Our research has shown that the most popular small-cap picks amongst hedge funds have historically outperformed the market by 18 percentage points. Thus, looking into Stephen Mandel’s Lone Pine Capital’s picks might provide us with some attractive investment options -he last declared holding long stakes in 47 publicly traded companies, with a focus on technology and services stocks.
Mandel’s most valuable small-cap position barely made it to this list, in account of its $5.3 billion market cap. Realogy Holdings Corp (NYSE:RLGY) is a provider of residential real estate services in the U.S. Over the first quarter of 2014, Lone Pine increased its exposure to the company by 4%. The 12.9 million shares of Realogy Holdings Corp (NYSE:RLGY) are worth more than half a billion dollars, according to the last 13F filing, and account for approximately 2.5% of the fund’s total equity portfolio’s value. In addition, Lone Pine is the largest hedge fund shareholder of the company – amongst the roughly 700 funds that we keep track of, trailed by John Paulson’s Paulson & Co., which owns 12 million shares of Realogy Holdings Corp (NYSE:RLGY).
Next is a newcomer at Mr. Mandel’s equity portfolio: LPL Financial Holdings Inc (NASDAQ:LPLA), a $4.99 billion market cap provider of brokerage and investment advisory services. The fund’s recently acquired 8.518 million shares are worth more than $477 million, and make it, once again, the largest hedge fund shareholder of LPL Financial Holdings Inc (NASDAQ:LPLA). Another prominent investor betting on LPL Financial Holdings Inc (NASDAQ:LPLA) is Millennium Management’s Israel Englander, who recently upped its exposure by 749%, to 514,216 shares.
Third in this list is SouFun Holdings Limited (NYSE:SFUN), a $3.99 billion market cap real estate Internet portal in China. This company is too a newcomer at Lone Pine’s equity portfolio.The fund holds 4.426 million shares of SouFun Holdings Limited (NYSE:SFUN), worth more than $300 million, make it – yet again – the biggest hedge fund investor at the company. John Burbank’s Passport Capital also seems to like SouFun Holdings Limited (NYSE:SFUN), since it last declared having upped its stake by 7%, to 2.378 million shares.
Another one of Mandel’s top small-cap stock picks is DSW Inc. (NYSE:DSW), a $2.55 billion market cap branded footwear & accessories retailer. Over Q1, Lone Pine acquired 91,700 shares of the company, taking its holdings to 6.953 million shares, valued at approximately a quarter of a billion dollars. As you might imagine by now, the fund is –one more time- the bulkiest hedge fund investor in the company. In addition, as reported last week, Citadel Investment Group, managed by Ken Griffin, disclosed an increase in its position in DSW Inc. (NYSE:DSW). According to a new filing with the U.S. Securities and Exchange Commission, the fund owns 4.54 million shares of class A common stock of DSW Inc. (NYSE:DSW), up from 4.48 million shares reported previously. The stake is equivalent to 5.5% of the class and is passive by nature.
Last, but not least, is Lumber Liquidators Holdings Inc (NYSE:LL). This $2 billion market cap specialty retailer of hardwood flooring also has Mr. Mandel as the largest hedge fund stockholder. His 2.619 million shares (up 429% over Q1), worth roughly $250 million account for 1% of the fund’s equity portfolio. Recently, Steven Cohen‘s Point72 Asset Management declared an increase of its position in Lumber Liquidators Holdings Inc (NYSE:LL), from 310,722 shares disclosed in its last 13F filing, to 707,528 shares.
Disclosure: Javier Hasse holds no position in any stocks mentioned
