Now, Mandel is able to manage $12 billion and a two-digit annual return since Pine Capital’s inception. Indeed, he is considered one of the most successful members of Tiger who left its founder, Julian Robertson Jr., to set up his own firm.
Last year his funds rocketed bringing about impressive returns. What is his strategy? In general terms, Mandel looks for good companies run by good people with stock valuations below what he considers intrinsic value rather focusing on other issues.
This strategy has enabled him to reach Google as well as home builders and foreign banks. Most of his assets are invested in non-U.S. stocks. In addition, his team is made up of 12 investment professionals who are permanently looking for ideas across the world in seven industry groups, namely: consumer, financial, health care, telecommunications and media, technology, business services and industrials.
What are Mandel’s latest picks?
NetEase (NTES): is one of the most popular Internet portals in China as it is a leading online game developer and operator. Also, it has launched several multiplayer online games and offers hit games licensed from developers.
The company has a solid balance sheet. Indeed, in March it made more than $1.6 billion in cash with no debt. NetEase has a strong cash position and record in converting more than 50% of sales into free cash flows. This situation enables the firm to invest in research and marketing and meet external obligations as stated in the licensing agreements entered into with the game developer Blizzard. At the end of December 2010, it achieved $191 million in outstanding commitments.
Wyndham Worldwide (WYN): the largest global operator of timeshares and hotels is Wyndham Worldwide. The company is organized into three segments: 1) Wyndham Vacation Ownership, which represents 51% of revenue and is in charge of developing, selling and managing timeshare properties; 2) Wyndham Exchange & Rentals, which accounts for 31% of revenue and focuses on timeshare exchange services and vacation rental marketing services and 3) Wyndham Hotel Group, which accounts for 18% of revenue and focuses on hotel franchising.
WYN is financially healthy and its situation is improving thanks to the recovery in the hospitality industry. Its EBITDA/interest is expected to improve to 6.6 times vis-à-vis prior year’s 5.4 times. Furthermore, the company has increased its dividend three times since 2008.
News Corporation (NWS): It is a media conglomerate with a wide range of assets: filmed entertainment; television, which includes the Fox broadcast network and 27 local TV stations, cable network programming; direct-broadcast satellite television (Sky Italia), publishing which includes marketing and newspapers in Australia, the UK, and the U.S.
NWS is in a solid financial shape. As of June 2011, the company had $12 billion in cash and $13.5 billion in debt. Its EBITDA is expected to meet interest expense 8 times on average through 2016.
Las Vegas Sands (LVS): LVS is the largest operator of fully integrated resorts with casino, hotel, entertainment, food and beverage, retail and convention center operations. The company owns many resorts such as the Venetian Macao, Sands Macao and Four Seasons Hotel in different points across the globe such as China and US. 85% of its revenue comes from Asia.
The opening of a new resort, Marina Bay Sands, the strong operating results in Macau and a recovery in the Vegas Strip market have improved its healthy financial situation. Its EBITDA/interest coverage ratio improved from 2.5 times in 2009 to 6.1 times in 2010, compared with an average of more than 3.5 times for gaming companies. As regards 2011, the EBITDA/interest expense ratio is expected to increase more than 9 times.
Express Scripts (ESRX): the largest pharmacy benefit manager in US administers around 750 million in 2010. It has been able to do so through its mail-order pharmacy and network of retail pharmacies. It incurred into a significant debt and issued stock to purchase NextRx. Fortunately, it has been able to repay the debt and repurchased the stock quickly.
The company is expecting to use its cash flows to rebuild its balance sheet.