Here Are This Elite Fund’s Top 10 Stock Picks
In this article, we discuss the top ten stock picks of Stephen Mandel’s Lone Pine Capital. To skip the performance and investment philosophy of the firm, go directly to Here Are This Elite Fund’s Top 5 Stock Picks.
Lone Pine Capital was founded in 1997 by Stephen Mandel, Jr. and is headquartered in Greenwich, Connecticut. In 2019, Mandel announced that he would no longer manage investments of his hedge fund, but he remained a managing director of the firm.
Stephen Mandel Education and Early Career
Stephen Mandel received his Bachelor of Arts in government from Dartmouth College and completed his MBA from Harvard Business School in 1982. Mandel’s former classmates at Harvard include some prominent investing world figures such as Baupost Group’s Seth Klarman and Jamie Dimon, Chairman of the Board and Chief Executive Officer of JPMorgan. Seth Klarman has made the following comment about Stephen Mandel:
“Steve Mandel is the best industry analyst I’ve ever met, who became the best long-short hedge-fund manager of his generation.”
After receiving his MBA, Mandel worked as a senior consultant for two years and then joined Goldman Sachs as a consumer-retail analyst in 1984 and worked there till 1990. He is a Tiger Cub who joined Tiger Management as a consumer analyst and later became the managing director before founding Lone Pine Capital in 1997. As of November 20, Stephen Mandel has a net worth of $2.5 billion. He has lost around $1.1 billion since July 2023.
Lone Pine Capital Performance and Investment Philosophy
Lone Pine Capital’s assets under management (AUM) have not been disclosed, but according to several sources, the firm had assets under management of $15 billion as of the start of the third quarter of 2023. Lone Pine Capital calls itself a "research-driven, fundamental equity investor." Mandel’s investment philosophy revolves around his long/short equity strategy. In our second quarter report about Lone Pine Capital, we explained Mandel and his firm’s investment strategy in simple terms:
“The firm takes a look at companies' balance sheets, and their strength, and conducts research into their operations and markets to gauge a sense of their financial situation and future prospects. Mathematically, this includes projecting the future cash flows of a firm and then determining its fair value to check whether it's traded above or below this value on the stock market. This analysis can involve both factors that are intrinsic to a company - such as its management, product portfolio, or research strength - and the broader macroeconomic environment such as the ease of doing business and consumer spending power.”
Lone Pine Capital suffered heavily in 2022. The fund lost 47% between September 2021 and June 2022 and was the fourth worst-performing hedge fund during the period, and its AUM dropped by around 51% year-over-year (YoY). Lone Pine’s average annualized returns since inception were around 15% till July 2023.
According to TipRanks, Lone Pine Capital’s portfolio has gained 249.16% between June 2013 and 2023 and has recorded average annualized returns of 21.40% over the last three years.
Lone Pine Capital Q3 Bets
According to Lone Pine Capital’s third quarter 2023 13F filings, the firm's portfolio is valued at $10.372 billion, down from $10.9 billion in the second quarter. The firm is highly concentrated in the technology sector, and three out of four new stock picks in the company’s third-quarter portfolio are tech-related companies.
Lone Pine’s new purchases include Meta Platforms, Inc. (NASDAQ:META), Alphabet Inc. (NASDAQ:GOOGL), Block, Inc. (NYSE:SQ), and Tempur Sealy International, Inc. (NYSE:TPX). Lone Pine Capital also made additional purchases in 7 stocks. The firm closed out positions in 7 stocks, including Visa Inc. (NYSE:V) and NVIDIA Corporation (NASDAQ:NVDA), and reduced investments in 10 stocks.
Some of Lone Pine Capital’s top stocks include Meta Platforms, Inc. (NASDAQ:META), Amazon.com, Inc. (NASDAQ:AMZN), and Mastercard Incorporated (NYSE:MA). For more information about stock picks of other elite hedge funds, you can check out 12 Best Stocks to Buy According to Billionaire Paul Tudor Jones and Billionaire Jim Simons’ Top 12 High-Dividend Stocks.
Stephen Mandel of Lone Pine Capital
Our Methodology
For this article, we chose the top ten companies in Lone Pine Capital’s third-quarter 13F portfolio. The stocks are listed in the ascending order of their concentration in Lone Pine Capital’s 13F portfolio.
