Lone Pine Capital, the hedge fund founded by Steve Mandel (Trades, Portfolio) in 1997, disclosed its first-quarter portfolio earlier this 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 (Trades, Portfolio), is known to not hold positions for very long.
Keeping these considerations in mind, the firm entered 4 new positions during the three months ended Dec. 31, sold out of six stocks and added to or reduced a slew of other existing investments. Among the most notable trades for the quarter were a new stake in ICICI Bank Ltd. (IBN, Financial), the divestment of the DocuSign Inc. (DOCU, Financial), Autodesk Inc. (ADSK, Financial) and Humana Inc. (HUM, Financial) positions and an addition to the Amazon.com Inc. (AMZN, Financial) holding.
ICICI Bank
After previously selling out of ICICI Bank (IBN, Financial) in the third quarter of 2014, Lone Pine invested in a new 43.15 million-share stake, allocating it to 2.51% of the equity portfolio. The stock traded for an average price of $16.37 per share during the quarter.
The Indian bank has a $59.04 billion market cap; its shares were trading around $17.10 on Thursday with a price-earnings ratio of 23.52, a price-book ratio of 2.75 and a price-sales ratio of 3.63.
The Peter Lynch chart suggests the stock is overvalued currently.
GuruFocus rated ICICI's financial strength 3 out of 10 on the back of debt ratios that are underperforming other industry players as well as versus its own history. Assets are also building up at a faster rate than revenue is growing, suggesting the company may be becoming less efficient.
The company's profitability fared better with a 7 out of 10 rating, boosted by returns on equity and assets that outperform a majority of competitors. ICICI Bank also has a high Piotroski F-Score of 8, indicating its operations are healthy. Consistent earnings and revenue growth also contributed to a predictability rank of 4.5 out of five stars. According to GuruFocus, companies with this rank return an average of 10.6% annually over a 10-year period.
Mandel's firm is now the company's largest guru shareholder with a 1.25% stake. Other top guru investors are Baillie Gifford (Trades, Portfolio), Sarah Ketterer (Trades, Portfolio), Richard Pzena (Trades, Portfolio), Pioneer Investments (Trades, Portfolio), Jim Simons (Trades, Portfolio)' Renaissance Technologies, Dodge & Cox, Steven Cohen (Trades, Portfolio) and Jeremy Grantham (Trades, Portfolio).
DocuSign
Following a reduction in the fourth quarter of 2020, the firm completely divested of DocuSign (DOCU, Financial), selling 4.05 million shares. The transaction had an impact of -3.28% on the equity portfolio. Shares traded for an average price of $232.40 each during the quarter.
GuruFocus estimates Lone Pine gained 11.9% on the investment.
The cloud-based software company headquartered in San Francisco that facilitates e-signature transactions has a market cap of $37.82 billion; its shares were trading around $195.45 on Thursday with a price-book ratio of 117.38 and a price-sales ratio of 25.37.
According to the GF Value Line, the stock is significantly overvalued currently based on its historical ratios, past performance and future earnings projections.
DocuSign's financial strength was rated 5 out of 10 by GuruFocus. Despite the robust Altman Z-Score of 10.51 indicating the company is in good standing, its assets are building up at a faster rate than revenue is growing. The Sloan Ratio also implies it has poor earnings quality.
The company's profitability scored a 2 out of 10 rating. Although the operating margin is expanding, DocuSign is being weighed down by negative returns that underperform a majority of industry peers. It also has a moderate Piotroski F-Score of 4, suggesting business conditions are stable, but revenue per share has declined over the past five years.
Of the gurus invested in DocuSign, Chase Coleman (Trades, Portfolio) has the largest stake with 2.65% of outstanding shares. Catherine Wood (Trades, Portfolio), Simons' firm, Pioneer, Philippe Laffont (Trades, Portfolio), PRIMECAP Management (Trades, Portfolio), Caxton Associates (Trades, Portfolio), Julian Robertson (Trades, Portfolio), Steven Cohen (Trades, Portfolio), Joel Greenblatt (Trades, Portfolio) and First Pacific Advisors (Trades, Portfolio) also own the stock.
Autodesk
Impacting the equity portfolio by -2.46%, the firm sold its 2.2 million remaining shares of Autodesk (ADSK, Financial). The stock traded for an average per-share price of $288.65 during the quarter.
GuruFocus data shows Lone Pine gained 19.07% on the investment.
The San Rafael, California-based software company, which provides design solutions to the architecture, engineering, construction, manufacturing, media, education and entertainment industries, has a $61.67 billion market cap; its shares were trading around $280.32 on Thursday with a price-earnings ratio of 51.61, a price-book ratio of 63.74 and a price-sales ratio of 16.4.
