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Lone Pine Capital’s 32 Stock Portfolio: Top 10 Holdings Analyzed

by All News Admin
July 1, 2021
in Investment
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Up to date on June thirtieth, 2021 by Nikolaos Sismanis

Lone Pine Capital is an American-based hedge fund headquartered in Greenwich, Connecticut. It was established in 1997 by its president and managing director Stephen Mandel. Lone Pine Capital is well-known for its distinctive returns due to the experience of Stephen Mandel. The fund has round $27.5 billion price of property beneath administration (AUM), the vast majority of which is invested in publicly-traded firms.

Buyers following the corporate’s 13F filings over the past 3 years (from mid-Might 2018 by means of mid-Might 2021) would have generated annualized complete returns of 28.76%. For comparability, the S&P 500 ETF (SPY) generated annualized complete returns of 18.60% over the identical time interval.

You possibly can obtain an Excel spreadsheet with metrics that matter of Lone Pine Capital’s present 13F fairness holdings under:

Word: 13F submitting efficiency is totally different than fund efficiency. See how we calculate 13F submitting efficiency right here.

This text will talk about Lone Pine Capital’s funding technique and portfolio holdings.

Desk Of Contents

Lone Pine Capital’s Holdings

Lone Pine Capital has achieved spectacular annualized returns over the previous few years, outperforming the S&P 500 by a large margin. The excellent efficiency has resulted from the administration’s competency in figuring out and investing in firms within the high-growth tech sector.

The portfolio of the fund virtually completely consists of expertise shares, and thus it has some exceptional traits. Solely 5 out of the 32 shares included within the portfolio pay a dividend whereas the typical ahead price-to-earnings ratio is extraordinarily excessive, standing over 100.0 (excluding the non-meaningful earnings a number of of some shares).

In the course of the earlier quarter, Lone Pine Capital made the next noteworthy modifications to its portfolio.

New Buys:

  • ICICI Financial institution Ltd. ADR (IBN)
  • Workday Inc (WDAY)
  • Insulet Corp (PODD)
  • Qualtrics Intl Inc (XM)

New Sells:

  • Autodesk, Inc. (ADSK)
  • DocuSign Inc (DOCU)
  • Amicus Therapeutics Inc (FOLD)
  • Howmet Aerospace Inc. (HWM)
  • Humana, Inc. (HUM)
  • XP Inc. (XP)

The highest 5 holdings of the inventory portfolio comprise 37% of its complete worth. It’s thus evident that Lone Pine Capital has excessive conviction in its main holdings.

Supply: 13F filings, Writer

Lone Pine Capital’s prime 10 holdings comprise 60.7% of its complete portfolio and include the next equities:

Shopify (SHOP):

Shopify is Lone Pine Capital’s largest holding, comprising 8.0% of the whole worth of its portfolio. The stake was initiated in 2019, at costs between $195 and $328, with the inventory having delivered multi-bagger returns since, now standing at $1473.

Shopify gives a cloud-based commerce platform, which permits retailers to adapt to the e-commerce period. The corporate clearly advantages from a secular pattern, which has many years forward to run, particularly the shift of customers from brick-and-mortar purchases to on-line purchases. The pandemic has brought on this long-term pattern to speed up at an unlimited tempo.

In consequence, Shopify noticed its revenues develop by 85.6% YoY in 2020. Because of the firm’s recurring revenues, accelerated development, and constructive catalysts surrounding e-commerce, the inventory is at the moment buying and selling a ahead value/gross sales of 39, one of many highest valuation multiples within the business.

Due to the immense development potential of its enterprise, Shopify is more likely to continue to grow its revenues and its earnings at a wide ranging tempo for a number of extra years. Nonetheless, the market has already priced an ideal portion of future development within the inventory value. To supply a perspective, the inventory is at the moment buying and selling at 61 occasions its anticipated earnings in 2025. In consequence, the inventory can have materials draw back danger each time it faces an unexpected headwind.

Lone Pine trimmed its place by 4% through the quarter.

Microsoft (MSFT):

Microsoft’s diversified portfolio of tech services has dominated the tech sector’s digital infrastructure. The corporate’s CEO Satya Nadella has remodeled the corporate right into a cloud powerhouse. In consequence, Microsoft has managed to speed up its development and put up all-time excessive earnings within the final two years.

Microsoft is now a mega-cap inventory with a market capitalization of $2.0 trillion.

Supported by the corporate’s sturdy profitability, administration has been persistently elevating buybacks over the previous decade to additional reward its shareholders. The quantity allotted to inventory repurchases has reached new all-time highs over the previous 4 quarters, at almost $26B.

