Billionaire Stephen Mandel is respected for his “bottom-up” investment approach that has returned an average of around 23% over the past 11 years. At the end of the first quarter of 2015, his Lone Pine Capital hedge fund had $34.98 billion in assets under management. The fund filed its 13F filing with the U.S. Securities and Exchange Commission for the reporting period of March 31 last month, showing that it had $26.42 billion worth of holdings in its public equity portfolio, up from $23.85 billion at the end of the previous quarter. Mandel launched Lone Pine in 1997 after he left Julian Robertson‘s Tiger Management. His fund boasts a diversified portfolio, having larges stakes in technology, services, and healthcare, among other sectors. In this article, we will look at Mandel’s top new picks from the latest filing period, which are Williams Companies Inc (NYSE:WMB), Nike Inc (NYSE:NKE), and Allergan PLC (NYSE:AGN).
At Insider Monkey, we track hedge funds’ moves in order to identify actionable patterns and profit from them. Our research has shown that hedge funds’ large-cap stock picks historically delivered a monthly alpha of six basis points, though these stocks underperformed the S&P 500 Total Return Index by an average of seven basis points per month between 1999 and 2012. On the other hand, the 15 most popular small-cap stocks among hedge funds outperformed the S&P 500 Index by an average of 95 basis points per month (read the details here). Since the official launch of our small-cap strategy in August 2012, it has performed just as predicted, returning over 144% and beating the market by more than 84 percentage points. We believe the data is clear: investors will be better off by focusing on small-cap stocks utilizing hedge fund expertise rather than large-cap stocks.
Let’s first look at Williams Companies Inc (NYSE:WMB) in which Lone Pine Capital held a total of 12.02 million shares with a market value of $607.85 million at the end of the first quarter of 2015. The investment represents 2.3% of the fund’s total holdings, and being a new purchase, it’s a significant investment, even for a company with billions in equity exposure. Let’s try to understand why an experienced investor like Mandel would want to own a stake in the Tulsa, Oklahoma-based energy company. First, Williams Companies Inc (NYSE:WMB) is in a sector that’s expected to post better performance in general going forward. Moreover, this is one of the companies that embraced what has been widely referred to as the “Internet of Things”, having installed sensors in its pipelines for decades. While this might have appeared unimportant at the initiation stage, a new app has made it an important aspect of the company’s operations, helping in monitor and resolve detected slowdowns in the flow of natural gas. The app, called Pi, has made it possible for the company to boost its revenue by between $1-2 million. Over the past three months, the company has registered 3.11% growth. In Williams Companies Inc (NYSE:WMB)’s most recent results, it posted $0.16 in earnings per share, beating Thomson Reuters’ consensus estimate of $0.15. Williams Companies Inc’s earnings per share for the same quarter last year was $0.28. A total of 60 hedge funds from our database were invested in the stock with eight being run by billionaires, with the latter accounting for an aggregate $1.29 billion in investment value. A few of these billionaire funds are Daniel S. Och‘s OZ Management, D.E Shaw’s D E Shaw, and Jorge Paulo Lemann’s 3G Capital.
Nike Inc (NYSE:NKE) has been an attractive brand and an attractive stock for many years. At the end of the first quarter of 2015, Lone Pine Capital held a total of 5.68 million shares of the stock with a market value of $569.74 million. The Beaverton, Oregon-based designer and manufacturer of footwear, apparel, accessories, and equipment has had a healthy and improving bottom line as the brand grows globally. It is for such reasons, and its consistency that it impresses investors. Now, the company has inked an 8-year deal with the National Basketball Association to be the official on-field gear and apparel face of the league, beginning from the 2017-18 season. Nike Inc (NYSE:NKE) has also introduced NIKEiD, a service that allows customers to design their apparel online and add their preferred features, resulting in increased online revenue. The company’s most recent quarterly results showed that it pulled in $0.89 in earnings per share, beating Thomson Reuters’ consensus estimate of $0.84. Analysts expect it to post $3.55 in earnings per share for the current financial year. We recently compared Nike’s stock to one of its rivals, Under Armour Inc (NYSE:UA) and concluded that it was the better of the two stocks at this time, and worthy of a small buy. At the end of the quarter, a total of six billionaire hedge funds had stakes in the stock, accounting for an aggregate of $849.39 million in investment. Ken Griffin’s Citadel Investment Group was among those billionaire funds.
Actavis PLC recently went merged with Allergen and is now officially Allergan PLC (NYSE:AGN). The Dublin, Ireland-based pharmaceutical company specializes in developing and manufacturing branded pharmaceutical products. The Botox-maker provides products for diverse uses, including eye care, gastroenterology, urology, women’s health, and more. After the merger that saw the company change its name, it is now set to purchase Kythera Biopharmaceuticals in a $2.1 billion cash deal expected to be concluded in the third quarter of 2015. Kythera Biopharmaceuticals is a biopharmaceutical company that develops and sells drugs and related medical equipment. It is the maker of the recently FDA approved double-chin treatment, Kybella. Allergan PLC (NYSE:AGN) is focused on increasing Kythera Biopharmaceuticals’ sales in the U.S. beyond the $500 million target that the company’s management recently set. While analysts say it is a good move by Allergen to make the acquisition, Kythera Biopharmaceuticals has not made a profit since its initial public offering in 2012. Such analysts argue that the purchase is a long-term strategy and an effort to boost Allergan PLC’s global position in aesthetics. The company’s performance in the first quarter of 2015 beat analysts’ forecast, posting $4.30 in earnings per share against $3.84 predicted by analysts. On average, analysts expect the stock to post earnings per share of $17.85 for the current fiscal year. At the end of the first quarter, a total of 26 billionaires we track had stakes in the stock, far more than were invested in any other stock, with their total holdings amounting to $10.52 billion. Andreas Halvorsen‘s Viking Global, John Paulson’s Paulson & Co, and Daniel S. Och’s OZ Management are some of the billionaire hedge funds that were invested in the stock.