Steve Mandel (Trades, Portfolio), a long-short equity money manager, founded Lone Pine Capital in 1997. The guru invests in companies with a fundamental analysis and bottom-up approach, which incorporates both value and growth methodologies. He expanded his consumer cyclical empire in the third quarter by investing in two travel companies and two online retail companies.
eBay
Mandel purchased 33,164,569 shares of eBay Inc. (EBAY, Financial) at an average price of $30.19, increasing his portfolio by 4.87%.
Even though the California online retail company only has a profitability rank of 6, eBay has high profit margins and returns on equity. The company’s operating margin outperforms 96% of global specialty retail companies, and its return on equity is near a 10-year high.
CEO Devin Wenig lauded the company’s strong third-quarter earnings. Revenues totaled $2.2 billion, an increase of 8% on a foreign-exchange neutral basis or 6% on an as-reported basis. EBay reported $418 million in net income based on generally accepted accounting principles, yielding a diluted earnings per share of 36 cents.
Alibaba
The Lone Pine Capital manager purchased 5,151,461 shares of Alibaba Group Holding Ltd.Ă‚ (BABA, Financial), a well-known Chinese online retail company. Mandel paid an average price of $92.68 per share during the third quarter.
Alibaba has a profitability rank of 8, suggesting high and sustainable profitability in the short term. The company has expanding operating margins, which currently rank higher than 97% of global specialty retail companies. Chief Financial Officer Maggie Wu discussed the company’s strong September earnings, which include a 55% year-over-year revenue growth, over 450 million mobile users and increased numbers in paying customers of their cloud computing business.
As the company also has strong financial strength and high value potential, other gurus invested in Alibaba. Chase Coleman (Trades, Portfolio), Daniel Loeb (Trades, Portfolio) and Stanley Druckenmiller (Trades, Portfolio) purchased 5,373,553 shares, 2.6 million shares and 470,600 shares.
Guru makes two buys in the travel industry
As discussed in a previous article, Mandel purchased 7,143,331 shares of Expedia Inc. (EXPE, Financial) for an average price of $113.09. The transaction increased his portfolio by 3.72%.
The online travel company had a strong third quarter as implied by its earnings report. Gross bookings increased 21% year over year to $18.6 billion, resulting in a 33% revenue increase. The two acquisitions in 2015, Orbitz Worldwide and HomeAway, contributed to the increase in room bookings and flight reservations. Even though the company’s operating margin underperforms 62% of global leisure companies, the company has above-average three-year revenue growth and three-year earnings per share growth. Likely due to the high revenue and EPS growth, Expedia has a profitability rank of 8.
The Lone Pine Capital manager also purchased 19,597,829 shares of Hilton Worldwide Holdings Inc. (HLT, Financial), a well-known lodging and hospitality company. The company has a strong Piotroski F-score of 7 albeit low Altman Z-scores and a modest profitability rank of 6. The company reported diluted EPS of $0.74 and adjusted EPS of $0.66 for the first nine months of 2016, both slightly outperforming respective values for the first nine months of 2015. Hilton CEO Chris Nassetta acclaims the company’s accelerating capital-light growth, which is driven by “clearly defined brands” that represent about 22% of their rooms under construction globally.
Richard Pzena (Trades, Portfolio) and Steven Cohen (Trades, Portfolio) also invested in Hilton in the recent quarter. The former purchased 9,804,419 shares while the latter bought a modest 838,300.
See also
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Disclosure: No position in the stocks mentioned.
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