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Steve Mandel Continues to Add VanceInfo Technologies

July 22, 2011 | About:
Steve Mandel is the manager and founder of the hedge fund Lone Pine Capital, a long-short equity money manager. A graduate of Harvard Business School, he is regarded as one of the "Tiger Cubs" due to his tenure under legendary hedge fund investor Julian Robertson at Tiger Funds. As such, he employs a similar long-short approach that invests primarily in stocks, and Mandel has outperformed the S&P 500 by 20% each year for the past eleven years.

His success stems from his bottom-up investing strategy that focuses on a company's underlying fundamentals and less on overarching macroeconomic events. He strives to understand a company's practices, operations, and future growth to decide on whether to long or short the stock. Compared to other managers, Mandel holds his positions for a short amount of time, quickly moving in and out of positions. According to his latest 13G filings, Mandel added 7.5% to VanceInfo Technologies Inc. (VIT).

Holding History

Mandel first bought into VanceInfo in the second quarter of 2010 during the midst of the stock's growth in price. He first purchased 1,149,089 shares for an average price of $22.96. Two months later, he nearly sold out his holdings for $26.79 a share, netting him a return of 16.7%. However, he quickly bought back into the company by the end of the third quarter to 2,835,474 total shares, more than doubling his initial position. In the fourth quarter of 2010, he added yet another 1.3 million shares for an average price of $35.50, bringing him to 4,192,821 total shares of stock. He has held steadily for the past few months while the price of the VanceInfo Technologies dropped from its peak of nearly $40 down to under $20. Most recently, he added another 7.5% of VanceInfo Technologies for $17.25 per share, giving him a total of 4,507,146 shares.

VanceInfo Technologies Inc. (VIT)

VanceInfo Technologies, Inc. provides information technology outsourcing services. It offers information technology services, such as packaged solutions, application development and maintenance, quality assurance and testing, business intelligence/data warehouse, and business process outsourcing services. The company also provides research and development services, including software development, quality assurance and testing, product globalization, content globalization, and software localization; and technology solutions, such as platforms and operating systems, networks and system management, database and business intelligence/data warehousing, middleware, and application packages. It serves high tech, financial services, manufacturing, retail and distribution, and telecommunications industries in the Asia Pacific, North America, Europe, and China.

According to their latest quarterly statements, revenues increased to $57.4 million, a 29% increase year-over-year, though slightly down from the previous quarter's revenues of $59.6 million. The growth in revenues was driven by growth in business from the U.S., Europe, and China markets. Revenues from application development and maintenance doubled year-over-year, also helping net revenue growth. Net income was $6.93 million, improving over last year's $6.57 million though down from last quarter's $8.4 million. The company has reported five straight quarters of positive net income and has seen annual net income grow in each of the last four years. It also has a debt-to-equity ratio of .178, indicating relatively low amounts of debt on its balance sheet. Free cash flow was a loss of $7.7 million, a decrease over last year's gain of $4.2 million in free cash flow.

The stock currently trades with a P/E ratio of 28.0, a P/S ratio of 3.8, and a P/B ratio of 2.5, all of which are consistent with its rough historical averages. However, each ratio has been declining since hitting a peak in late 2010 to nearly half of its previous values. Quarterly sales per share have been steadily increasing to $1.45. Book value per share spiked in the last two quarters, currently at $7.77.

Other Headlines

On 4/12/2011, VanceInfo announced that it acquired 100% equity interest in the main operating subsidiaries of LW International Holdings Limited ("Lifewood"), a China-based company providing business process outsourcing. This marks VanceInfo's expansion into the BPO business, considered an early stage growth sector with synergies to the IT outsourcing sector. The transaction is expected to slightly increase VanceInfo's 2011 earnings.

On 6/7/2011, VanceInfo Technologies announced that it was ranked as the top China-based offshore software development vendor for European and North American markets for the fourth straight year, as measured by 2010 revenues according to International Data Corporation.

This is part of GuruFocus Real Time Picks report, which reports the stock trades of Gurus within the last few days. For more information, go to Real Time Picks.

Rating: 3.7/5 (15 votes)


Vgm - 6 years ago    Report SPAM
Thanks for posting. Mandel is awesome. Seth Klarman once described him as a "fantastic analyst".

It seems he also added considerably to iSoftStone (ISS) another small Chinese IT outfit recently.

Mandel does move in and out of stocks quickly, but with some he holds - like AAPL and YUM.

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