Steve Mandel is the founder of Lone Pine Capital, one of the most successful hedge funds in the world. According to Forbes, he is the 23rd richest man with a $1.5 billion net worth. Mandel started his career as a money manager in 1997. Mandel worked at several companies within several important positions. He was senior managing director and consumer analyst at Tiger Management Corporation, retailing analyst at Goldman Sachs and senior consultant at Mars and Company.
As of March 31, Lone Pine Capital had 60 stocks worth $12.5 billion. He invests mostly in information technology, consumer discretionary, industrials and financials. Here is a brief analysis of Mandel’s two big sells and three big buys among the consumer discretionary sector: (Data from Finviz and current as June 3rd's close.)
Dick's Sporting Goods Inc (DKS) is a sporting goods retailer, offering exercise equipment, footwear and equipment under several brand names. As of June 3rd's close, with a market cap of $4.45 billion, Dick’s had a P/E ratio of 23.61 and forward P/E ratio 16.26. The next five years' EPS growth estimate is 17.17% which is very reasonable given the past five years EPS growth of 17.22%. This year's EPS growth is 30.35%. while the gross margin is 29.92%, net profit margin falls to 3.92%, still higher than the retail average.
Lone Capital unloaded 4.7 million shares. The stock was up by almost 50% in the six months before March. Mandel made his profit and sold-off almost at the top. While the growth expectation is high, this is already priced in the shares. O-Metrix value is approximately 4 out of 10. This means the company will perform more or less the same as the market in the next five years. Selling of the company is more profitable than holding on.
Urban Outfitters Inc (URBN) is a retailer that operates under the names of Urban Outfitters, Anthropologie, Free People and Terrain brands. Its retail stores offer differentiated collections of women's and me'n clothes, home goods and trimming. Also, the company has a service that sells its goods to consumers directly via e-commerce such as www.urbanoutfitters.com. As of June 3rd's close, Urban outfitters had a $4.74 billion market cap, and P/E ratio of 19.08 and forward P/E ratio of 15.20.
Urban has a gross margin of 40.08% and the profit margin of 11.16%. Its past five year EPS growth rate has been 15.80% and analysts estimate an EPS growth of 19.08% for the next five years. Urban does not pay any dividends. The O-Metrix grade is 5 out of 10. I think Mandel sold this stock because he made enough profit out of it. He turned out to be remarkably correct, since the stock is trading 20% below its peak value. Also, $29 is a strong resistance point, therefore those holding to the stock might watch for a break-off or bounce back.
Medco Health Solutions (MHS) is a healthcare company providing pharmacy services for public and private employers. The company serves two parts: Pharmacy Benefit Management and Specialty Pharmacy. Pharmacy Management operates in several distribution channels such as mail-order service and retail pharmacy networks. Specialty Pharmacy offers call center pharmacy and compensation services.
As of June 3rd's close the P/E ratio was 17.46, and a forward P/E fall was 12.09. Medco has no dividend yield. The company displayed a huge amount of growth in recent years. In 2010, it reported $66.68 billion of revenues, an increase of 10.3% from 2009 and a 28.7% increase from 2008. The stock has an O-Metrix score of 6. Hence, Mandel thought of it as a good buy. June 3rd's closing price of $57 is lower than what Mandel paid for. It is a high growth company priced below its fair value.
News Corporation (NWSA) is a global media company that operates in eight segments: Filmed Entertainment, Television, Cable Network Programming, Direct Broadcast Satellite Television, Integrated Marketing Services, Newspapers and Information Services, Book Publishing, and Others. Also, it is one of the biggest companies in its sector with a $45.13 billion market cap as of June 3rd's close.
As of June 3rd's close, News Corp. had a P/E ratio of 15.48 and forward P/E ratio was 12.82, while the next five year EPS growth is expected to be 13.39%. According to fundamental values the O-Metrix grade is 4.5 out of 10. The values are not super-good but Mandel invested. I think he took a reasonable risk by investing $168 million in News Corp. The firm will be profitable in the future, but it may take a long period. Again, patience is virtue.
Royal Caribbean Cruises Ltd. (RCL) is a cruise company that operated 40 ships in the cruise holiday industry with roughly 92,300 berths in 31 December, 2010. The brands include Royal Caribbean International, Celebrity Cruises, and Azamara Club Cruises along with Pullmantur. The company’s ships operate approximately 420 destinations around the world. As of June 3rd's close it had a market cap of $7.95 billion, and its P/E ratio was 14.61. Forward P/E ratio falls to 9.58. RCL does not pay any dividends.
While the gross profit margin is 49%, net profit margin is 7.95%. Interestingly, while the past five year EPS growth rate was negative at -3.67%, analysts are extremely bullish about RCL's future. Next five year EPS growth estimate is 20.56%. Based on the fundamental ratios above the O-Metrix grade is 8 out of 10. I see a large market beating potential in the company. Summer is here, and it might be a good idea to make reservations on Royal Caribbean before the prices goes up.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.