Billionaire Stephen Mandel is Betting Big on Internet and Tech Stocks

Billionaire Stephen Mandel, one of the many “Tiger Cubs” who worked under Julian Robertson at Tiger Management for a time, founded Lone Pine Capital in 1997. In a quarterly letter to investors dated January 15, Lone Pine Capital revealed that internet-driven investments continued to account for the largest share of the firm’s long portfolio, as “the internet remains the single most important and disruptive economic phenomenon in the world” according to the letter. As stated in the aforementioned letter, the investment firm is shorting companies operating in areas such as advertising, media, retailing, technology, and travel, whose “longstanding economic models” are being dismantled by the rise of the internet. The 13F filing for the March quarter submitted with the SEC by Mr. Mandel’s firm reveals that Lone Pine’s top stock picks are mostly dominated by tech companies that have conquered the online space and continue to benefit from the expansion of the internet. That said, the following article will discuss Mr. Mandel’s top technology picks as of the end of the first quarter.

We believe that imitating hedge funds and other large institutional investors can be helpful in identifying stocks capable of outperforming the broader market. Through extensive research that covered portfolios of several hundred large investors between 1999 and 2012, we determined that following the small-cap stocks that large money managers are collectively bullish on, can generate monthly returns nearly 1.0 percentage points above the market (see more details here).

#5. JD.Com Inc. (ADR) (NASDAQ:JD)

 – Number of shares owned by Lone Pine Capital as of March 31: 22.08 Million

 – Value of Lone Pine Capital’s holding as of March 31: $585.10 Million

Lone Pine Capital trimmed its stake in JD.Com Inc. (ADR) (NASDAQ:JD) by 4.92 million American Depository Shares (ADSs) during the first quarter of 2016, to 22.08 million ADSs. The reduced stake was valued at $585.10 million at the end of the quarter and accounted for 2.9% of the fund’s portfolio. JD.Com, China’s largest internet company by revenue, has seen its market capitalization decline by 26% this year. The company’s net revenue for the first quarter was $8.4 billion, which marked a massive year-over-year increase of 47.3%. However, soon after JD.Com released its first quarter earnings report, analysts at MKM Partners cut their price target on the Chinese e-commerce giant to $32 from $34, though they maintained their ‘Buy’ rating on it, saying that “the key issue for the stock is related to profitability”. JD.Com recorded an increase of 55% in gross merchandise volume to $20.1 billion in the first quarter, after recording a year-over-year increase of 99% in the same quarter of 2015. Tiger Global Management, founded by Tiger Cub Chase Coleman, owns 44.01 million ADSs of JD.Com Inc. (ADR) (NASDAQ:JD) as of the end of March.

#4. Priceline Group Inc. (NASDAQ:PCLN)

 – Number of shares owned by Lone Pine Capital as of March 31: 791,637

 – Value of Lone Pine Capital’s holding as of March 31: $1.02 Billion

Stephen Mandel and his team also reduced their exposure to Priceline Group Inc. (NASDAQ:PCLN) in the first quarter, as Lone Pine cut its stake in the stock by 42,748 shares. The stake of 791,637 shares owned on March 31 was worth $1.02 billion and made up 5.1% of Lone Pine’s portfolio. Priceline Group, which provides customers with a wide range of accommodation reservations through its booking.com, priceline.com and agoda.com brands, has seen its shares advance by 3% in the past 12 months. Priceline has greatly benefited from the increased usage of the internet in recent years, as more consumers search for products and services online, as evidenced by the fact that its shares are up by an impressive 4,103% in the past ten years. The company’s total revenue for the three months that ended March 31 reached $2.15 billion, up from $1.84 billion recorded a year earlier. Lee Ainslie’s Maverick Capital had 262,612 shares of Priceline Group Inc. (NASDAQ:PCLN) in its portfolio at the end of the March quarter.

Three tech giants battle it out for the top spot in Mr. Mandel’s portfolio; see the battle unfold on the next page.

#3. Amazon.com Inc. (NASDAQ:AMZN)

 – Number of shares owned by Lone Pine Capital as of March 31: 1.99 Million

 – Value of Lone Pine Capital’s holding as of March 31: $1.18 Billion

The billionaire Tiger Cub’s hedge fund cut its Amazon.com Inc. (NASDAQ:AMZN) stake by 220,884 shares in the first quarter, to 1.99 million shares. The restructured stake was worth $1.18 billion at the end of the quarter and constituted 5.9% of Lone Pine’s portfolio. The online retail giant reported net sales of $29.13 billion for the first quarter of the year, up from $22.72 billion recorded a year earlier. North America sales jumped by 27% year-over-year to nearly $17.00 billion due to sustained efforts to reduce prices, sales in faster growing categories such as electronics, and an increased selection of product offerings. Amazon anticipates net sales of $28.0 billion-to-$30.5 billion for the second quarter, which would represent an increase of 21%-to-32% year-over-year. Shares of Amazon have gained 4% since the beginning of the year. Andreas Halvorsen’s Viking Global was the largest shareholder of Amazon.com Inc. (NASDAQ:AMZN) within our database at the end of March, holding 3.44 million shares.

#2. Facebook Inc. (NASDAQ:FB)

 – Number of shares owned by Lone Pine Capital as of March 31: 11.41 Million

 – Value of Lone Pine Capital’s holding as of March 31: $1.3o Billion

Facebook Inc. (NASDAQ:FB) received some love from Lone Pine Capital during the January-to-March period, as the asset manager upped its stake in the social networking giant by 1.63 million shares. The 11.41 million-share stake held at the end of March was valued at $1.30 billion and represented 6.5% of the fund’s portfolio. Fresh statistics reveal that around three million businesses are advertising on Facebook’s platform, an increase from roughly two million recorded in February of 2015. Nonetheless, this number will most likely keep increasing in the months and years ahead, as there is a staggering total of 50 million businesses that maintain Facebook pages as of the end of April. Therefore, Facebook’s main objective at this point in time involves preserving engagement on the social networking platform and getting those 50 million businesses to start advertising or increase their existing advertising spending. Shares of Facebook are 12% in the green year-to-date. John Armitage’s Egerton Capital Limited reported ownership of 5.89 million shares of Facebook Inc. (NASDAQ:FB) in its most recent 13F filing.

#1. Microsoft Corporation (NASDAQ:MSFT)

 – Number of shares owned by Lone Pine Capital as of March 31: 25.77 Million

 – Value of Lone Pine Capital’s holding as of March 31: $1.42 Billion

Microsoft Corporation (NASDAQ:MSFT) was the largest holding in Lone Pine Capital’s portfolio at the end of March, amassing 7.1% of the value of the portfolio. Mr. Mandel’s fund cut its stake in Microsoft by 1.49 million shares during the first three months of the year, ending the March quarter with 25.77 million shares valued at $1.42 billion. Earlier this week, Microsoft announced the divestiture of its low-end phone unit to FIH Mobile Limited and HMD Global for $350 million. HMD, a new Finnish company, has also acquired the rights to use Microsoft’s Nokia brand name, allowing it to create a wide array of Nokia-branded smartphones, tablets, and feature phones for the next ten years. Thus, the Nokia brand could make a strong return to the mobile phone and tablet markets in the near future, with reports stating that the devices will Android-based and developed by FIH Mobile, a subsidiary of Foxconn. Microsoft will continue to develop Windows 10 Mobile and Lumia devices. Ken Fisher’s Fisher Asset Management owned 18.22 million shares of Microsoft Corporation (NASDAQ:MSFT) on March 31.

Disclosure: None