Stephen Mandel's Favorite Stock Picks

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Includes: AAPL, BBBY, C, CCI, CTRP, CTSH, DG, EL, EQIX, ESRX, GOOG, GR, MHS, MON, NTAP, NTES, NWS, ORLY, QCOM, RL, SLB, TDG, WBC, WYN, YNDX, YUM
by: Insider Monkey

Lone Pine was launched by Stephen Mandel in 1997. During the past 11 years, Stephen Mandel has returned approximately 23%, beating the SPY annually by 20 percentage points on average. Prior to founding Lone Pine, he worked at Tiger Management under the great Julian Robertson. He is among the most popular tiger cubs (see the historical performance of Julian Robertson’s tiger cubs). Recently, Lone Pine was among the top 9 hedge funds that lost millions due to the News Corp. (NASDAQ:NWS) scandal.

During the second quarter, Mandel reduced his stake in seven of his top 25 holdings. He reduced Express Scripts Inc (NASDAQ:ESRX) by 17%, Yum Brands Inc (NYSE:YUM) by 30%, Netapp Inc (NASDAQ:NTAP) by 14%, Qualcomm Inc (NASDAQ:QCOM) by 2%, Equinix Inc (NASDAQ:EQIX) by 25% and Lauder Estee Cos Inc (NYSE:EL) by 11%. All these six companies have underperformed since the end of June. Therefore, Mandel was able to reduce his losses through the reductions. Companies such as Netapp Inc (NTAP) lost as much as 31%.

Many hedge fund managers are bullish about Citigroup. Lee Ainslie purchased 10 million shares of the company during the second quarter (check out Lee Ainslie’s top stock picks). However, Citigroup has lost 28% since the end of June. During the second quarter, Stephen Mandel also cut his stake in the company by 30%. Here are the top holdings of Mandel’s Lone Pine at the end of June:

Company

Ticker

Value (x1000)

Activity

Return Since June

APPLE INC

AAPL

663708

27%

14%

COGNIZANT TECH

CTSH

631139

35%

-17%

DOLLAR GENERAL

DG

548684

3%

-4%

POLO RALPH LAUREN

RL

541831

14%

-1%

CROWN CASTLE INTL

CCI

493007

0%

2%

GOODRICH CORP

GR

472632

13%

-10%

EXPRESS SCRIPTS INC

ESRX

434341

-17%

-16%

GOOGLE INC

GOOG

420970

New

4%

YUM BRANDS INC

YUM

402258

-30%

-4%

NETAPP INC

NTAP

399639

-14%

-31%

MONSANTO CO NEW

MON

368672

119%

-2%

O REILLY AUTOMOTIVE

ORLY

364458

0%

-2%

SCHLUMBERGER LTD

SLB

353081

6%

-13%

QUALCOMM INC

QCOM

350506

-2%

-13%

CTRIP COM INTL LTD

CTRP

348480

2%

-11%

EQUINIX INC

EQIX

305454

-25%

-12%

LAUDER ESTEE COS INC

EL

282420

-11%

-9%

WABCO HOLDINGS INC

WBC

280309

213%

-37%

TRANSDIGM GROUP INC

TDG

275987

5%

-4%

CITIGROUP INC

C

273702

-30%

-28%

BED BATH & BEYOND INC

BBBY

243312

New

-6%

WYNDHAM WORLDWIDE

WYN

226488

0%

-11%

YANDEX N V

YNDX

222943

New

-14%

NETEASE COM INC

NTES

221427

139%

4%

MEDCO HEALTH SOLN

MHS

207742

18%

-5%

Apple (NASDAQ:AAPL) is the largest holding of Lone Pine’s equity portfolio. During the second quarter, Stephen Mandel increased his Apple position by 27%. He profited from the increase as Apple returned 14% since the end of June. Apple is the most favorite stock among hedge funds (see the top 10 list here). According to Goldman Sachs’ Hedge Fund Trend Monitor, Apple was the No. 1 ‘must-have’ stock in the first quarter. During the second quarter, even more hedge fund managers added Apple to their equity portfolio. Eric Mindich added Apple to Eton Park Capital’s 13F portfolio during the second quarter (see the top holdings of Eric Mindich’s Eton Park Capital).

Cognizant Technology (NASDAQ:CTSH) lost 17% since the end of the second quarter. Stephen Mandel increased his stake in Cognizant by 35% during the quarter ending June. Currently, he has the highest position in the company. Ken Griffin’s Citadel Investment Group has one of the top five positions in the company. Ken Griffin increased his bet in Cognizant by 87% during the second quarter. He also has both put and call options of the company (view Ken Griffin’s bullish stock picks).

Stephen Mandel increased Dollar General Corp (NYSE:DG) by 3% during the second quarter. Since the end of June the company has lost 4%. Mandel has the highest position in Dollar General. He is not the only famous hedge fund manager bullish about Dollar General. The investment guru Warren Buffett added Dollar General to Berkshire Hathaway’s equity portfolio during the second quarter as well (take a look at Warren Buffett’s $52.9 billion 13F portfolio).

Mandel also initiated brand new positions in GOOG, BBBY, and YNDX. These stocks performed better than the rest of his top picks. Stephen Mandel’s top 13F portfolio holdings lost 7.9%. However, he managed to beat the market by 2.7 percentage points. Mandel has a strong equity portfolio which consists some of the top hedge funds’ favorite stocks. We believe investors can benefit from imitating Mandel’s stock picks in the long run.

Disclosure: I am long C.