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Here's What This Huge Long-Term Winner Is Buying

Selena Maranjian
March 22, 2013

Every quarter, many money managers have to disclose what they've bought and sold, via “13F” filings. Their latest moves can shine a bright light on smart stock picks.

Today, let's look at 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 reportedly beat the S&P 500 for 11 years in a row. Like many value investors, Mandel is known to dig deep into companies, aiming to buy undervalued ones.

The company's reportable stock portfolio totaled $15.9 billion in value as of Dec. 31, 2012.

Interesting developments
So what does Lone Pine Capital's latest quarterly 13F filing tell us? Here are a few interesting details:

The biggest new holdings are Facebook (NASDAQ: FB) and Capital One Financial (NYSE: COF). Other new holdings of interest include Intuitive Surgical (NASDAQ: ISRG). Facebook is compelling to many, with its hundreds of millions of users and its top ranking in mobile app reach. But it’s not without risks, such as a seemingly rich valuation and concerns about the influential younger generation gravitating toward other social platforms. In addition, a new study casts doubt on the efficacy of social-media advertising.

Shares of Intuitive Surgical hit a 52-week low recently, partly on reports that robotic surgeries may not be as worthwhile as many think and news of an investigation into its systems’ safety. But with a recent P/E ratio of about 30, a forward P/E of 21, and an expected near-term growth rate of 18% (following an average growth rate of 34% over the past five years), many see it as attractively priced now.

Among holdings in which Lone Pine Capital increased its stake was (NASDAQ: PCLN). Priceline has been experiencing strong growth internationally, and its financial statements offer lots to love, such as its steep and growing free cash flow and net margins near 27%. Its forward P/E ratio of just 15 is attractive, too, considering its sizable growth rate. The company has made a $1.8 billion offer for Kayak Software (NASDAQ: KYAK), and its hotel-booking business has been a very strong performer.

Lone Pine Capital reduced its stake in lots of companies, including Accretive Health (NYSE: AH), which has fallen by more than 57% over the past year, in part due to news that it’s