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Billionaire Stephen Mandel’s Turns Bearish on Consumer Stocks; Gets More Bullish on Tech

Lone Pine Capital was started in 1997 by “Tiger Cub” Stephen Mandelwho is regarded as one of the most successful hedge fund managers in recent times with Lone Pine Capital ranking among the largest hedge funds in the world. His fund has a stellar track record of significantly outperforming the broader markets. However, Lone Pine Capital LLC was down by 2%, according to the Wall Street Journal.

In its latest 13F filing, Lone Pine Capital reported an equity portfolio worth around $19.2 billion, down from $22.40 billion a quarter earlier. The top ten holdings constituted almost 45% of its total 13F portfolio. During the fourth quarter, Stephen Mandel’s fund  acquired stakes in seven stocks and closed six positions. In this article, we are going to take a closer look at some of Lone Pine’s largest moves from the fourth quarter.

For further reading, don’t miss our list of the 140 biggest activist hedge funds.

Lone Pine Capital 2015 Q2 Investor Letter

We follow over 700 hedge funds and other institutional investors and by analyzing their quarterly 13F filings, we identify stocks that they are collectively bullish on and develop investment strategies based on this data. One strategy that outperformed the market over the last year involves selecting the 100 best-performing funds and identifying the 30 mid-cap stocks that they are collectively the most bullish on. Over the past year, this strategy generated returns of 39.7%, topping the 24.1% gain registered by S&P 500 ETFs. Insider Monkey’s enhanced small-cap strategy registered gains of more than 45% over the last 12 months and outperformed SPY by more than 30 percentage points in the last 4.5 years (see the details here).

Lone Pine Capital added 3.35 million shares of Activision Blizzard, Inc. (NASDAQ:ATVI) to its equity portfolio during the fourth quarter and held 20.64 million shares worth $745 million at the end of December. On the other hand, Daniel Och’s OZ Management sold 3.19 million shares of Activision Blizzard, Inc. (NASDAQ:ATVI) having reduced its total holding to 7.41 million shares. Activision Blizzard, Inc. (NASDAQ:ATVI) recently has hired Tim Kilpin, a former employee of Mattel and Disney, in a move should enhance audience engagement of the $34 billion entertainment powerhouse. In addition, the company also announced the launch of a newly created Consumer Products division, which will enable Activision Blizzard, Inc. (NASDAQ:ATVI) to expand its platforms through which it offers its franchises to audiences. The company reported an online player community of 50 million for 2016, up by 3% on the year. While the number of funds that we track long Activision Blizzard, Inc. (NASDAQ:ATVI) decreased by three to 61 during the last quarter, the value of their holdings declined by 34.5% to $2.77 billion.

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Lone Pine Capital cut its stake in Dollar Tree, Inc. (NASDAQ:DLTR) by 6.07 million shares to 9.31 million shares worth $719 million. Another fund that cut its exposure to the stock was Steve Cohen’s Point72 Asset Management, which sold 302,106 shares and held 1.91 million shares at the end of December. Dollar Tree, Inc. (NASDAQ:DLTR) operates more than 14,000 stores across 48 states and five provinces in Canada under Dollar Tree, Family Dollar and Dollar Tree Canada brands. The stock has underperformed the market by gaining just 3% over the last year.  For full fiscal 2016, the company expects to report revenue between $20.67 billion and $20.77 billion, while earnings per share are projected at $3.67 to $3.76. The number of funds from our database long Dollar Tree, Inc. (NASDAQ:DLTR) in their portfolios inched up by to to 65 during the October-December period.

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In Alibaba Group Holding Ltd. (NYSE:BABA), Stephen Mandel’s fund boosted its stake by 47% over the quarter to 7.62 million shares worth $669 million. Fellow Tiger Cub Philippe Laffont’s Coatue Management also shared the bullish sentiment and increased its position by 1.47 million shares to 4.25 million shares. The shares of Alibaba Group Holding Ltd (NYSE:BABA) have rallied by 66% over the last year. A leading e-commerce player in China, the company has also diversified into gaming, digital payments, and financial services. For the third quarter of fiscal 2017, the company reported earnings of $9.02 per share on revenues of $53.25 billion, which exceeded the consensus estimates of $7.74 and $50.15 billion, respectively. A growing cloud computing and core e-commerce business led to better than expected quarterly performance. At the end of the fourth quarter, 86 funds tracked by us held shares of Alibaba Group Holding Ltd (NYSE:BABA) worth $5.89 billion in aggregate, versus 104 funds with stakes valued at $8.26 billion at the end of September.

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Lone Pine Capital grew bearish on Yum! Brands, Inc. (NYSE:YUMand sold its entire holding which had contained 6.26 million shares during the fourth quarter. Among other sellers of Yum! Brands, Inc. (NYSE:YUM) were Ken Griffin’s Citadel Investment Group, Dan Loeb’s Third Point and Israel Englander Millennium Management. The company owns leading brands such KFC, Pizza Hut and Taco Bell, which have 42,000 restaurants in over 130 countries and territories. Yum! Brands, Inc. (NYSE:YUM) reported earnings of $0.79 per share for the fourth quarter of 2016, topping the consensus estimate of $0.74. However, revenue of $2.02 billion missed the expected $2.09 billion figure. It benefited from strong sales registered by KFC and Taco Bell segments, but Pizza Hut sales fell by 2% during the quarter. Though the number of hedge funds from our database bullish on Yum! Brands, Inc. (NYSE:YUM) stock remained unchanged at 42, the value of their holdings declined by 43% to $2.3 billion during the last quarter.

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Lone Pine Capital also exited its position in Monster Beverage Corporation (NASDAQ:MNST) as it sold 12.44 million shares. On the other hand, Point72 Asset Management bought 312,000 shares of Monster Beverage Corporation (NASDAQ:MNST) and held 796,800 shares at the end of 2016.  The company announced a 3:1 stock split in October last year. The manufacturer of energy fruit drinks and natural soft drinks should gain from a declining trend in consumption of carbonated soft drinks. Shares of Monster Beverage Corporation (NASDAQ:MNST) declined by more than 10% in 2016. During the fourth quarter, the number of funds from our database holding shares of Monster Beverage Corporation declined by four to 35, while the aggregate value of their positions slid to $931 million from $1.69 billion.

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Disclosure: none