By Aubrey Tabuga
Lone Pine Capital LLC is a privately owned hedge fund which invests in public equity markets worldwide. It was founded by Stephen Mandel in 1997. Mr. Mandel uses both value and growth strategies. He goes after stocks that have valuations deemed lower than the intrinsic value. The mega fund is known to have consistently beaten the S&P 500 index by a notable 20% points since its foundation.
At the end of the third quarter, Lone Pine had $16.461 billion worth of assets under its management. The hedge fund bought new 11 stocks, increased its stake in 7, and sold 18 out. Lone Pine's big buys for the latest quarter arePriceline.com Incorporated (NASDAQ:PCLN); Cognizant Technology Solutions Corporation (NASDAQ:CTSH), Schlumberger Limited (NYSE:SLB), VeriSign, Inc. (NASDAQ:VRSN), Dollar General Corporation (NYSE:DG).
% of Portfolio
Change in Shares
EPS growth next 5Y
Cognizant Technology Solutions Corporation
Dollar General Corporation
Sources: whalewisdom.com & finviz.com
Priceline.com (PCLN) is an online travel company that provides price-disclosed reservation services worldwide. It operates under Booking.com, priceline.com, and Agoda brand. Priceline is set to buy Kayak at $1.8 billion, which analysts say is rather pricey. The online travel company had spent a lot of money relying on search engines like Google (NASDAQ:GOOG) and other sites, which is quite risky. Acquiring Kayak, therefore, is the company's way of diversifying the risks.
Lone Pine further increased its stake in Priceline by 25% bringing the total holdings to 1.416 million. The stock is currently the hedge fund's number 1. The most recent sell of a significant amount happened in the first quarter of the current year when Lone Pine sold 26% of its stake. Apart from this, the hedge fund has been either increasing or maintaining its holding in the company since the first quarter of 2011.
Priceline's strength lies on its impressive earnings growth, both current and long-term estimates. This year, its EPS doubled and will continue to grow annually at an estimated rate of 20.31% for the next 5 years. The company's sales swelled in the last 5 years at 31.14% per year. It has a remarkable profit margin of 26.88%. The stock has been yielding positive movements with the price leaping by 35.89% from the previous year.
Cognizant Technology Solutions Corporation
Cognizant Technology Solutions Corporation (CTSH) is a provider of IT, consulting, and business process outsourcing services in many countries. The Teaneck, New Jersey-based company had recently been reiterated by TheStreet Ratings as a buy with A- ratings score. The company came in with revenue growth stronger than that for the industry, impressive EPS growth, and reasonable debt levels. Last month, the company announced its plans to expand its data centers in North America and Europe. The expansion will further strengthen the company's capabilities for infrastructure management.
Lone Pine increased its stake in Cognizant Technology by 24% in the latest quarter, bringing the total to 10.591 million shares. The hedge fund also added 46% to its holdings in the previous quarter. The company constituted 4.50% of the hedge fund's total portfolio. The largest amount of shares that the hedge fund had held in the past was that for the same quarter last year at 10.697 million.
Cognizant had the most impressive growth profile among its peers even with the global economic slowdown. The company had experienced a remarkable growth rate of 33.86% in its sales in the past. Earnings are seen to grow at 18.16% each year in the long term. Investors are also lured by Cognizant because of the company's decent profit margin at 14.34%. The stock, however, had gained only 1.60% from the past year.
Schlumberger Limited (SLB) supplies the oil and gas exploration and production industries around the world with technology, project management, and information solutions. The Houston-based company has recently entered into a partnership with flow equipment and services specialists Cameron International Corporation to form a joint venture called the OneSubsea.Through this venture, both companies will capitalize on the escalating demand for deepwater drilling. It was reported that Schlumberger will pay Cameron $600 million for putting in its subsea division to the venture.
The hedge fund bought 6.420 million new shares of Schlumberger in the latest quarter. The last time SLB appeared in Lone Pine's 13F Filing was in the last quarter of the previous year when the hedge fund manager sold out its stake.
Schlumberger's attractiveness as an investment comes from its current and potential growth. The long-term annual growth estimate is 16.51%, and its profit margin is 13.10%. The company's forward P/E is 14.26, lower than the current 17.12. The joint venture it had forged with Cameron will help the company gain momentum. Likewise, the company has been providing a stable stream of dividend payments for many years.
VeriSign, Inc. (VRSN) is the Internet infrastructure services and network intelligence provider based in Reston, Virginia. The company was recently given a Neutral recommendation that is supported by a Zacks #3 Rank. VeriSign had just submitted an agreement with ICANN concerning renewal of its operation of the .com domain. However, there are delays due to a review on pricing being conducted by Commerce Department with the Justice Department. The hedge fund bought 9.441 million new shares of VeriSign in the latest quarter. This constituted 2.79% of Lone Pine's total portfolio. It was the first time that the company had appeared in the 13F filing of Lone Pine.
Despite a decline in VeriSign's sales in the recent past, its growth prospects are notable with earnings estimated to grow at an annual rate of 15.87% in the coming years. Investors must have been happy with its earnings doubling this year. The company's profit margin is an exciting 30.31%. Also, despite a recent drop in the stock price, it gained 13.27% from the previous year. Meanwhile, the forward P/E is 18.56, lower than the current one at 25.77.
Dollar General Corporation
Dollar General Corporation (DG) is an operator of approximately 10,000 discount stores in 40 states. The Goodlettsville, Tennessee-based firm was formerly known as J.L. Turner & Son, Inc. Currently, Dollar General is outperforming its competitors Family Dollar and Fred's. It is reported to be remodeling some 600 stores and will be opening around 600 new stores this year. These developments will greatly help the company in the future. Lone Pine bought 4.586 million shares of DG in the third quarter or 2.59% of the hedge fund's total holdings. This was the first time within a 5-quarter period that Lone Pine increased its stake in the company.
Dollar General is showing its growth prowess with an annual growth expectation of 17.63% in the years to come. EPS of the discount store company has been growing at a notable 38.24% per year in the past 5 years. Such growth manifests in the gains it obtained in terms of stock price. The year-to-date performance is a positive 15.68%. DG's forward P/E ratio is expected to be at 14.25, lower than its current at 18.23.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Business relationship disclosure: EfsInvestment is a team of analysts. This article was written by Aubrey Tabuga, one of our equity researchers. We did not receive compensation for this article (other than from Seeking Alpha), and we have no business relationship with any company whose stock is mentioned in this article.