Steve Mandel: A Look at One of Investing’s Top Stock Pickers
In a recent letter to investors, Steve Mandel reflected on the “eye-popping” valuations of technology companies. But the billionaire isn’t shunning the venture capital game in tech, either. His firm, Lone Pine Capital, was one of the participants in Uber’s most recent $1.2 billion funding round.
This scenario highlights what makes Mandel stand out as an investor — his ability to make good picks. His talents have allowed him to amass $30 billion in assets at Lone Pine and build a $2.3 billion fortune of his own.
Life and Education
Raised in a Jewish family, Steve Mandel attended Phillips Exeter Academy before heading off to Dartmouth College, from which he graduated in 1978 with a degree in government. He went on to attend Harvard Business School, where he received an MBA.
It is worth noting Mandel’s continued involvement at his alma mater. He serves on the school’s board of trustees and is also on the board of directors at Teach for America.
Career
After graduating, Mandel went to work at Mars & Co., where he worked as a senior consultant. He then got a job as a consumer retail analyst at Goldman Sachs.
In the ’90s, Steve Mandel joined Tiger Management, where he worked under hedge fund legend Julian Robertson. He left the firm to launch his own fund in 1997, naming it Lone Pine Capital, after a pine tree at Dartmouth College that survived a lightning strike. Since then, he’s become one of the most noteworthy “tiger cubs” in investing.
Investment Philosophy
At Lone Pine, Steve Mandel follows a long/short strategy for investing. He employs fundamental analysis and a bottom-up stock picking approach, meaning he focuses on individual companies instead of global macro trends and economic cycles.
The billionaire seeks out good businesses run by good people with valuations that he perceives as lower than their intrinsic value. He works to understand a company’s practices, operations and growth prospects and also adds value in his strategy for sizing his positions. He prefers stocks that compound value through organic earnings growth as well as companies undergoing favorable management and strategic value that are not yet recognized in their valuations.
Mandel’s approach to investing worked spectacularly in 2012 and 2013, and Lone Pine posted strong double digit returns both years. But in 2014, growth slowed.
In his second quarter letter to investors, he addressed the issue. “Our errors in 2014 have largely been ones of omission, not commission,” he wrote, explaining that the market had been rewarding “other types” of investments instead of his own.
Notable Plays
Despite his success, Steve Mandel has maintained a relatively low profile throughout his career. He isn’t one to broadcast his investments in the media, meaning his investor letters and portfolio holdings are the main sources of insights into his biggest plays.
So what’s had the billionaire’s attention lately? What he calls “creative destruction.”
In his third quarter letter to Third Point investors, the billionaire wrote:
There is a greater degree of creative destruction occurring now across a number of businesses than at any time during our investment careers (and perhaps ever, or certainly since the industrial revolution. The internet and mobile communications are the main drivers behind this upheaval. This information and communications revolution is driving profound change across many industries, creating investment opportunity for us, long and short, as markets underestimate such change.
Hence his large positions in companies like MasterCard (NYSE:MA) and FleetCor (NYSE:FLT). He also gave nod to “aspirational brands” like Michael Kors (NYSE:KORS) and Tiffany & Co. (NYSE:TIF).
In his most recent investor letter, Mandel emphasized interest in M&A activity in healthcare in tech. His thesis is evidenced in a large position in pharmaceutical company Valeant (NYSE:VRX). He also seems to see opportunity in emerging markets — specifically, Baidu (NASDAQ:BIDU) and JD.com (NASDAQ:JD).
Quotes
“Heads I win very small, tails, I lose very big.”
“There is a greater degree of creative destruction occurring now across a number of businesses than at any time during our investment careers.”
Videos
A Welcome Celebration for Dartmouth President-Elect Philip J. Hanlon ’77: Steve Mandel ‘78
