Viking Global’s top stock pick for the second quarter was the same as the third largest position that Lone Pine owned: Priceline.com Inc (NASDAQ:PCLN). The online travel company has offered excellent growth: it is up 21% this year, it has nearly doubled from its level two years ago, and it is up an impressive 620% from five years ago. Past performance is no guarantee of future returns, but we can see why both Halvorsen and Mandel think that this appreciation in share price is likely to continue. In its most recent quarter earnings rose 37% compared to the same period in 2011, roughly half of which was driven by revenue (up 20%) and the rest by higher margins. The trailing P/E is 24, which is not high enough to cover the earnings expectations generated by Wall Street analysts: their projections imply a forward earnings multiple of 16 and a five-year PEG of 0.9. Both funds increased their Priceline holdings in the second quarter: Viking Global by 69% and Lone Pine by 4%. Billionaires Chase Coleman and Ken Fisher are also among fund managers with large Priceline.com Inc (NASDAQ:PCLN) positions (see Ken Fisher’s new stock picks).
Viking and Lone Pine also increased their holdings of Apple Inc (NASDAQ:AAPL), and the stock now occupies the #5 and #1 spots in each fund’s portfolio, respectively, according to their 13Fs. In this case Lone Pine increased its position by 13% while Viking Global, which had previously only had a moderate position in the stock relative to the fund’s size, brought its position up to about 980,000 shares. On a quantitative basis Apple Inc (NASDAQ:AAPL) is a great stock: it trades at a trailing P/E of 16 and has been growing its revenue and earnings at a strong clip. Given analyst expectations, the forward P/E is 13. It also has a strong market position and a dedicated fan base. The only question is whether or not such a large company can continue to deliver similar growth rates even as competition on smartphones and tablets intensifies. Apple topped our list of the ten most popular stocks among hedge funds in the second quarter of 2012. Billionaire David Einhorn is also very bullish about Apple Inc (NASDAQ:AAPL) which is the top stock in Greenlight Capital’s portfolio (see David Einhorn’s top picks).
Both funds had large positions in Visa (NYSE:V), though there was a divergence in the movements each manager made in the stock. Visa fell out of Lone Pine’s top ten holdings due to selling, though the fund still owned 3.3 million shares; Viking Global, as it did with Apple, added heavily to a previously moderate position in Visa and now the credit card issuer is that fund’s third largest stock holding at 4.9 million shares. Fellow credit card company Mastercard (NYSE:MA) is another top Viking holding. This suggests that Halvorsen and his team are getting particularly bullish on credit card companies, as mentor Julian Robertson recommended last fall. Visa trades at a forward P/E of 18 and a five-year PEG of 1.1, so even with its 61% rally over the last year sell-side analysts think the stock could have further to rise. Visa also expresses a (perhaps surprisingly) moderate relationship with the overall market at a beta of 0.8; as Robertson explains, the credit card issuers do not bear much credit risk. Warren Buffett’s Berkshire has a position in Visa as well but it was reduced by 27% over the second quarter (see Warren Buffett’s new bullish bets).
All three of these consensus picks by two of the top Tiger Cubs are growth machines. Between the three, we like Priceline.com Inc (NASDAQ:PCLN) the best: it has very high growth and doesn’t have as many big names lining up to compete with it as Apple Inc (NASDAQ:AAPL) does. The multiples are fairly low considering the growth rate and we’re further encouraged by the strong positions both funds are taking in the stock.
