Lone Pine Capital leader Steve Mandel (Trades, Portfolio) released his first-quarter portfolio last week, listing seven new holdings.
As one of Julian Robertson (Trades, Portfolio)’s former “Tiger Cubs,” Mandel and his firm pick stocks using a long-short strategy that is based on bottom-up, fundamental analysis.
Among the positions he established during the quarter were Dollar Tree Inc. (DLTR, Financial), SBA Communications Corp. (SBAC, Financial), Taiwan Semiconductor Manufacturing Co. Ltd. (TSM, Financial), T-Mobile US Inc. (TMUS, Financial) and Square Inc. (SQ, Financial).
Dollar Tree
Having previously closed a position in Dollar Tree in the second quarter of 2017, the investor initiated a new 6.3 million-share stake for an average price of $104.83 per share, giving it 3.05% portfolio space.
The Chesapeake, Virgina-based discount retailer has a market cap of $22.39 billion; its shares were trading around $94.17 on Tuesday with a price-earnings ratio of 13.06, a price-book ratio of 3.1 and a price-sales ratio of 1.
The Peter Lynch chart below shows the stock is trading below its fair value, suggesting it is undervalued.
GuruFocus rated Dollar Tree’s financial strength 6 out of 10. While the company has a weak level of interest coverage in comparison to peers, its Altman Z-Score of 3.74 indicates it is financially healthy. Despite having declining operating margins, the company’s profitability and growth scored an 8 out of 10 rating as it still outperforms 88% of competitors. In addition, the company has a moderate Piotroski F-Score of 6 and a business predictability rating of 4.5 stars (out of five).
With his purchase of 2.67% of outstanding shares, Mandel became the company’s largest guru shareholder. Paul Tudor Jones (Trades, Portfolio) and John Hussman (Trades, Portfolio) also established positions in the first quarter. Other big guru investors include Chuck Akre (Trades, Portfolio), Steven Cohen (Trades, Portfolio), Pioneer Investments (Trades, Portfolio), Wallace Weitz (Trades, Portfolio) and Lee Ainslie (Trades, Portfolio).
SBA Communications
Mandel invested in 3.4 million shares of SBA Communications for an average price of $165.74 per share, expanding the portfolio 2.93%. He previously exited a position in the stock in the fourth quarter of 2015.
The communication services company, which is headquartered in Boca Raton, Florida, has a market cap of $18.28 billion; its shares were trading around $158.74 on Tuesday with a price-earnings ratio of 193.58 and a price-sales ratio of 10.82.
According to the Peter Lynch chart below, the stock is overpriced as it is trading significantly higher than its fair value.
As a result of low interest coverage and approximately $1.4 billion in new long-term debt, SBA’s financial strength was rated 3 out of 10 by GuruFocus. In addition, the company’s Altman Z-Score of 0.72 indicates it is in danger of going bankrupt. The company’s profitability and growth, however, fared much better, scoring a 9 out of 10 rating as it is strengthened by an expanding operating margin, a high Piotroski F-Score of 7 and a perfect, five-star business predictability rating.
Mandel is now the company’s largest guru shareholder, holding 2.94% of outstanding shares. Louis Moore Bacon (Trades, Portfolio) also established a position in the first quarter. Akre, Ron Baron (Trades, Portfolio), Jim Simons (Trades, Portfolio), Manning & Napier Advisors Inc., George Soros (Trades, Portfolio) and several other gurus also own the stock.
Taiwan Semiconductor
The guru picked up 12.3 million shares of Taiwan Semiconductor for an average price of $43.59 per share, allocating 2.74% of the portfolio to the stake.
The Taiwanese manufacturer of semiconductor chips has a market cap of $198.97 billion; its shares were trading around $39.57 on Tuesday with a price-earnings ratio of 17.19, a price-book ratio of 3.71 and a price-sales ratio of 6.01.
Based on the Peter Lynch chart below, the stock appears to be overpriced as it is trading above its fair value.
