We track hundreds of 13F filings from hedge funds such as billionaire Stephen Mandel’s Lone Pine Capital and other notable investors, using the included information to help us develop investment strategies (we have found, for example, that the most popular small cap stocks among hedge funds earn an average excess return of 18 percentage points per year). 13Fs are also a potential source of initial investment ideas; investors can see what top managers are doing and then perform further research on any intriguing names. Read on for our quick take on Lone Pine’s five largest holdings by market value as of the end of March and compare these picks to those in previous filings.
Mandel and his team reported a position of 1.8 million shares of Priceline.com Inc (NASDAQ:PCLN) at the end of the first quarter of 2013. Blue Ridge Capital, managed by John Griffin, is another of the many Tiger Cub funds which have been major shareholders in the travel reservations website (see Griffin’s stock picks). While Priceline is expensive in terms of its trailing earnings, with a P/E multiple of 28, the company has continued to experience high growth rates even as it has increased in size; specifically, earnings grew by 34% last quarter compared to the first quarter of 2012. Given its further growth potential the stock could be worthy of further research.
Lone Pine trimmed its stake in Google Inc (NASDAQ:GOOG) between January and March, but still owned 1.4 million shares according to the 13F. Our database shows that Google was the second most popular stock among hedge funds in Q1 2013 (check out the rest of our top ten list). Similarly to Priceline, Google’s trailing P/E is somewhat high (at 27) but the company has been growing its business in both its advertising (read: search) and Motorola related business segments. As such, Wall Street analysts are expecting earnings per share to increase going forward; consensus estimates for 2014 imply a forward P/E of 17.
Dollar General Corp. (NYSE:DG) was another of Mandel’s top stock picks with the filing disclosing ownership of over 14 million shares. As a general rule, the dollar stores are valued at small premiums to big-box discount retailers such as Target Corporation (NYSE:TGT) and Wal-Mart Stores, Inc. (NYSE:WMT) but as smaller businesses have better growth opportunities. Dollar General also boasts less market exposure than these two peers, with a beta of 0.1, though recent financials actually haven’t been that strong. Brookside Capital, a hedge fund which is part of the larger Bain Capital organization, had been a major shareholder at the beginning of January.
The fund increased its holdings of Monsanto Company (NYSE:MON) by 24% between January and March, pushing the agricultural technology company into its top five holdings. As with the rest of these picks, nobody would mistake Monsanto for a value stock- the trailing and forward P/Es are 22 and 20, respectively. While the sell-side actually seems to be forecasting slow earnings growth at the company, recent numbers have been very good as revenue rose 15% in its most recent quarter compared to the same period in the previous fiscal year (with net income up at a slightly higher rate). We’d be interested in taking a closer look at the company.
Disclosure: I own no shares of any stocks mentioned in this article.
