommodations globally.”

Priceline continued to post strong revenue growth during its latest quarter despite weakening airline ticket sales, thanks to a big boost in room bookings. Car rental bookings also helped drive growth, which was actually stronger than it was during the same quarter of the previous year. As the room bookings growth indicates, Airbnb has not yet proven to be a direct threat to Priceline, despite some grave concerns to that effect in the midst of Airbnb’s ascent. Priceline Group Inc (NASDAQ:PCLN) was held by 85 hedge funds in our database on June 30, who collectively owned 11.70% of its shares.

Disclosure: None