Billionaire and Tiger cub Stephen Mandel manages nearly $17 billion of assets under management. Previously, Mandel worked under Julian Robertson until 1997, then left to launch Lone Pine Capital. Hedge funds and other notable investors required to report their long holdings to the SEC do so quarterly with 13F filings. The most recent third quarter 13F for Mandel’s Lone Pine showed a number of shakeups in its portfolio. We have identified Mandel’s five largest 13F holdings during the third quarter. Check out all of Mandel’s stocks.
Priceline.com Inc (NASDAQ:PCLN) was Lone Pine’s top 13F holding at the end of 3Q after a 26% increase in shares from 2Q. Priceline’s recent Kayak acquisition should only help drive its annual 20% expected five-year earnings growth. Revenues are expected to be up 20% in 2012 and 15% in 2013, as market share gains help drive the company. Part of Priceline’s market share gains will involve having a greater mobile presence thanks to the Kayak acquisition. Past acquisitions have placed Priceline as a key overseas operator, with over 50% of its bookings coming from ex-U.S. On a valuation basis, Priceline trades in line with its industry peers at 25x, compared to TripAdvisor (28x) and Expedia (25x), but on a forward P/E basis, Priceline appears to be a good buy at 17x. Priceline is one of the top ten service stocks owned by hedge funds in 3Q (here’s our list of all 10).
Google Inc (NASDAQ:GOOG) was a slight decrease for Lone Pine during 2Q of 20%, but still made it as Mandel’s 2nd largest 13F holding. Google trades at a trailing P/E of 21x, well above other tech giants Microsoft (15x) and Apple (13x). Despite a recent weak quarter and concerns over its Motorola unit, we believe that Google still presents solid value to investors. Revenue is expected to be up 38% in 2012 and then 16% in 2013, and the tech giant’s forward P/E is only 15x. Google ranks as the second most popular stock, behind only Apple, of the hedge funds we track – check out all the stocks here.
Cognizant Technology Sols Corp (NASDAQ:CTSH) saw Mandel up his 2Q stake by 25% to become Lone Pine’s 3rd largest 13F holding. Cognizant is up only 4% year to date but does trade at the high-end P/E range for the industry. The custom info tech company presents solid growth prospects though, and is expected to grow EPS by 18% annually over the next five years. This is some of the best potential in the industry, with one of the top balance sheets and over $2 billion in cash. We believe the recent financial reform and increased technology spending in the healthcare sector will further drive demand for Cognizant services as firms look to boost infrastructure.
Ralph Lauren Corp (NYSE:RL) is part of the high end apparel industry that has held up relatively well in a weak economy given their catering to higher income consumers. Lone Pine’s stake in Ralph Lauren stayed relatively consistent and made up nearly 4% of its 3Q 13F. Ralph Lauren expects to generate additional growth with expanded products that includes handbags and footwear. From a valuation standpoint, Ralph Lauren trades in line with top peer PVH, but its forward P/E of 17x puts it near the industry low. Its over discounted future earnings and 10%+ five-year EPS CAGR makes it a solid investment.
Kinder Morgan Inc (NYSE:KMI) was Lone Pine’s 5th largest holding and made up 3.8% of its 13F. Kinder trades at the high end of the industry at a forward P/E of 25x, but this energy transportation and storage company have some of the best prospects in the industry—with a 4.2% dividend yield and a 25% five-year EPS CAGR. Helping drive this growth will be Kinder’s acquisition of El Paso Corporation earlier this year, which made Kinder the largest interstate natural gas pipeline operator in the U.S.
We believe that the two Internet companies Priceline and Google have solid prospects going forward due to their ability to develop recently acquired companies. Cognizant should see strength from a renewed interest in IT spending and Ralph Lauren has the ability to expand overseas to grow earnings. Kinder is another one of Mandel’s picks that we like, a stock that should show growth as natural gas becomes a viable energy source.