Income development stays within the double-digits, so it’s more likely to see capital returns accelerating shifting ahead. The corporate can also be rising the dividend at a double-digit price, although on the present yield, which stands under 1%, buyers ought to anticipate the vast majority of their future returns within the type of capital features.

Regardless of that, Microsoft’s money place has been rising frequently, with the corporate at the moment sitting on prime of an enormous $125 billion money pile.

Additional, whereas many firms have chosen to make the most of the present ultra-low rates of interest to boost low cost debt and purchase again inventory, Microsoft’s method has been prudent and considerate. Not solely are present earnings extensively masking buybacks (59% buyback “payout ratio”), however long-term debt has been considerably diminished from $76 billion in mid-2017 to round $55 billion as of its final report.

It’s spectacular {that a} inventory with a market capitalization of $2 trillion, nonetheless has such a powerful development momentum. Shares are additionally buying and selling a P/E ratio of round 32, which is sort of cheap for a dominating tech behemoth.

Lone Pine seemingly finds Microsoft nonetheless proceed engaging, because the place was hiked by 23% quarter-over-quarter.

The specialty retailer behind Victoria’s Secret had an terrible previous couple of years, with retail gross sales struggling massively. COVID-19 including further strain to retail places, and the corporate’s shares collapsed to round $8 through the March of 2020, from round $97 4 years in the past. Melvin doubled its place through the inventory’s nosedive, making a pleasant revenue on the way in which again up.

The fund trimmed its place by round 59% over the past quarter. With shares surging even additional over the previous few months amid the corporate’s higher than anticipated restoration, the fund seemingly offered off a big chunk of its place for diversification causes.

The corporate has proven incredible restoration indicators, with its most up-to-date Q1 quarter exhibiting gross sales development of 83% to $3.02 billion. Comparable gross sales additionally elevated by +7% vs. -5% within the comparable interval final 12 months. Consequently, L Manufacturers shortly returned to profitability and even reinstated its beforehand reduce quarterly dividend. At round 11.6 occasions its ahead web revenue, the inventory could even nonetheless be a reduction regardless of its rally.

L Manufacturers is Lone Pine’s third-largest holding, with the place remaining fixed over the past quarter. The fund holds round 9.4% of the corporate’s excellent shares.

Fb Inc. (FB):

Fb is an amazing money cow, however with an issue. On the one hand, with sturdy financials, one in every of Wall St.’s healthiest stability sheets, and the perfect platform for advertisers to make the most of, Fb has been dominating the social media business. The corporate has reported an all-time excessive backside line of $33.7 billion over the previous 4 quarters, amid nice consumer development, which remained within the double-digits as soon as once more in its newest report.

For these causes, it could not be a whole shock if Fb paid a dividend in some unspecified time in the future sooner or later.

However, the inventory has failed to draw an acceptable valuation a number of, because the steep scrutiny it has confronted over the previous few years have made Fb, a non-investor-friendly firm. Fb missteps have been fairly detrimental in creating this narrative, particularly now that buyers are more and more extra anticipating ESG-friendly investments. The inventory is just buying and selling at round 25 occasions its underlying earnings, regardless of its speedy development.

With its ARPU (common income per consumer) nonetheless very sturdy, Fb’s financials are greater than more likely to proceed increasing quickly. Fb’s funding case right now doesn’t solely embrace the potential for a major upside but additionally comes with an ideal margin of security.

If such a valuation enlargement by no means seems, and Fb continues to commerce at a ahead P/E of round 25, at an EPS development price of 20%-30% within the medium time period (which the present consumer and APRU development trajectory might simply maintain), buyers ought to obtain equally passable returns with a continuing valuation a number of.

The inventory is Lone Pine’s 4th largest place, climbing amongst the fund’s largest holdings as a result of fund growing its place by 58% through the quarter.

Amazon (AMZN):

Being one of many 4 firms within the trillion-dollar-market-cap membership, Jeff Bezos’s firm is at the moment the third-largest on this planet, price round $1.76T. As the corporate’s steady developments carry on taking up the world each when it comes to its commerce and digital infrastructure, Amazon has turn out to be an unstoppable drive, inflicting its inventory to keep up substantial investor demand.

Nevertheless, buyers shouldn’t anticipate a dividend from Amazon anytime quickly.

Amazon delivered one other spectacular quarter just lately, with Q1 AWS web gross sales up 32% YoY to $13.5B, topping the 22.5% development price consensus estimate. Income grew to $108.52 billion, a 43.7% improve YoY, contributing to all-time excessive LTM (Final Twelve Month) gross sales of $419 billion.

