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Steve Mandel's Lone Pine Bets Big on Taiwan Semiconductor, Meta Platforms

Former tiger cub's firm releases 1st-quarter portfolio

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May 20, 2022
Summary
  • The firm established eight new positions during the quarter, including in Taiwan Semiconductor Manufacturing and Meta Platforms.
  • It also reduced its holdings of Mastercard, UnitedHealth and Snap.
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Lone Pine Capital, the hedge fund founded by

Steve Mandel (Trades, Portfolio) in 1997, disclosed its first-quarter 2022 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, Lone Pine, 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’s 13F filing showed it entered eight new positions during the three months ended March 31, sold out of eight stocks and added to or trimmed a slew of other existing investments. Among the most notable trades for the quarter were new stakes in Taiwan Semiconductor Manufacturing Co. Ltd. (

TSM, Financial) and Meta Platforms Inc. (FB, Financial) as well as reduced bets on Mastercard Inc. (MA, Financial), UnitedHealth Group Inc. (UNH, Financial) and Snap Inc. (SNAP, Financial).

Investors should be aware that 13F filings do not give a complete picture of a firm’s holdings as the reports only include its positions in U.S. stocks and American depository receipts, but they can still provide valuable information. Further, the reports only reflect trades and holdings as of the most-recent portfolio filing date, which may or may not be held by the reporting firm today or even when this article was published.

Taiwan Semiconductor Manufacturing

After previously selling out of Taiwan Semiconductor Manufacturing (

TSM, Financial) in the second quarter of 2018, Lone Pine invested in a new 7.98 million-share stake, allocating it to 4.95% of the equity portfolio. The stock traded for an average price of $117.35 per share during the quarter.

The stock is now the firm’s seventh-largest holding.

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The Taiwanese manufacturer of semiconductor chips has a $474.68 billion market cap; its shares were trading around $91.41 on Friday with a price-earnings ratio of 21.29, a price-book ratio of 6.10 and a price-sales ratio of 8.21.

The GF Value Line suggests the stock is modestly undervalued currently based on historical ratios, past financial performance and future earnings projections.

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GuruFocus rated Taiwan Semiconductor’s financial strength 8 out of 10. Although the company has issued new long-term debt over the past three years, it is manageable due to a sufficient level of interest coverage. The robust Altman Z-Score of 7.04 indicates the company is in good standing even though assets are building up at a faster rate than revenue is growing. The return on invested capital also overshadows the weighted average cost of capital, meaning value is being created as the company grows.

The company’s profitability scored a 10 out of 10 rating, driven by an expanding operating margin, strong returns on equity, assets and capital that exceed a majority of competitors and a moderate Piotroski F-Score of 5 out of 9, which indicates conditions are typical for a stable company. Taiwan Semiconductor’s consistent revenue per share growth contributed to a predictability rank of four out of five stars. According to GuruFocus, companies with this rank return an average of 9.8% annually over a 10-year period.

Of the gurus invested in Taiwan Semiconductor,

Ken Fisher (Trades, Portfolio) has the largest stake with 0.51% of its outstanding shares. Frank Sands (Trades, Portfolio), First Eagle Investment (Trades, Portfolio), Baillie Gifford (Trades, Portfolio), Ruane Cunniff (Trades, Portfolio), Ron Baron (Trades, Portfolio), Spiros Segalas (Trades, Portfolio), Sarah Ketterer (Trades, Portfolio) and Jeremy Grantham (Trades, Portfolio) also have notable positions in the stock.

Meta Platforms

Having previously exited a position in Meta Platforms (

FB, Financial) in the fourth quarter of 2021, the guru’s firm picked up a new 3.6 million-share stake, dedicating it to 4.84% of the equity portfolio. Shares traded for an average price of $250.52 each during the quarter.

The stock is now Lone Pine’s eighth-largest holding.

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The social media company formerly known as Facebook, which is headquartered in Menlo Park, California, has a market cap of $532.52 billion; its shares were trading around $195.86 on Friday with a price-earnings ratio of 14.82, a price-book ratio of 4.34 and a price-sales ratio of 4.63.

According to the GF Value Line, the stock is significantly undervalued currently.

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Meta Platforms’ financial strength was rated 8 out of 10 by GuruFocus due to a comfortable level of interest coverage and a robust Altman Z-Score of 10.1 that indicates it is in good standing. The ROIC also eclipses the WACC, suggesting the company is creating value.

The company’s profitability fared even better with a 10 out of 10 rating. Despite recording a decline in its margins, Meta is supported by strong returns that top a majority of industry peers. It also has a moderate Piotroski F-Score of 5. Steady earnings and revenue growth contributed to a 4.5-star predictability rank. GuruFocus research found companies with this rank return, on average, 10.6% annually.

With a 0.41% stake, Fisher is Meta’s largest guru shareholder. Dodge & Cox,

Baillie Gifford (Trades, Portfolio), First Eagle, Chase Coleman (Trades, Portfolio), Chris Davis (Trades, Portfolio), Jim Simons (Trades, Portfolio)’ Renaissance Technologies and Ruane Cunniff (Trades, Portfolio), among several others, also have significant stakes in the company.

Mastercard

Impacting the equity portfolio by -3.54%, the firm slashed its Mastercard (

MA, Financial) position by 49.84%, selling 2.40 million shares. The stock traded for an average per-share price of $359.86 during the quarter.

