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Steve Mandel’s Lone Pine Reports 4th-Quarter Portfolio

Lone Pine Capital, the hedge fund founded by Steve Mandel (TradesPortfolio) in 1997, disclosed its fourth-quarter 2020 portfolio last week.

The Greenwich, Connecticut-based firm picks stocks using a long-short strategy that focuses on bottom-up, fundamental analysis. Combining growth and value strategies, the firm, whose founder was a former “tiger cub” of Julian Robertson (TradesPortfolio), is known to not hold positions for very long.

Keeping these considerations in mind, the firm entered 15 new positions during the three months ended Dec. 31, sold out of six stocks and added to or reduced a slew of other existing holdings. Among the most notable trades for the quarter was a new stake in Snap Inc. (NYSE:SNAP), the divestment of the PayPal Holdings Inc. (NASDAQ:PYPL) and Capital One Financial Corp. (NYSE:COF) positions, a reduced holding in Facebook Inc. (NASDAQ:FB) and an addition to the DexCom Inc. (NASDAQ:DXCM) investment.

Snap

After previously selling out of Snap (NYSE:SNAP) in the third quarter of 2017, Lone Pine invested in a new 19.5 million-share stake, allocating it to 3.55% of the equity portfolio. The stock traded for an average price of $41.78 per share during the quarter.

The Santa Monica, California-based social media company, which owns and operates Snapchat and Bitmoji, has a $98.07 billion market cap; its shares were trading around $65.02 on Monday with a price-book ratio of 41.44 and a price-sales ratio of 37.91, which GuruFocus notes are all approaching multiyear highs.

According to the GF Value chart, the stock is significantly overvalued currently.

GuruFocus rated Snap’s financial strength 5 out of 10. Although the cash-debt ratio of 1.27 is underperforming versus its own history as well as its industry, the Altman Z-Score of 20.4 indicates the company is in good standing.

The company’s profitability did not fare as well, scoring a 2 out of 10 rating. Despite having an expanding operating margin, it is underperforming versus competitors. Snap also has negative returns that fall well below standards, a low Piotroski F-Score of 3, suggesting business conditions are in poor shape, and has recorded a slowdown in revenue per share growth over the past 12 months.

Mandel’s firm is now the company’s largest guru shareholder with a 1.29% stake. Jim Simons (TradesPortfolio)’ Renaissance Technologies, Catherine Wood (TradesPortfolio), Pioneer Investments (TradesPortfolio), Ron Baron (TradesPortfolio), Ray Dalio (TradesPortfolio), Philippe Laffont (TradesPortfolio), PRIMECAP Management (TradesPortfolio), Louis Moore Bacon (TradesPortfolio), Paul Tudor Jones (TradesPortfolio) and Joel Greenblatt (TradesPortfolio) also have positions in Snap.

PayPal

Following a reduction in the third quarter, the firm completely divested of PayPal (NASDAQ:PYPL), selling 6 million shares. The transaction had an impact of -5.08% on the equity portfolio. Shares traded for an average price of $207.36 each during the quarter.

GuruFocus estimates Lone Pine gained 38.45% on the investment.

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The online payments company, which is headquartered in Palo Alto, California, has a market cap of $325.99 billion; its shares were trading around $278.17 on Monday with a price-earnings ratio of 78.62, a price-book ratio of 16.55 and a price-sales ratio of 15.41.

According to the GF Value Line, the stock is significantly overvalued currently.

PayPal’s financial strength was rated 6 out of 10 by GuruFocus. Although the company has issued approximately $7.9 billion in new long-term debt over the past three years, it is at a manageable level due to having adequate interest coverage. The Altman Z-Score of 5.02 also implies it is in good standing. The return on invested capital surpasses the weighted average cost of capital, indicating good value creation.

The company’s profitability scored an 8 out of 10 rating, driven by an expanding operating margin, strong returns that outperform a majority of industry peers and a moderate Piotroski F-Score of 6, indicating business conditions are stable.

Of the gurus invested in PayPal, Ken Fisher (TradesPortfolio) has the largest stake in PayPal with 0.91% of outstanding shares. Laffont, Pioneer, Spiros Segalas (TradesPortfolio), Wood and PRIMECAP also have large positions in the stock.

Capital One Financial

Impacting the equity portfolio by -3.17%, the firm divested of its 10.27 million remaining shares of Capital One (NYSE:COF). The stock traded for an average per-share price of $85.22 during the quarter.

GuruFocus estimates Lone Pine gained 25.95% on the investment.

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The McLean, Virginia-based bank holding company, which specializes in credit cards and auto loans in addition to banking and savings accounts, has a $56.38 billion market cap; its shares were trading around $122.66 on Monday with a price-earnings ratio of 24.07, a price-book ratio of 0.93 and a price-sales ratio of 2.

