Lone Pine Capital's 37 Stock Portfolio: Top 10 Holdings Analyzed - Sure Dividend

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Lone Pine Capital’s 37 Stock Portfolio: Top 10 Holdings Analyzed


Updated on March 23rd, 2021 by Nikolaos Sismanis

Lone Pine Capital is an American-based hedge fund headquartered in Greenwich, Connecticut. It was established in 1997 by its president and managing director Stephen Mandel. Lone Pine Capital is well-known for its exceptional returns thanks to the expertise of Stephen Mandel. The fund has around $27 billion worth of assets under management (AUM), the majority of which is invested in publicly-traded companies.

Investors following the company’s 13F filings over the last 3 years (from mid-February 2018 through mid-February 2021) would have generated annualized total returns of 35.5%. For comparison, the S&P 500 ETF (SPY) generated annualized total returns of 12.2% over the same time period

You can download an Excel spreadsheet with metrics that matter of Lone Pine Capital’s current 13F equity holdings below:

 

Note:  The spreadsheet is currently down due to a technical issue.  We hope to have it back up soon.  We are sorry for the inconvenience.

Note: 13F filing performance is different than fund performance. See how we calculate 13F filing performance here.

This article will discuss Lone Pine Capital’s investment strategy and portfolio holdings.

Table Of Contents

Lone Pine Capital’s Holdings

Lone Pine Capital has achieved impressive annualized returns over the past few years, outperforming the S&P 500 by a wide margin. The outstanding performance has resulted from the management’s competency in identifying and investing in companies in the high-growth tech sector.

The portfolio of the fund almost exclusively includes technology stocks, and thus it has some remarkable characteristics. Only 6 out of the 37 stocks included in the portfolio pay a dividend while the average forward price-to-earnings ratio is extremely high, standing around 110.0 (excluding the non-meaningful earnings multiple of some stocks).

During the previous quarter, Lone Pine Capital made the following noteworthy changes to its portfolio.

New Buys (weighting at least 1% of its holdings):

New Sells:

The top 5 holdings of the stock portfolio comprise 29.7% of its total value. It is thus evident that Lone Pine Capital has high conviction in its major holdings.

Source: 13F filings, Author

Lone Pine Capital’s top 10 holdings comprise 50.5% of its total portfolio and consist of the following equities:

Shopify (SHOP):

Shopify is Lone Pine Capital’s largest holding, comprising 9.4% of the total value of its portfolio. The stake was initiated last year, at prices between $195 and $328. Although this is a relatively new stake, the stock has more than tripled since the initiation of the stake, now standing at $1,160.

Shopify provides a cloud-based commerce platform, which enables merchants to adapt to the e-commerce era. The company obviously benefits from a secular trend, which has decades ahead to run, namely the shift of consumers from brick-and-mortar purchases to online purchases. The pandemic has caused this long-term trend to accelerate at an enormous pace.

As a result, Shopify saw its revenues grow by 85.6% YoY in 2020. Due to the company’s recurring revenues, accelerated growth, and positive catalysts surrounding e-commerce, the stock is currently trading a forward price/sales of 35.2, one of the highest valuation multiples in the industry.

Thanks to the immense growth potential of its business, Shopify is likely to keep growing its revenues and its earnings at a breathtaking pace for several more years. Nonetheless, the market has already priced a great portion of future growth in the stock price. To provide a perspective, the stock is currently trading at 53 times its expected earnings in 2025. As a result, the stock will have material downside risk whenever it faces an unforeseen headwind.

Microsoft (MSFT):

Microsoft is the second-largest holding of Lone Pine Capital, accounting for 5.5% of its portfolio value. The stake was initiated in 2017 at prices between $65 and $72 and the stock has more than tripled since then. The diversified portfolio of tech products and services of Microsoft has been ruling the sector’s digital infrastructure.

The company’s CEO Satya Nadella has been marvelously transforming the company into a cloud powerhouse. As a result, Microsoft has managed to accelerate its growth and post all-time high earnings in the last two years.

It is impressive that a stock with a market capitalization of $1.78 trillion, still has such a strong growth momentum. Shares are also trading at an attractive P/E ratio of around 30, which is quite reasonable for a snowballing tech behemoth.

Coupa Software (COUP) & Global Payments (GPN):

Coupa software & Global Payments are two relatively new stocks that ascended towards the company’s top holdings, purchasing them in Q2-2019 and Q3-2019 respectively. Both positions remained stable during the quarter, with the fund only slightly trimming them by around 1%.

Coupa has been growing its revenues higher by the quarter, currently showcasing a $652 million run-rate based on its latest $163 million in sales in Q4. While the company remains highly unprofitable, investors appreciate its massive growth, currently trading shares near all-time highs. The stock is trading at nearly 27.7 times its forward sales, making Coupa one of the most expensive stocks in the market.

Global Payments, on the other hand, is quite a mature company, with a consistently profitable track record. Hence, unlike Coupa, shares are trading at around 25 times their next year’s expected net income. Lone Pine has been accumulating stock around $160/share, which means that the company has profited quite nicely at its current price of $203, considering it initiated its first position as recently as last year.

