Earlier in August, billionaire and Tiger Cub Stephen Mandel’s Lone Pine Capital filed its 13F for the second quarter of 2013 with the SEC, disclosing many of its long equity positions as of the end of June. While the primary reason why we track 13F filings is as part of our work developing investment strategies- for example, the most popular small cap stocks among hedge funds tend to outperform the S&P 500 by 18 percentage points per year, with a model portfolio following this strategy beating the market by 33 percentage points in the last 11 months (learn more about our small cap strategy)– they’re also useful as a source of investment ideas.
For example, we also track insider purchasing activity having noticed that there tends to be a small outperformance effect for stocks bought by insiders (read our analysis of studies on insider trading). Using these databases we can look for stocks which Lone Pine owned according to its most recent filing and which at least one insider has purchased in the last three months. Here are four of the fund’s holdings satisfying this criteria (or see the full list of Mandel’s picks over time):
Mandel and his team reported a position of 7.4 million shares in Mead Johnson Nutrition CO (NYSE:MJN), which provides infant formula and other children’s nutrition products. Investors have bid up the stock price to 26 times trailing earnings on speculation that China will relax its one-child policy (China is a critical market for the company). In addition, food companies generally trade at high multiples in the current environment. Renaissance Technologies, founded by billionaire Jim Simons, trimmed its holdings but still owned 1.3 million shares according to its own 13F (find Renaissance’s favorite stocks).
We’ve also tracked insider buying activity at Dollar Tree, Inc. (NASDAQ:DLTR) in the past few months, another stock which appears on the fund’s 13F. In what has been a tough environment for many other discount retailers, Dollar Tree recorded 8% sales growth in its most recent quarter compared to the same period in the previous fiscal year with profits growth of 15%. Its beta of 0.1 is also lower than that of many larger peers. However, as with other dollar stores markets expect considerably more future earnings growth than at, say, Wal-Mart Stores, Inc. (NYSE:WMT); the trailing and forward P/Es are 19 and 16 respectively.
Liberty Media Corp (NASDAQ:LMCA) also satisfies our criteria of a stock recently bought by insiders and owned by Lone Pine. Mandel isn’t the only Tiger Cub who likes Liberty Media: Tiger Global, whose co-founders include billionaire Chase Coleman, owned 3.8 million shares of the stock at the end of the quarter (research more stocks Tiger Global owns). The company’s media and entertainment assets include the Atlanta Braves, a stake in Sirius XM Radio Inc (NASDAQ:SIRI), and the production of TV content. While it is valued at 46 times forward earnings estimates, the sell-side is highly bullish on future results and as a result the five-year PEG ratio is in fact less than 1.
Disclosure: I own no shares of any stocks mentioned in this article.