Based on the GF Value Line, the stock appears to be modestly overvalued currently.
The GuruFocus valuation rank of 1 out of 10 supports this assessment.
GuruFocus rated Autodesk's financial strength 5 out of 10, driven by adequate interest coverage and a high Altman Z-Score of 6.12. The return on invested capital also surpasses the return on invested capital, indicating good value creation as it grows.
The company's profitability scored a 6 out of 10 rating on the back of strong margins and returns that outperform a majority of competitors, a high Piotroski F-Score of 8 and a one-star predictability rank. GuruFocus says companies with this rank return an average of 1.1% annually.
With a 0.37% holding, Pioneer is Autodesk's largest guru shareholder. PRIMECAP, Ken Fisher (Trades, Portfolio), Simons' firm, Cohen, Wood, Jerome Dodson (Trades, Portfolio), Paul Tudor Jones (Trades, Portfolio), Greenblatt, Robert Karr (Trades, Portfolio), First Pacific and Mairs and Power (Trades, Portfolio) are also invested in the stock.
Humana
With an impact of -2.25% on the equity portfolio, Mandel's firm eliminated its Humana (HUM, Financial) stake, selling 1.5 million shares. During the quarter, the stock traded for an average price of $398.88 per share.
According to GuruFocus data, the firm gained 25.04% on the investment.
The health insurance company, which is headquartered in Louisville, Kentucky, has a market cap of $57.32 billion; its shares were trading around $444.44 on Thursday with a price-earnings ratio of 15.78, a price-book ratio of 4.05 and a price-sales ratio of 0.74.
The GF Value Line shows the stock is considered to be fairly valued currently.
Humana's financial strength was rated 6 out of 10 by GuruFocus. Although the company has issued approximately $2.3 billion in new long-term debt over the past three years, it is still at a manageable level as a result of sufficient interest coverage. The ROIC also eclipses the WACC, indicating good value creation.
The company's profitability fared even better with an 8 out of 10 rating. In addition to strong margins and returns that outperform a majority of industry peers, Humana is supported by a high Piotroski F-Score of 8, steady earnings and revenue growth and a four-star predictability rank. GuruFocus data shows companies with this rank return, on average, 9.8% annually.
The Vanguard Health Care Fund (Trades, Portfolio) is Humana's largest guru shareholder with a 1.34% stake. Other top guru investors include Diamond Hill Capital (Trades, Portfolio), Pioneer, Bill Nygren (Trades, Portfolio), Spiros Segalas (Trades, Portfolio), Barrow, Hanley, Mewhinney & Strauss, Hotchkis & Wiley, Lee Ainslie (Trades, Portfolio), Larry Robbins (Trades, Portfolio), Cohen and Chris Davis (Trades, Portfolio).
Amazon
Lone Pine boosted its position in Amazon (AMZN, Financial) by 87.36%, buying 224,618 shares. The transaction had an impact of 2.52% on the equity portfolio. During the quarter, shares traded for an average price of $3,171.97 each.
Mandel's firm now holds a total of 481,744 shares, making up 5.41% of the equity portfolio. It is now the firm's fifth-largest holding. GuruFocus estimates it has gained 42.98% on the investment so far.
The Seattle-based e-commerce company has a $1.64 trillion market cap; its shares were trading around $3,249.55 on Thursday with a price-earnings ratio of 61.77, a price-book ratio of 15.82 and a price-sales ratio of 3.96.
According to the GF Value Line, the stock is fairly valued currently.
GuruFocus rated Amazon's financial strength 7 out of 10 on the back of adequate interest coverage and a high Altman Z-Score of 6.37. While the ROIC being above the WACC is indicative of good value creation, the company may be becoming less efficient since its assets are building up at a faster rate than revenue is growing.
The company's profitability scored an 8 out of 10 rating as it has an expanding operating margin and returns that are outperforming a majority of competitors. Amazon also has a moderate Piotroski F-Score of 6 as well as a five-star predictability rank. GuruFocus says companies with this rank return an average of 12.1% annually.
Of the many gurus invested in Amazon, Baillie Gifford (Trades, Portfolio) has the largest stake with 0.58% of outstanding shares. Fisher, Pioneer, Segalas, Sands, Coleman and Warren Buffett (Trades, Portfolio), among others, are also invested in the stock.
Additional trades and portfolio composition
During the quarter, Lone Pine also established new positions in Workday Inc. (WDAY, Financial), Insulet Corp. (PODD, Financial) and Qualtrics International Inc. (XM, Financial).
Nearly 40% of the firm's $27.53 billion equity portfolio, which is composed of 38 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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