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

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 Maranjian

Selena Maranjian has been writing for the Fool since 1996 and covers basic investing and personal finance topics. She also prepares the Fool's syndicated newspaper column and has written or co-written a number of Fool books. For more financial and non-financial fare (as well as silly things), follow her on Twitter...

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Related Tickers

9/4/2015 3:59 PM
DLTR $68.09 Up +1.09 +1.63%
Dollar Tree Stores CAPS Rating: ***
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Microsoft CAPS Rating: ***
NOK $6.16 Down -0.12 -1.91%
Nokia CAPS Rating: **
SEAS $17.68 Up +0.16 +0.91%
SeaWorld Entertain… CAPS Rating: *