Here Are This Elite Fund’s Top 10 Stock Picks
10. PTC Inc. (NASDAQ:PTC)
Percentage of Lone Pine Capital’s Stock Portfolio: 4.32%
PTC Inc. (NASDAQ:PTC), previously Parametric Technology Corporation, is a company that specializes in the development of software products and associated services.
On November 2, Baird increased the price target on PTC Inc. (NASDAQ:PTC) stock to $182 from $173 and maintained an Outperform rating. The firm mentioned that the 2024 AAR outlook is promising, signaling a positive start as the company progresses toward achieving $1 billion in free cash flow.
On November 1, PTC Inc. (NASDAQ:PTC) posted its Q4 non-GAAP EPS of $1.20, topping the estimates by $0.06. Meanwhile, the quarter's revenue was $547 million, showing an increase of 7.7% YoY.
PTC Inc. (NASDAQ:PTC) is one of the top picks of Lone Pine Capital, along with Meta Platforms, Inc. (NASDAQ:META), Amazon.com, Inc. (NASDAQ:AMZN), and Mastercard Incorporated (NYSE:MA).
9. UnitedHealth Group Incorporated (NYSE:UNH)
Percentage of Lone Pine Capital’s Stock Portfolio: 4.33%
UnitedHealth Group Incorporated (NYSE:UNH) is a Minnesota-based company that offers health coverage, medicare plans, short-term health insurance, and Medicaid plans.
Over the last three months, 15 Wall Street analysts covered UnitedHealth Group Incorporated (NYSE:UNH) stock. 13 of the analysts keep a Buy rating on the stock, and the average analyst price target is $593.07.
On November 8, UnitedHealth Group Incorporated (NYSE:UNH) announced a quarterly dividend of $1.88. At the time of writing as of November 20, the company’s dividend yield was 1.40%.
Madison Investments mentioned UnitedHealth Group Incorporated (NYSE:UNH) in its third quarter 2023 investor letter. Here is what it said:
“The top contributors in the quarter were Eli Lilly, Jacobs, Alphabet, Costco, and UnitedHealth Group Incorporated (NYSE:UNH). UnitedHealth responded well to a solid second quarter, with a better medical loss ratio driving the better-than-expected results. Additionally, UNH modestly raised guidance for the full year.
We updated the sustainable scorecard for UnitedHealth Group. The company continues to have Above Average Corporate Governance with a clear policy on separating the roles of the Chair of the Board and the CEO. We also rate the company Above Average on Social factors due to its clear cybersecurity, privacy, and data governance policies. The company continues to diversify its top management positions, where 40% of top management positions are held by women, up from 37% in 2020. We reduced our Environment rating to Average from Above Average as the company has significantly expanded its footprint in the last few years by acquiring local providers. The company is at the beginning of its journey to source renewable electricity for 100% of its operations by 2030.”
8. Booking Holdings Inc. (NASDAQ:BKNG)
Percentage of Lone Pine Capital’s Stock Portfolio: 4.44%
Booking Holdings Inc. (NASDAQ:BKNG) provides services related to online travel, like booking accommodations, comparing prices, reserving rental cars, securing restaurant reservations, booking airline tickets, and more.
On November 2, Booking Holdings Inc. (NASDAQ:BKNG) announced its Q3 earnings result with a non-GAAP EPS of $72.32, beating the analysts’ estimates by $4.40. The revenue surged 21.3% YoY to $7.34 billion, surpassing the estimates by $80 million.
On November 10, Booking Holdings Inc. (NASDAQ:BKNG) announced the introduction of a new cruise platform on its website, which would help meet the rising customer demand for cruise bookings. The new platform will feature 10,000 sailings by more than 30 cruise lines, and the cruise offerings will cover 55 departure ports.
RiverPark Advisors mentioned Booking Holdings Inc. (NASDAQ:BKNG) in its third quarter 2023 investor letter. Here is what it said:
“Booking Holdings Inc. (NASDAQ:BKNG): BKNG was a top contributor in the quarter following better than expected bookings, revenue and profit margins in the company’s 2Q driven by strong summer travel demand. BKNG reported $40 billion of bookings, $5.5 billion of revenue, and 23% EBITDA margins, which were $1.5 billion, $300m, and two percentage points ahead of expectations, respectively. In addition to strong summer demand, management pointed to continued strength in leisure travel (they raised travel booking guidance for the remainder of the year), building momentum in its alternative accommodation business and improvement in marketing efficiency.
