Stephen Mandel’s Lone Pine Capital has more than 2.7 million Apple (NASDAQ:AAPL) shares in its portfolio. AAPL was the largest stock holding in the $11.3 billion portfolio at the end of September. Since then Apple shares gained more than 20%, earning Lone Pine more than $150 million.
Steve Mandel has $17 billion in assets under management. His personal wealth is about one tenth of that. Mandel is a Tiger cub, leaving Robertson in 1997 to launch Lone Pine. He’s a “bottom-up” investor with great stock picking skills. He returned about 23% during the past 11 years, beating the S&P 500 index by more than 20 percentage points per year. Mandel’s market beta seems quite high though. According to a Valley News article, Mandel didn’t offer much downside protection in 2008:
The value of Dartmouth’s stakes in four Lone Pine funds plummeted during the disastrous 2008-09 fiscal year, according to information reviewed by the Valley News. The biggest holding, in Lone Sierra, fell 25.8%, to $55 million, while Lone Dragon Pine fell 28.5%, to $6.5 million. The value of its Lone Pinon holding was down 18.2%, to $17.8 million, while its Lone Cedar stake fell 19.8%, to $30.9 million. During that same 12-month period, the S&P 500 index of stock prices fell 28.2%.
Nevertheless, Mandel was a very successful hedge fund manager, becoming a billionaire along the way. Unfortunately, Mandel isn’t very easy to monkey. He trades quickly, getting in and out of positions in a very short period of time. He had 3 million Apple shares at the end of 2006 when they were trading at $85 per share. He sold 1.5 million of those shares between April and June of 2007, as Apple reached $120 per share. He sold another quarter million shares as Apple reached $150 at the end of September 2007. By the end of 2007, Apple was trading around $200 per share and Mandel reduced his holdings to 600,000 shares. Hold on tight. At the beginning of 2008, Apple shares went down to $140 and Mandel added 2.3 million shares by the end of March 2008. Then he sold all of them by the end of June 2008. He didn’t trade Apple for more than a year, and then purchased 3.1 million shares during the third quarter of 2009. Apple was trading at $190 then. At the end of 2009, he reduced his holdings by 500,000 shares as Apple climbed to $210. He sold another 300,000 shares by the end of March 2010. During the second quarter of 2010, he reversed his previous trade and added 350,000 shares to his holdings.
When imitating Mandel it’s better not to pay attention to small changes in his holdings; they just might be head fakes. It seems like he rebalances his holdings as share prices increase. That’s why we’ll be paying more attention to what Mandel holds. Here are his other large holdings at the end of the third quarter of 2010:
1. Yum Brands Inc (NYSE:YUM): Mandel had 15 million shares valued at nearly $700 million. Yum Brands returned 8.1% vs. a 13% return for the S&P 500 since the end of September.
3. Crown Castle Intl Corp (NYSE:CCI): His holdings were valued at $540 million. Crown Castle lost 5.9% since the end of September, underperforming the market by a huge margin.
4. JP Morgan Chase (NYSE:JPM): Lone Pine had 11.7 million shares of JPM valued at $446 million. Second Curve’s Tom Brown was recently very bullish about JP Morgan. JP Morgan returned 15.1% since the end of September.
5. SPDR Gold Trust (NYSEARCA:GLD): He had $431 million exposure to GLD. Harbinger Capital’s Philip Falcone, Brevan Howard and Daniel Loeb’s Third Point are also among the hedge funds that invest in gold. Gold underperformed the market by 8.5 percentage points since September.
6. Accenture Plc Ireland (NYSE:ACN): Lone Pine’s holdings were valued at $393 million. ACN returned 19.3% since the end of September.
7. Equinix Inc (NASDAQ:EQIX): Mandel had 3.3 million shares ($341 million) at the end of September. The stock lost 15.5% since then.
8. Estee Lauder (NYSE:EL): Lone Pine had around $338 million worth of Estee Lauder stock at the end of September. The stock returned 33.7% since then.
9. Goodrich Corp (NYSE:GR): Lone Pine had nearly $300 million of worth Goodrich Corp stock. The stock returned 22.1% since the end of September. Goodrich is also one of Lee Ainslie’s high conviction stock picks.
10. Polo Ralph Lauren (NYSE:RL): Mandel had 3.1 million shares of RL and added more during the fourth quarter of 2010, increasing his ownership to 5% of the company. This stock also managed to beat the SPY by about 4.1 percentage points. Ralph Lauren was one of the stocks that received Oprah’s endorsement.
Overall, Mandel’s top 11 holdings underperformed the SPY by 1 percentage point since the end of September. These 11 positions were nearly half of the 13F portfolio. We expected a better performance from Mandel but a 3 month time frame is too short to judge a hedge fund manager.
Disclosure: I am long SPY.