Below are the top 5 stock picks of billionaire Stephen Mandel’s Lone Pine Capital. For a comprehensive list see Billionaire Stephen Mandel’s Lone Pine Is Embracing The Tech Revolution.
5. Coupa Software Incorporated (NASDAQ: COUP)
Coupa Software Incorporated has helped Lone Pine Capital to beat the broader market index in 2020. Shares of Coupa Software rallied 12.56% in the last three months and the stock price is up more than 100% in the last twelve months.
Billionaire Stephen Mandel’s hedge fund first initiated a position in Coupa Software during the second quarter of 2019 and the firm has increased its position by 103% in the September quarter. It is the fifth-largest stock holding of Lone Pine, accounting for 5.12% of the overall portfolio.
The company has generated revenue growth of 30.6% year over year in the September quarter, with the expectation that fourth-quarter revenues will stand in the range of $146M.
4. UnitedHealth Group Incorporated (NYSE: UNH)
Lone Pine Capital has increased its position in UnitedHealth Group Incorporated (NYSE: UNH) by 30% in the September quarter to 5.30% of the overall portfolio. Shares of UnitedHealth managed to top the broader market index in the final quarter and fiscal 2020.
Polen Capital Management claims in an investor’s letter that UnitedHealth has a strong integrated model, which will help in generating sustainable growth in the long-term. Here is what Polen Capital Management stated:
“We expect UnitedHealth Group to be able to grow earnings per share at a low-to-mid-teens rate over time with low cyclicality. In addition, we see little chance of a government-run health system in the U.S. due to the massive cost, especially at a time when federal budget deficits are tremendously high, plus several other factors. As such, we believe scaled players with strong integrated models that are already being utilized to run large parts of government programs will likely continue to play a large role for many years to come.”
3. Microsoft Corporation (NASDAQ: MSFT)
Microsoft Corporation (NASDAQ: MSFT) is the long-running investment of Lone Pine Capital. The hedge fund has raised its stake by 3% in the September quarter. It is the third-largest stock holding of Tiger cub’s hedge fund, accounting for 5.84% of the overall portfolio.
The share price of Microsoft underperformed in the last three months, but the technology giant has topped the broader market index in the last twelve months. Moreover, the company has returned significant cash to investors in the form of dividends.
RiverPark Capital was also right about betting on MSFT early on. Here is what they said 1.5 years ago:
“Microsoft: Microsoft shares were our next top contributor driven by the company’s solid fiscal third quarter results, as well as the strong rebound in technology shares during the month (especially for those firms, like MSFT, that are not currently targets of antitrust investigations ). For its fiscal third quarter (ending March), MSFT’s Commercial Cloud revenue grew 41% yearover-year to $10 billion, generating more than 30% of Microsoft’s total revenue. The company’s two other segments, Productivity and Business Processes and More Personal Computing, grew a combined 14% as overall company revenue grew 16% and Non-GAAP EPS grew 20%.
Microsoft has, we believe, entered a second chapter of market-leading growth that will drive the company’s revenue and profits for years to come. Microsoft’s Cloud Infrastructure offering is in the fastest growing segment of the cloud services market (including software-as-a-service (SaaS)), a market that is characterized by recurring revenues, strong pricing, high levels of customer engagement and high margins. The overall Infrastructure-as-a-Service (IaaS) industry is growing more than 30% per year and is forecast to reach $100 billion of revenues by 2021. We believe that cloud-based services can become the company’s largest revenue and earnings producer and expect Microsoft to generate significant and growing free cash flow ($11 billion last quarter, up 19% year-over-year). The company should deliver at least mid-to-high teens EPS growth, with upside from deploying its $134 billion cash balance ($7 billion was returned to shareholders in the quarter through dividends and share buybacks). We trimmed our position on strength, and Microsoft remains a top five position in in the Fund.”
2. Facebook, Inc. (NASDAQ: FB)
Billionaire Stephen Mandel’s hedge fund has also benefited from its Facebook (NASDAQ: FB) position in 2020. Indeed, the hedge fund looks optimistic over the future fundamentals of the social media giant. Lone Pine Capital raised its position by 11% in Facebook during the September quarter to 6.60% of the overall portfolio.
Shares of Facebook underperformed compared to the S&P 500 in the last three months but outperformed in the past twelve months.
Facebook ranks #3 among the 30 most popular hedge fund stocks. Here is the bearish thesis on Facebook written by The LT3000 Blog. Here is a brief summary:
“Perception of sustainable high growth rate with low risk owing to durable structural drivers, has made FB a darling for both growth and value investors alike. Here are a few legitimate concerns about the survival of FB’s earnings growth.
(1) Number of users: Despite steady growth in its DAUs/MAUs, FB has already captured the vast bulk of the world’s high-value users with affordability of smart phone, access to internet and high budget for products and services advertised on its online platforms.
(2) Amount of time spent: As social media, gaming, streaming and many other apps vie to share the limited 24 hour-a-day time of the user, his/her attention is bound to be divided. The attention saturation will eventually turn every new platform cannibalistic at the cost of success of another, rather being additive to the overall attention industry. This could very well lead to a vicious cycle of fewer visits, UGC, less frequent visits (and scrolling dwell-time), as there is less UGC to consume, leading to even less visits, etc.
(3) Cyclical industry and over capacity: As the advertisement industry is notoriously cyclical, the backdrop of incremental technology infrastructure (supply) growing faster than decreasing user visits (demand) could force FB to become yet another name in the long list of similarly failing companies and industries over the past century.
(4) Unicorn bust: In the event of a virtually inevitable VC/Unicorn bust, unlike Alphabet (GOOG), which has valuable and reliable iCloud business, FB’s could be vulnerable to a serious dent in its revenues.
Therefore, a deep long position held by investors confronted by a slew of dangers indicates that a permanent growth in FB should not be assumed. This doesn’t mean that you should short Facebook, but definitely avoid a long position here.”
1. Shopify Inc. (NASDAQ: SHOP)
Shopify (NASDAQ: SHOP) is the largest stock holding of billionaire Stephen Mandel’s 13F portfolio, accounting for 7.59% of the overall portfolio. Shopify has helped Lone Pine Capital to beat the broader market index in 2020. Shares of Shopify rallied 164% in the last twelve months and its stock price is up more than 7.40% in the last three months. Staying at home policies and consumer’s shift towards online platforms added to the SHOP’s stock price performance in 2020.
Please also see Is George Soros Still Good At Picking Stocks At The Age of 90? and Short Selling Legend Jim Chanos’ Top 10 Stock Picks and Tesla, IBM Comments
