In this installment of fund holding analysis, I will look at 5 tech buys made by Steve Mandel's Lone Pine Capital using the latest available SEC filings. In addition to the stock picks, I have also calculated my fair value estimate for these picks and estimated the prices Mandel might have paid for the purchases.
1. NetEase.com (NASDAQ:NTES):
NTES is a Chinese internet technology company and provides online game services through in-house development or licensing of online games, such as "Fantasy Westward Journey" and "World of Warcraft." During the last year, the stock is up 16% compared to the 2% decline in the Nasdaq index.
Lone Pine Capital purchased 1.47 million shares at an estimated average price of $46.60 compared to the January 13, 2012, closing price of $44.86. The company is expected to grow its earnings at a 18% clip in the long term, and appears to be deeply discounted at current levels. My price target of $60 a share is obtained by applying a multiple of 14 to 2012 EPS estimate of $4.3. This represents a return of 34% from current levels.
2. Google (NASDAQ:GOOG):
For financial year ending December 2006, GOOG reported net income of $3.08 billion on revenues of $10.6 billion. The company currently has revenues of $35.7 billion and earnings of $9.5 billion. Although the street does not expect the company to maintain this 25% growth rate, the projected long term growth of 19% is very respectable in my opinion considering the fact that GOOG is a mega-cap company with a market capitalization of over $200 billion.
Lone Pine added approximately 108,000 shares of GOOG during the last quarter at an average price of $550. The stock has since appreciated to $625 implying a healthy paper return for Lone Pine. Applying a P/E of 21 (significantly below its five year average of 35), my price target for GOOG is $802 a share by December 2012.
3. Qualcomm (NASDAQ:QCOM):
QCOM designs, manufactures and markets CDMA technology based telecommunication products and services. The company grew its earnings at an annual rate of 12% during the last 5 years, and is now projected to increase its earnings at an annual rate of 16%. Lone Pine bought 1.05 million shares at an average price of $52.19 representing a change of 17% in the total number of QCOM stocks owned by them. Applying a multiple of 20 to 2012 EPS estimate of $3.64, my price target of $73 is obtained. At current levels, a return of 29% is possible.
4. Apple Inc. (NASDAQ:AAPL):
Lone Pine added 82250 shares of Apple during the 3rd quarter at an estimated price of $380.5 to take its total position to approximately 1.98 million shares. The stock has appreciated by 27% during the last year and currently trades around $410. An audit report released on January 13, 2012 indicated that underage labor was being employed at 5 supplier factories. Apple has said that it will cease to work repeat offenders of its involuntary labor standards. During the last 5 years, the company grew its earnings at an annual rate of 62% and is expected to grow at annual rate of 19% in the next 5 years. My target price of $510 a share implies a gain of more than 21% from current levels.
5. Cognizant Technology Solutions (NASDAQ:CTSH):
Lone Pine increased its position in CTSH by 24% by adding approximately 2.1 million shares. The company is expected to increase its earnings at an annual rate of 19% compared to the 27% growth rate during the past 5 years. The stock is modestly undervalued in my opinion. My 12-month price target of $82 is obtained by applying a P/E of 24 to consensus 2012 EPS estimate of $3.41. This would represent a return of 20%.
As always, please do not consider this list as a "buy" list, rather use this list as a starting point for your research. NetEase.com is very intriguing to me at these levels. I plan on performing a detailed analysis shortly for possible investment in the company.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.