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Billionaire Stephen Mandel Bullish On Tech

Stephen Mandel’s Lone Pine Capital trimmed or cut its exposure to many of its top picks during the first quarter, a strong one for the fund in which it crushed the market. Of the fund’s top ten long positions as of March 31, seven of them were decreased, including Priceline Group Inc (NASDAQ:PCLN), Mastercard Inc (NYSE:MA), and Valeant Pharmaceuticals Intl Inc (NYSE:VRX), three of its top four long stock picks. However, we noticed that three of the fund’s top 20 long positions were increased substantially during the first quarter, and all of them happened to be positions in tech stocks. Let’s take a look at those moves, which cover JD.Com Inc (ADR) (NASDAQ:JD), Apple Inc. (NASDAQ:AAPL), and Microsoft Corporation (NASDAQ:MSFT).

Lone Pine Capital 2014 Q3 Investor Letter

Professional investors like Mandel spend considerable time and money conducting due diligence on each company they invest in, which makes them the perfect investors to emulate. However, we also know that the returns of hedge funds on the whole have not been good for several years, underperforming the market. We analyzed the historical stock picks of these investors and our research revealed that the small-cap picks of these funds performed far better than their large-cap picks, which is where most of their money is invested and why their performances as a whole have been poor. A portfolio of the 15 most popular small-cap stocks among funds outperformed the S&P 500 Total Return Index by 95 basis points per month between 1999 and 2012 in backtesting. The exceptional results of this strategy got even better in forward testing after the strategy went live at the end of August 2012. A portfolio consisting of the 15 most popular small-cap stock picks among the funds we track has returned more than 144% and beaten the market by more than 84 percentage points since then, and by 4.6 percentage points in the first quarter of this year (see the details).

Stephen Mandel
Lone Pine Capital

JD.Com Inc (ADR) (NASDAQ:JD) has vaulted all the way into the second spot in the public equity portfolio of billionaire Mandel, after he first opened a position on the stock in the fourth quarter of 2014, a few months after the Chinese company’s U.S IPO. JD.Com Inc (ADR) (NASDAQ:JD) helped Mandel achieve those strong first quarter returns, gaining over 25% during that time. Nor was he wrong to increase his position by another 336% to 38.53 million shares valued at $1.13 billion as of March 31, at least in the short term; the stock has continued to perform strongly into the second quarter, gaining another 21%. The Chinese online direct sales company, a competitor of Alibaba Group Holding Ltd (NYSE:BABA), benefited from speculation early in the second quarter that the People’s Republic of China would boost its stimulus measures to keep the Chinese economy growing at the government’s desired pace. Mandel was just one of a number of “Tiger Cubs” bullish on the company, in which hedge funds as a whole owned 44% of its shares, compared to just 12% of Alibaba’s shares. Other Cubs with stakes in JD.Com Inc (ADR) (NASDAQ:JD) include Chase Coleman’s Tiger Global Management, which has JD.Com as its top pick now after increasing its own position by 309% during the first quarter, and Philippe Laffont’s Coatue Management.

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