On account of scaling its operations, the corporate’s web revenue margins have continually been evolving, reaching 6.42% throughout this era, turning Amazon into an more and more worthwhile development monster. The inventory is at the moment buying and selling at a ahead P/E of 58.5, however contemplating its EPS development, it may very well be an affordable valuation a number of.

The inventory accounts for 7.2% of Lone Pine’s portfolio.

UnitedHealth Group (UNH):

Lone Pine initiated its place in UnitedHealth again in 2017, that includes a mean buy value of round $234. United Well being advantages from the rising consumer-oriented well being profit plan market. It has grown its web revenue each single 12 months within the final decade and thus it has greater than quadrupled its earnings per share over this era. Due to the favorable tendencies in its enterprise and increasing margins resulting from economies of scale, it’s more likely to continue to grow its backside line at a double-digit price within the upcoming years.

We thus view its ahead price-to-earnings ratio of 21.7 as comparatively engaging and anticipate the inventory to proceed to extremely reward its shareholders. Nonetheless, resulting from its tiny yield, the inventory could not drastically attraction to income-oriented buyers.

Lone Pine trimmed its place by a slight 1% through the quarter. UnitedHealth is now Lone Pine’s sixth largest holding.

Snap (SNAP):

Few individuals had taken Snap severely again in its IPO days, resulting in shares declining as little as $5 in late 2018. Over the previous couple of years, nonetheless, the corporate has continued its regular and speedy development whereas creatively monetizing its viewers, which led to quickly rising revenues.

That mentioned, the corporate stays fairly unprofitable. It has by no means posted a constructive web revenue to this point. Nevertheless, at this price, Snap might generate its first earnings by 2022, if not the tip of 2021.

The place is comparatively new, initiated by Lone Pine throughout This fall-2020. It’s at the moment the fund’s seventh largest place.

Adobe Inc. (ADBE) :

Adobe is an distinctive enterprise, that includes a excessive margin recurring income mannequin in a enterprise which the corporate has primarily monopolized. Income development has been distinctive and sustained at a strong price, with the corporate breaking new data by the quarter.

Shares could seem value buying and selling at a ahead P/E of round 45, nonetheless, contemplating that Adobe is accelerating its inventory repurchases on the present a number of, the inventory may very well be pretty priced based mostly on its future prospects.

Lone Pine elevated its place by 29% through the quarter. It’s now the fund’s eighth largest holding.

MercadoLibre, Inc. (MELI):

MercadoLibre is commonly known as the “Amazon of Latin America,” using an identical enterprise mannequin. Just like all the opposite firms within the e-commerce business, MELI’s revenues noticed a lift from the staying-at-home financial system, at the moment that includes a 3-year income development CAGR of 54.7%. The corporate can also be flirting with profitability, which ought to finally develop in addition to quickly as MELI scales its margins a bit additional.

Lone Pine elevated its place by 19% through the quarter. Buyers needs to be cautious of the foreign money danger concerned, as MELI’s unique gross sales should not in U.S. {dollars}, however solely transformed afterward.

Coupa Software program (COUP)

Coupa Software program is a comparatively new inventory in Lone Pine’s portfolio that has ascended in direction of the corporate’s prime holdings. The corporate has been rising its revenues by the quarter, at the moment showcasing a $664 million run-rate based mostly on its newest $166 million in gross sales in Q1. Whereas the corporate stays extremely unprofitable, buyers admire its huge development, and shares are close to all-time highs. The inventory is buying and selling at almost 26 occasions its ahead gross sales, nonetheless, making Coupa an costly inventory on a valuation foundation.

Lone Pine barely trimmed its place through the quarter, by round 1%. It’s the fund’s tenth largest holding.

Closing Ideas

Lone Pine Capital invests solely in firms with large development potential and a large moat of their companies. In consequence, the great earnings development of those shares has greater than offset their preliminary wealthy valuation. However, buyers seeking to faucet into Lone Pine Capital’s holdings needs to be cautious of the fund’s lack of diversification and the tech sector’s sky-high valuations.

Further Assets

Alkeon Capital Administration’s 121 Inventory Portfolio: Prime 10 Holdings Analyzed

Bridgewater Associates’ 411 Inventory Portfolio: Prime 10 Holdings Analyzed

Maverick Capital’s 614 Inventory Portfolio: Prime 10 Holdings Analyzed

Baker Brothers’ 93 Inventory Portfolio: Prime 4 Holdings Analyzed

Appaloosa Administration’s 35 Inventory Portfolio: Prime 10 Holdings Analyzed

Thanks for studying this text. Please ship any suggestions, corrections, or inquiries to [email protected].





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