Steve Mandel (Trades, Portfolio), founder of Lone Pine Capital, has released his first-quarter portfolio. Notable trades include buying into new holdings of Visa Inc. (V, Financial), Howmet Aerospace Inc. (HWM, Financial) and L Brands Inc. (LB, Financial) as well as additions to his holdings in Match Group Inc. (MTCH, Financial) and Global Payments Inc. (GPN, Financial).
Mandel, a long-short strategist, investings in public equity markets across the globe. His firm uses fundamental analysis and bottom-up stock picking to build the portfolio. Both value and growth methodologies are used for the investment, but many holdings are short term. The portfolio currently includes 39 holdings, nine of which are new.
Portfolio overview
Mandel's top holdings include Alibaba Group Holding Ltd. (BABA) at a 7.3% weight in the portfolio, UnitedHealth Group Inc. (UNH) at 6.83%, Amazon.com Inc. (AMZN) at 6.74%, Microsoft Corp. (MSFT) at 5.54% and Netflix Inc. (NFLX) at a 5.37%.
By weight. the portfolio is primarily invested in the technology (28.40%), consumer cyclicals (22.61%) and industrials (12.90%) sectors.
Visa
For the first time since 2017, Mandel has a new stake in Visa, totaling 3.32 million shares. The shares traded for an average price of $34.83 during the quarter. This purchase represented a 3.18% impact on the portfolio.
Visa is an American financial services corporation based in California. The company facilitates money transfers throughout the world, primarily through their own branded credit, debit and pre-paid cards. As of May 20, it was trading around $193.48 per share with a market cap of $427.90 billion. According to the Peter Lynch chart, the stock is overvalued.
GuruFocus gives the company a financial strength rating of 7 out of 10, a profitability rank of 10 out of 10 and a valuation rank of 1 out of 10. A cash-to-debt ratio of 0.68 places the copmany above 65.50% of credit services companies. Visa also boasts an operating margin of 66.83%, which is higher than 91.50% of industry competitors.
Howmet Aerospace
Establishing a new position for the first time, the guru also bought 20.66 million shares of Howmet Aerospace. During the quarter, the company traded at an average price of $20.93 per share. This new holding represented a 1.97% impact on the portfolio.
The aerospace company based in Pennsylvania manufactures jet engines, fasteners and titanium structures for aersopace applications and forged aluminum wheels for trucks. As of May 20, the company is trading at $12.58 per share at a market cap of $5.46 billion. The Peter Lynch chart suggests the stock was undervalued during the first quarter.
A cash-to-debt ratio of 0.35 and a debt-to-equity ratio of 1.54, which is lower than 92.07% of the industry, earns the company a GuruFocus financial strength rating of 4 out of 10. A profitability rank of 5 out of 10 is given thanks to a operating margin of 12.17%, which is higher than 78.02% of other industrial product manufacturers.
L Brands
Mandel's last new addition was the purchase of 26.26 million shares of L Brands at an average price of $19.69 per share. This new addition represented a 1.80% impact on the portfolio and an estimated total gain of -39.38%.
The American fashion retailer based in Ohio is known for its flagship brands Victoria's Secret and Bath & Body Works. As of May 20, the company was trading around $12.11 per share with a market cap of $3.38 billion. Historically, the company has fluctuated between under and overvaluation on the Peter Lynch chart.
GuruFocus gives the company a financial strength rating of 3 out of 10, a profitability rank of 9 out of 10 and a valuation rate of 10 out of 10. While the company has a poor cash-to-debt ratio of 0.04, which detracts from the financial strength, a high forward price-earnings ratio of 16.75 and a Shiller price-earnings ratio of 4.62 contribute to the high valuation rank.
Match Group
Adding to the new holding purchased in the fourth quarter of 2019, the guru's firm bought an additional 3.80 million shares of Match Group. At an average price of $73.95 per share during the quarter, this represented a 125.4% increase in the holding. Overall, the purchase had a 1.49% impact on the portfolio.
The American internet company operates several online dating websites, including OkCupid, PlentyOfFish, Tinder, Hinge and Match.com. On May 20, the company was trading at $83.71 per share with market cap of $24.01 billion. The Peter Lynch chart shows that the stock is overvalued.
GuruFocus gives the company a low financial strength rating of 5 out of 10 compared to a profitability rank of 8 out 10. High return on assets and equity contribute to the solid profitability rank. Increased levels of debt have lead to the cash-debt ratio of 0.38, which is lower than 85.54% of the industry.
Global Payments
Mandel also added an additiona 1.70 million shares to the holding of Global Payments. The shares traded at an average price of $183.36 during the quarter. The purchase represented an addition of 52.67% to the holding and a 1.46% impact on the portfolio.
The company provides financial payment services globally. Their main offerings include payment technology and software solutions. As of May 20, the company was trading at $181.07 per share with a market cap of $54.37 billion. The Peter Lynch chart suggests the stock is overvalued.
GuruFocus gives the company a financial strength rating of 5 out of 10, a profitability rank of 9 out of 10 and a valuation rank of 1 out of 10 thanks to the overvaluation. While the company has an operating margin of 16.11%, higher than 79.55% of the industry, it also sees a cash-to-debt ratio of 0.17, which is lower than 74.88% of the industry. An Altman Z-Score of 2.17 places them in the grey zone, though they are leaning toward distress.
Disclosure: Author owns no shares in any of the stocks mentioned. The mention of stocks in this article does not at any point constitute an investment recommendation. Portfolio updates reflect only common stock positions as per the regulatory filings for the quarter in question and may not include changes made after the quarter ended.
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