Netflix (NFLX):

Netflix is Lone Pine’s 4th-largest holding, as the fund increased its stake in the company by 8% quarter-over-quarter. The streaming giant continues to expand, with its most recent year-end results posting all-time high levels in both its top and bottom line, at $25 billion and $2.76 billion respectively. Despite its solid performance and expanding margins, recent slowdown concerns have halted the stock’s prolonged rally.

In terms of its valuation, the stock is currently trading at around 52 times its forward net income, which a more humble valuation than its historical one, expressing investors’ elevated concerns. This is primarily attributed to Netflix’s competition growing larger, especially from the forefront of Disney, which a couple of weeks ago announced that its Disney Plus service had surpassed 100 million subscribers.

Lone Pine has been accumulating the stock at an average price of $353. Hence, the fund has greatly benefited from unrealized gains now that shares trade around $523.

L Brands, Inc. (LB)

The specialty retailer behind the iconic brands of Victoria’s Secret, and Bath & Body Works had a rough 2020, with the pandemic greatly damaging sales in its retail locations. However, due to management’s quick and successful pivot towards boosting its e-commerce sales, revenues were significantly boosted over the past couple of quarters.

In fact, in its latest quarter, L Brands reported the highest quarterly revenues in its history, of $4.82 billion. Still, with not significant moats apart from its brand value, and the retail space remaining very risky, the stock has retained a relatively conservative valuation, currently around 13.3 times its forward net income.

The fund held its position steady during the quarter.

Snap (SNAP):

Few people had taken Snap seriously back in its IPO days, leading to shares declining at as low as $5 in late 2018. Over the past couple of years, however, the company has continued its steady and rapid growth while creatively monetizing its audience, which led to rapidly growing revenues.

That said, the company remains quite unprofitable. It has never posted a positive net income so far. However, at this rate, Snap could generate its first profits by 2022, if not the end of 2021.

The position is entirely new, initiated by Lone Pine during the past quarter. It is currently the fund’s 7th largest position.

Square, Inc. (SQ):

The fintech giant has grown exponentially over the past year. While the company’s payment acceptance revenues dramatically declined as a result of retail locations being forced to close as a result of the pandemic, Square’s CashApp has been seeing explosive activity. Additionally, the company has been benefiting greatly off of Bitcoin’s rally, enjoying higher fee volumes every time people use its app to buy the cryptocurrency.

While the stock’s forward P/E may seem sky-high, valuing Square today based on its profitability is not quite meaningful. The company is reinvesting everything it makes back into growth. Still, its business model is a high-margin one, leading to hefty profits once the company matures.

Lone Pine trimmed its stake by around 21% during the quarter, likely in order to book some profits amid the stock’s prolonged rally.

MercadoLibre, Inc. (MELI):

MecadoLibre is often called the “Amazon of Latin America,” employing a similar business model. Similar to all the other companies in the e-commerce industry, MELI’s revenues saw a boost from the staying-at-home economy, currently featuring a 3-year revenue growth CAGR of 48.3%. The company is also flirting with profitability, which should eventually grow as well as soon as MELI scales its margins a bit further.

Lone Pine increased its position by 179% during the quarter. Investors should be wary of the FX risks involved, as MELI’s original sales are not in $US, but only converted afterward.

DocuSign, Inc. (DOCU)

Last but not least, Docusign accounts for around 3.8% of Lone Pine’s investment portfolio. The fund initiated a position in DocuSign in the previous quarter, Q3, at an average purchasing price of $215. The company continued its non-stop growth successfully during the year, delivering higher revenues one quarter after the other. This growth is because there has been a growing demand for e-signature solutions that enable businesses to digitally prepare, execute, and act on agreements.

It’s worth noting that no quarter has seen lower sales than its previous, since the company IPO, or for 16 straight quarters, which is quite impressive. With an accelerated growth and more businesses pivoting towards digitizing their business model, it’s likely that DocuSign’s expansion will continue strong. However, the stock’s valuation remains steep, at 20 times its forward sales or 55 times its expected 2025 net income.

Final Thoughts

Lone Pine Capital invests only in companies with huge growth potential and a wide moat in their businesses. As a result, the tremendous earnings growth of these stocks has more than offset their initial rich valuation. On the other hand, investors looking to tap into Lone Pine Capital’s holdings should be wary of the fund’s lack of diversification and the tech sector’s sky-high valuations.

 

Note:  The spreadsheet is currently down due to a technical issue.  We hope to have it back up soon.  We are sorry for the inconvenience.

Additional Resources

Bridgewater Associates’ 484 Stock Portfolio: Top 10 Holdings Analyzed

Valley Forge Capital Management’s 10 Stock Portfolio: All 10 Holdings Analyzed

Slate Path Capital’s 20 Stock Portfolio: Top 10 Holdings Analyzed

Akre Capital’s 26 Stock Portfolio: Top 10 Holdings Analyzed

Appaloosa Management’s 35 Stock Portfolio: Top 10 Holdings Analyzed

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