This $23 Billion Winner Has Been Buying Microsoft, SeaWorld, and Dollar Tree

Should you buck the SeaWorld and Microsoft doubters and buy, too?

Mar 10, 2014 at 4:45PM

The latest 13F season has arrived, when many money managers issue required reports on their holdings. It can be worthwhile to pay attention, as you might get an investment idea or two by seeing what some major investors have been buying and selling.

For example, consider Lone Pine Capital, founded by Steve Mandel in 1997. Prior to that, Mandel was a managing director at Tiger Management. Lone Pine is one of the biggest hedge fund companies, and has reportedly outperformed the S&P 500 handily since inception. Like many value investors, Mandel is known to dig deep into companies, aiming to buy undervalued ones. Lone Pine's reportable stock portfolio totaled $23.2 billion in value as of Dec. 31, 2013.

Lone Pine Capital's latest 13F report shows that it established a new position in Microsoft Corporation (NASDAQ:MSFT), which became its fifth-largest holding, while boosting its positions in SeaWorld Entertainment, (NYSE:SEAS) and Dollar Tree (NASDAQ:DLTR) by 76% and 6%, respectively.

Microsoft's fourth quarter was strong, with revenue up 11% and earnings dropping 4% -- far less than expected. Sales of devices and hardware surged 68%, but profit margins contracted. Bulls have high hopes for Microsoft's cloud computing moves, and they also note that PCs aren't exactly dead yet (though a recent forecast has the market shrinking by 6% in 2014). Many are also waiting to see how the company's purchase of Nokia's (NYSE:NOK) core assets will work out. (The handset business was an underperformer for Nokia, putting pressure on its profit margins. Nokia recently released its X smartphone, which runs a modified version of Android, and investors are waiting to see whether Microsoft keeps or killsit.) Microsoft bears see limited growth prospects in the face of strong competition and wonder whether the company's Surface tablet, which has been underperforming, might be on its way out. There are rumors about the demise of the Xbox One, too, and many are not thrilled with a sizable price cut on Windows 8.1 licensing fees. Microsoft stock yields 3%, and the company has a new CEO in Satya Nadella.

SeaWorld is experiencing some challenging times, mostly due to the Blackfish documentary that aired widely on CNN last year and later was added to Netflix's offerings. The film details how three people were killed by a captive orca and has reportedly tempered tourist enthusiasm for SeaWorld. The company reports its latest quarterly results on March 13, and many are anxious to see them. In January, SeaWorld forecast record performance. Its third quarter featured revenue up 3% and free cash flow up 15%. Bears don't like SeaWorld's debt load, which has been shrinking but still towers over its cash. SeaWorld's stock yields 2.4%.

Discount chain Dollar Tree has seen its stock surge more than 20% over the past year, and average 18% annually over the past decade. Discounters did well during the recent recession, as consumers tightened their belts, and Dollar Tree is still ringing up sales. (Of course, our economy is not yet firing on all cylinders.) Its fourth quarter featured sales growing by almost 5% over year-ago levels and adjusted earnings per share rising 9% to a new record. Better still, consumables are selling more briskly than non-consumables, which bodes well for the company, as consumables are items that are used and soon replaced. Dollar Tree also has ambitious stock buyback plans, authorizing up to $1 billion in purchases for the $11 billion-market-cap enterprise.

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Selena Maranjianwhom you can follow on Twitter, owns shares of Microsoft and Netflix. The Motley Fool recommends and owns shares of Netflix. It also owns shares of Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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