Billionaire Stephen Mandel’s Long Term Stock Picks Include QUALCOMM, Inc. (QCOM)

Lone Pine Capital is managed by billionaire and Tiger Cub Stephen Mandel (“Tiger Cubs” are the group of hedge fund managers who previously worked at legendary investor Julian Robertson’s Tiger Management). We track quarterly 13F filings from Lone Pine and other hedge funds as part of our work developing investment strategies (we have found, for example, that the most popular small cap stocks among hedge funds outperform the S&P 500 by an average of 18 percentage points per year). We can also use our database to find individual managers’ favorite stocks according to a number of criteria, including those which they have owned for a fairly long period of time. Here are five stocks which Lone Pine owned in its most recent 13F (for December 2012) and at the end of 2010 (or see the full list of stocks the fund reported owning):

Lone Pine disclosed ownership of nearly 11 million shares of Cognizant Technology Solutions Corp (NASDAQ:CTSH) in its most recent filing, making it one of the fund’s five largest holdings by market value. Cognizant Technology Solutions Corp (NASDAQ:CTSH) is a $19 billion market cap IT services company; its stock price is down 13% since the beginning of 2011 after diving in April as investors look to the upcoming release of last quarter’s results. Financials were good during Q4, though the company is trading a bit expensively with a trailing P/E of 19. William Gray’s Orbis Investment Management has been another major shareholder in Cognizant Technology Solutions Corp (NASDAQ:CTSH) (research more stocks that Orbis likes).

Mandel and his team have also been long-term owners of Ralph Lauren Corp (NYSE:RL). The apparel and accessories designer had the third quarter of its fiscal year end in December; during the quarter, earnings grew 28% compared to the same period in the previous fiscal year but revenue was up only slightly. This suggests to us that it would be difficult for Ralph Lauren Corp (NYSE:RL) to continue high earnings growth, at least without better performance sales wise. Fellow Tiger Cub John Griffin’s Blue Ridge Capital reported a position of 1.6 million shares at the end of December (find Griffin’s favorite stocks).

Dollar General Corp. (NYSE:DG) has been another of the fund’s long term picks, with Lone Pine owning over 13 million shares at the end of the fourth quarter of 2012. Dollar stores in general are trading at a small premium to big-box discount retailers such as Target (NYSE:TGT) and Wal-Mart (NYSE:WMT) with even lower betas. Dollar General Corp. (NYSE:DG) is no exception, with a beta of 0.1 (making it an interesting defensive stock) and trading at 18 times trailing earnings. Brookside Capital, which is Bain Capital’s long/short hedge fund, was buying between October and December and closed 2012 with a total of 5.3 million shares (check out more stocks Brookside was buying).

Lone Pine most recently disclosed ownership of 2.8 million shares of Equinix Inc (NASDAQ:EQIX), an $11 billion market cap data center services company. 19% of the float is held short as a number of market players are bearish. Current market expectations are for very high earnings growth- the forward P/E multiple is 47- but the numbers from the first quarter of 2013 show “only” 10% revenue growth versus a year earlier which is lower than we’d expect to see at that pricing. Paulson & Co., billionaire John Paulson’s hedge fund, had 2.1 million shares in its portfolio at the beginning of January (see Paulson’s stock picks).

The fund slightly trimmed its stake in QUALCOMM, Inc. (NASDAQ:QCOM), by 5%, leaving Mandel with 6.5 million shares per the filing. Net income declined in its most recent quarter compared to a year ago, but this was entirely due to income from discontinued operations in that period- income from continuing operations rose by 30%, essentially in line with sales figures. With earnings multiples in the teens, QUALCOMM, Inc. (NASDAQ:QCOM) could offer “growth at a reasonable price.” QUALCOMM, Inc. (NASDAQ:QCOM) had made our list of the most popular tech stocks among hedge funds in the fourth quarter of 2012 (find more tech stocks hedge funds love).

Disclosure: I own no shares of any stocks mentioned in this article.