Booking is the world’s leader in online travel, operating in 200 countries with brands including Booking.com, priceline.com, agoda.com, Kayak, Rentalcars.com and OpenTable. The company has been a dominant on-line travel agency for more than a decade with a high-margin business model that requires limited capital expenditures, typically less than 3% of revenue, producing $6.2 billion of free cash flow for 2022 and $7.2 billion expected for 2024. The company has used its free cash flow for episodic acquisitions as well as to return cash to shareholders. BKNG is well positioned in travel as the largest player in online lodging bookings and the second largest player in alternative accommodations.”
7. Salesforce, Inc. (NYSE:CRM)
Percentage of Lone Pine Capital’s Stock Portfolio: 4.88%
Salesforce, Inc. (NYSE:CRM) is a cloud computing solutions service provider. The company has global offices in the Americas, Asia-Pacific, Europe, and Africa.
In the third quarter, Lone Pine Capital upped its stake in Salesforce, Inc. (NYSE:CRM)’s stock by 48% to nearly 2.5 million shares worth approximately $506.875 million, representing 4.88% of the fund’s portfolio.
Salesforce, Inc. (NYSE:CRM) stock was covered by 37 Wall Street analysts over the last three months and 24 of them kept a Buy rating on the stock. The average price target is $251.70, showing an upside of 12.81% at the time of writing on November 20.
Harding Loevner talked about Salesforce, Inc. (NYSE:CRM) in its second-quarter 2023 investor letter. Here is what it said:
“Salesforce, Inc. (NYSE:CRM), a company we’ve owned since 2019, recently added ChatGPT-like capabilities onto its existing Al module, Einstein, to support its internal sales efforts and customer-facing software. For example, Einstein GPT can help generate marketing emails tailored to specific clients by using Salesforce’s customer database and past email correspondence to learn the most effective approach for each client. Einstein GPT is also different from off-the-shelf LLMS in three important ways: It keeps personal identifiable information private and secure, compared with external tools that retain anything a user enters. It employs the latest data in Salesforce’s system, as opposed to the sometimes-stale public data that train generic models. And generative Al capabilities can be integrated with other Salesforce offerings; the company has already introduced Slack GPT and Tableau GPT, Al-equipped versions of its workplace collaboration and analytics tools.”
6. Workday, Inc. (NASDAQ:WDAY)
Percentage of Lone Pine Capital’s Stock Portfolio: 5.34%
Workday, Inc. (NASDAQ:WDAY) is an American cloud computing and enterprise software company. It was founded in 2005 and is headquartered in California. The company provides its services worldwide.
In Q3, Workday, Inc. (NASDAQ:WDAY) covered 5.34% of Lone Pine Capital’s portfolio with 2.58 million shares worth $554.231 million. The most prominent investor of the company in Q3 was Andreas Halvorsen’s Viking Global, with 5.2 million shares worth $1.125 billion.
Over the last three months, 25 out of 33 Wall Street analysts have maintained a Buy rating on Workday, Inc. (NASDAQ:WDAY). The average analyst price target for the company stands at $255.90, showing an 8% upside to its stock price on November 20 market close.
Meta Platforms, Inc. (NASDAQ:META), Amazon.com, Inc. (NASDAQ:AMZN), and Mastercard Incorporated (NYSE:MA) are some of Lone Pine Capital’s top stock picks, along with Workday, Inc. (NASDAQ:WDAY).
Here is what Baron Technology Fund has to say about Workday, Inc. (NASDAQ:WDAY) in its Q3 2023 investor letter:
“Despite near-term macro uncertainty, it’s important to frame that we find ourselves in the early innings of both the AI investment cycle and overall cloud penetration. We estimate cloud penetration to be between 25% and 30% versus the likely 70% to 75% level over time, if not even higher. AI deployments are literally just getting off the ground.Infrastructure and development platforms for securely storing and curating data, training and fine-tuning large-language and other AI models, and developing and delivering AI applications. Beneficiaries include Microsoft Azure and Amazon Web Services. Integration of generative AI capabilities, such as AI agents and copilots, directly into existing product offerings and customer workflows. Software vendors capitalizing on this opportunity includes Workday, Inc.“
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Disclosure. None. Here Are This Elite Fund’s Top 10 Stock Picks is originally published on Insider Monkey.