Boosted by a comfortable level of interest coverage and a strong Altman Z-Score, Taiwan Semiconductor’s financial strength was rated 8 out of 10 by GuruFocus. Similarly, the company’s profitability and growth was rated 9 out of 10 as it has an expanding operating margin, a moderate Piotroski F-Score of 6 and a 4.5-star business predictability rating.
Of the gurus invested in Taiwan Semiconductor, Ken Fisher (Trades, Portfolio) has the largest position with 0.65% of outstanding shares. Sarah Ketterer (Trades, Portfolio), Jeremy Grantham (Trades, Portfolio), Pioneer Investments, Howard Marks (Trades, Portfolio), Baron, Frank Sands (Trades, Portfolio) and several other gurus are also shareholders.
T-Mobile
After selling out of T-Mobile in the fourth quarter of 2017, Mandel started a new holding of 3.5 million shares for an average price of $62.56 per share. The trade had an impact of 1.08% on the portfolio.
The Bellevue, Washington-based telecom company, which is planning to merge with Sprint Corp. (S, Financial), has a market cap of $48.35 billion; its shares were trading around $57.10 on Tuesday with a price-earnings ratio of 11.01, a price-book ratio of 2.13 and a price-sales ratio of 1.20.
The Peter Lynch chart below suggests the stock is undervalued as it is trading below its fair value.
T-Mobile’s financial strength was rated 5 out of 10 by GuruFocus as it has insufficient interest coverage. In addition, its Altman Z-Score of 1.06 implies the company could face bankruptcy in the near future. The company’s profitability and growth scored a 6 out of 10 rating as its operating margins are expanding. It also has a high Piotroski F-Score of 7 and a one-star business predictability rating.
With 0.53% of outstanding shares, Larry Robbins (Trades, Portfolio) is T-Mobile’s largest guru shareholder. Other gurus who established positions in the stock in the first quarter were First Eagle Investment (Trades, Portfolio), Grantham and Diamond Hill Capital (Trades, Portfolio). Other top guru shareholders include David Tepper (Trades, Portfolio), John Paulson (Trades, Portfolio), Ainslie, PRIMECAP Management (Trades, Portfolio) and Mario Gabelli (Trades, Portfolio).
Square
The guru purchased 2.7 million shares of Square for an average price of $45.90 per share, dedicating 0.67% of the portfolio to the position.
Headquartered in San Francisco, the company, which provides mobile payment solutions software, has a market cap of $22.06 billion; its shares were trading around $55.48 on Tuesday with a forward price-earnings ratio of 125, a price-book ratio of 27.35 and a price-sales ratio of 8.84.
According to the chart below, the stock is trading above its historical median price-sales value, indicating it is overpriced.
Square’s financial strength was rated 6 out of 10 by GuruFocus. While the company’s Altman Z-Score of 9.53 indicates it is financially stable, the Beneish M-Score of 66.13 implies it manipulates its financial reports. Despite recording operating margin expansion, the company’s profitability and growth was rated 4 out of 10 as it has a moderate Piotroski F-Score of 5.
Spiros Segalas (Trades, Portfolio) is the company’s largest guru shareholder with 0.9% of outstanding shares. He and Gabelli both established holdings in the first quarter. Simons, Royce, Pioneer Investments, Cohen and Jones are also shareholders.
Other trades
Mandel also established positions in PagSeguro Digital Ltd. (PAGS, Financial) and Exact Sciences Corp. (EXAS, Financial) during the quarter and added to multiple holdings, including Facebook Inc. (FB, Financial), Microsoft Corp. (MSFT, Financial) and Wynn Resorts Ltd. (WYNN, Financial).
The $19.7 billion portfolio, which consists of 30 stocks, is largely invested in the technology sector. According to Bloomberg, as of last September, Mandel’s main fund has returned an annualized 19.5% since its inception.
Disclosure: No positions.