Lone Pine now holds 2.42 million shares, which represent 5.14% of the equity portfolio and is its sixth-largest holding. According to GuruFocus, the firm has gained 21.02% on the investment since establishing it in the fourth quarter of 2021.

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The Purchase, New York-based financial services company, which provides global payment technology solutions and services, has a $325.56 billion market cap; its shares were trading around $333.66 on Friday with a price-earnings ratio of 34.82, a price-book ratio of 46.39 and a price-sales ratio of 16.63.

Based on the GF Value Line, the stock appears to be modestly undervalued currently.

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GuruFocus rated Mastercard’s financial strength 6 out of 10, driven by a comfortable level of interest coverage despite new long-term debt being issued. Even though the Altman Z-Score of 10is healthy, assets are building up at a faster rate than revenue is growing, indicating it may be becoming less efficient. The ROIC also exceeds the WACC, suggesting good value creation is occurring.

The company’s profitability fared even better, scoring a 10 out of 10 rating on the back of strong margins and returns that outperform a majority of competitors. It also has a high Piotroski F-Score of 8, indicating operations are healthy. Mastercard also has a five-star predictability rank, bolstered by consistent earnings and revenue growth. GuruFocus data shows companies with this rank return an average of 12.1% annually.

Chuck Akre (Trades, Portfolio)’s firm has the largest holding of Mastercard with 0.60% of its outstanding shares. Other top guru investors include Fisher, Warren Buffett (Trades, Portfolio), Baillie Gifford (Trades, Portfolio), Tom Russo (Trades, Portfolio), Segalas and Andreas Halvorsen (Trades, Portfolio).

UnitedHealth

With an impact of -2.94% on the equity portfolio, Lone Pine’s UnitedHealth (

UNH, Financial) holding was curbed by 62.3%, or 1.43 million shares. During the quarter, the stock traded for an average price of $481.86 per share.

The firm now holds 865,578 shares total, accounting for 2.63% of the equity portfolio. According to GuruFocus, Lone Pine has gained 60.28% on the investment so far.

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Headquartered in Minnetonka, Minnesota, the company, which provides health care plans and services, has a market cap of $445.94 billion; its shares were trading around $475.33 on Friday with a price-earnings ratio of 26.02, a price-book ratio of 6.16 and a price-sales ratio of 1.53.

The GF Value Line suggests the stock is modestly overvalued currently.

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UnitedHealth’s financial strength was rated 7 out of 10 by GuruFocus. Despite issuing approximately $9.3 billion in new long-term debt over the past three years, it is at a manageable level due to adequate interest coverage. The Altman Z-Score of 3.94 also indicates it is in good standing even though assets are building up at a faster rate than revenue is growing. Additionally, value creation is occurring since the ROIC surpasses the WACC.

The company’s profitability scored a 9 out of 10 rating on the back of an expanding operating margin, strong returns that outperform a majority of industry peers and a moderate Piotroski F-Score of 6. Recording steady earnings and revenue growth, UnitedHealth has a perfect five-star predictability rank.

Of the gurus invested in the company, the

Vanguard Health Care Fund (Trades, Portfolio) has the largest stake with 0.76% of its outstanding shares. Dodge & Cox, Ruane Cunniff (Trades, Portfolio), Grantham and Barrow, Hanley, Mewhinney & Strauss also have large positions in UnitedHealth.

Snap

Mandel’s firm trimmed its Snap (

SNAP, Financial) stake by 44.86%, selling 15.02 million shares. The transaction had an impact of -2.89% on the equity portfolio. Shares traded for an average price of $36.22 each during the quarter.

Lone Pine now holds a total of 18.46 million shares, which represent 3.95% of the equity portfolio. It has lost an estimated 36.52% on the investment since establishing it in the fourth quarter of 2020.

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The Santa Monica, California-based social media company, which is known for its Snapchat platform, has a $37.76 billion market cap; its shares were trading around $22.84 on Friday with a price-book ratio of 10.33 and a price-sales ratio of 8.13.

According to the GF Value Line, the stock is significantly undervalued currently.

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GuruFocus rated Snap’s financial strength 5 out of 10. While the Altman Z-Score of 3.79 indicates the company is in good standing, it is being weighed down by debt-related ratios that are underperforming versus other industry players.

The company’s profitability scored a 3 out of 10 rating. Although the operating margin is expanding, returns are negative and underperform over half its competitors. Snap also has a moderate Piotroski F-Score of 6.

With a 1.13% stake, Mandel’s firm is Snap’s largest guru shareholder. Other top guru investors are Baille Gifford, Segalas and Simons’ firm.

Additional trades and portfolio composition

During the quarter, Lone Pine also established new positions in Atlassian Corp. PLC (

TEAM, Financial), Dick’s Sporting Goods Inc. (DKS, Financial), Bill.com Holdings Inc. (BILL, Financial), Thermo Fisher Scientific Inc. (TMO, Financial), HubSpot Inc. (HUBS, Financial) and First Citizens Bancshares Inc. (FCNCA, Financial).

Nearly 45% of the firm’s $16.81 billion equity portfolio, which is composed of 30 stocks, is invested in the technology sector, followed by a smaller holding in the consumer cyclical space.

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Disclosures

I/we have no positions in any stocks mentioned, and have no plans to buy any new positions in the stocks mentioned within the next 72 hours. Click for the complete disclosure
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