There is one word at the center of Steve Mandel's investment strategy: internet.
Lone Pine Capital, the hedge fund led by the billionaire "Tiger Cub," is betting on companies that dominate the web in 2016, according to a letter sent to Lone Pine's Cascade fund's investors dated January 15.
Those companies with business models that continue to get crushed by the internet will form the fund's short portfolio, the letter said.
Here's the excerpt:
- The internet remains the single most important and disruptive economic phenomenon in the world. It is transforming almost every sector of the economy. A few leading internet companies dominate the scarce real estate on the mobile web, a place where customers are flocking globally. These companies still have significant runway for growth and are not trading for overly demanding valuations. Increased mobile web use can also improve the economics of existing platforms: e.g., enterprise software companies such as Adobe and Microsoft as they move to accretive subscription models. It also untethers the videogame industry from the boom/bust nature of the traditional console cycle. Internet-driven investments remain the largest portion of our long portfolio.
- The impact of the internet is resulting in the permanent and ongoing dismantling of longstanding economic models in advertising, media, retailing, technology and travel, among others. This informs a significant portion of our short portfolio.
Lone Pine's Cascade fund, its long-only fund, rose 1.4% in the fourth quarter to end 2015 down 1.2%, the letter said.
As of the end of 2015, the Cascade fund's 10 largest long-stock positions included Microsoft, Amazon, Tencent Holding, Facebook, Visa, Dollar Tree Stores, Williams Companies, FleetCor Technologies, JD.com, and Charter Communications.
Meanwhile, Lone Pine's Cyprus fund rose 4.6% in the fourth quarter, ending the year up 8.7%, while its Kauri fund rose 4.4% in the quarter to end 2015 up 8.9%.
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