Based on the GF Value Line, the stock is modestly overvalued. The GuruFocus valuation rank of 6 out of 10, however, leans more toward undervaluation even though the share price and price-sales ratio are nearing multiyear highs.

GuruFocus rated Capital One’s financial strength 3 out of 10. Although the cash-debt ratio of 1.02 is performing better than its competitors as well as versus its own industry, the WACC eclipses the ROIC, indicating struggles with creating value.

The company’s profitability fared better, scoring a 6 out of 10 rating even though margins and returns are underperforming over half of its competitors. Steady earnings and revenue growth also contributed to Capital One’s predictability rank of four out of five stars. According to GuruFocus, companies with this rank return an average of 9.8% annually over a 10-year period.

With a 10.92% stake, Dodge & Cox is the company’s largest guru shareholder. Chris Davis (TradesPortfolio), Richard Pzena (TradesPortfolio), Bill Nygren (TradesPortfolio), Fisher, Steven Cohen (TradesPortfolio) and the Parnassus Endeavor Fund (TradesPortfolio) are also major investors in Capital One.

Facebook

With an impact of -2.56% on the equity portfolio, Mandel’s firm trimmed its Facebook (NASDAQ:FB) stake by 38.87%, selling 2.3 million shares. During the quarter, the stock traded for an average price of $274.26 per share.

Lone Pine now holds 3.57 million shares total, accounting for 3.55% of the equity portfolio. It is now the firm’s ninth-largest holding. GuruFocus data shows it has gained an estimated 40.50% on the investment.

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The social media company, which is headquartered in Menlo Park, California, has a market cap of $740 billion; its shares were trading around $260.07 on Monday with a price-earnings ratio of 25.74, a price-book ratio of 5.88 and a price-sales ratio of 8.72.

The GF Value Line shows the stock is considered to be modestly undervalued currently.

Facebook’s financial strength was rated 7 out of 10 by GuruFocus. In addition to comfortable interest coverage, the company is supported by a high Altman Z-score of 17.2. The ROIC is also significantly higher than the WACC, indicating good value creation.

The company’s profitability scored a 10 out of 10 rating, supported by an expanding operating margin, strong returns that outperform a majority of industry peers and a moderate Piotrsoki F-Score of 6. Consistent earnings and revenue growth also contributed to a five-star predictability rank. GuruFocus says companies with this rank return, on average, 12.1% annually.

Frank Sands (TradesPortfolio) has the largest stake in Facebook with 0.37% of outstanding shares. Chase Coleman (TradesPortfolio), Segalas, Fisher, Pioneer, Dodge & Cox, Davis and First Eagle Investment (TradesPortfolio), among others, also have significant holdings in the stock.

DexCom

Lone Pine boosted its stake in DexCom (NASDAQ:DXCM) by 389.72%, buying 1.8 million shares. The transaction had an impact of 2.43% on the equity portfolio. During the quarter, shares traded for an average price of $356.25 each.

Mandel’s firm now holds a total of 2.26 million shares, making up 3.05% of the equity portfolio. GuruFocus estimates it has gained 18.5% on the investment so far.

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The San Diego-based medical devices company, which manufactures continuous glucose monitoring systems, has a $39.96 billion market cap; its shares were trading around $415.20 on Monday with a price-earnings ratio of 82.28, a price-book ratio of 22.58 and a price-sales ratio of 21.07.

According to the GF Value Line, the stock is significantly overvalued currently.

GuruFocus rated DexCom’s financial strength 5 out of 10. Although it has low interest coverage and assets are building up faster than revenue is growing, the Altman Z-Score of 11.22 indicates the company is in good standing. The ROIC also significantly surpasses the WACC, indicating good value creation.

The company’s profitability did not fare as well with a 4 out of 10 rating. In addition to margins and returns outperforming a majority of competitors, DexCom is supported by a moderate Piotroski F-Score of 6 and a one-star predictability rank. GuruFocus says companies with this rank return, on average, 1.1% annually.

Sands is DexCom’s largest guru shareholder with a 4.76% stake. Segalas, Baron, Simons’ firm, Pioneer, Cohen, Fisher, Dalio, Mario Gabelli (TradesPortfolio), Laffont, Greenblatt and Lee Ainslie (TradesPortfolio) also own the stock.

Additional trades and portfolio composition

During the quarter, Lone Pine also established new positions in Carvana Co. (NYSE:CVNA), Bilibili Inc. (NASDAQ:BILI), Farfetch Ltd. (NYSE:FTCH), Fidelity National Information Services Inc. (NYSE:FIS) and DoorDash Inc. (NYSE:DASH), among other stocks.

Nearly half of the firm’s $27.51 billion equity portfolio, which is composed of 41 stocks, is invested in the technology sector, followed by smaller holdings in the communication services, consumer cyclial and health care spaces.

Disclosure: No positions.

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