Lone Pine Capital | Hedge Fund Tracker Notes

Lone Pine Capital

Lone Pine Capital | Hedge Fund Notes

Below please find the Hedge Fund Tracker profile for Lone Pine Capital.

Resource #1: we have Lone Pine Capital, managed by Steven Mandel. Lone Pine is an $8 Billion fund that has returned over 25% annually ever since its inception in 1997. Why is Mandel worth following, you might ask? Well, he served as a consumer/retail analyst for Tiger Management back in the day for legendary investor Julian Robertson. Robertson's proteges/right-hand men have been nicknamed the "Tiger Cubs" and many have started their own funds. So, not only has Mandel learned from one of the best, but he has put up some very solid returns himself. Mandel is well versed in the ways of finding undervalued companies and his funds typically like to sniff out solid companies with good management that are trading below their intrinsic value. Just this past year 1 of his funds was up 34% before fees while another was up 32% before fees. His track record speaks for itself. And, not to mention, he learned from one of the greats in Julian Robertson. However, as I wrote about here, Lone Pine has had a rough 2008, where their Lone Cedar Fund was -5.38% year to date (as of the middle of July '08). By analyzing their 13F, maybe we'll be able to see where they are slipping up. source

Resource #2: By launching a long-only fund called Lone Cascade, Lone Pine Capital has not only given up hope of generating alpha on the short side, but has also taken a risky bet on the market. However good its stock picking (within reason), it’s hard to see how Lone Cascade will make money in a down-market.

This observation elicited two responses.

One response was to argue that ultimately it’s always possible to make money on the long side if your holding period is long enough. So if shorting is becoming increasingly hard, it’s fine to adopt a long-only strategy. Personally, I don’t buy that. Current predictions of long-term returns from the US equity markets are unusually pessimistic; just read Hussman’s and Grantham’s letters (which I’ve linked to from the Market Resource Page) and this analysis of Mauldin’s book Bull’s Eye Investing source

Resource #3: We found out last month that September was pretty brutal for several high-profile hedge funds. Among them was Lone Pine Capital, headed by Stephen Mandel, who was formerly a Managing Director at Julian Robertson's legendary Tiger Management.

Lone Pine employs a number of strategies, including value, growth, and short selling. According to Bloomberg, Lone Pine returned 47% in 2007, but Lone Pine's main Lone Cypress fund was down -14.7% for September and -26.5% year to date at that point. We now know that Lone Pine made several moves during the quarter ended September 30th. source

Resource #4: A big part of earning potential at a hedge fund is not just base pay plus bonuses, however. As managers now are doing whatever it takes to record gains in a tough trading environment, hanging on to top talent is getting increasingly important. More and more, hedge fund managers are starting to share the wealth by giving equity stakes in their firm to key employees or expanding already-existing equity plans.

Hedge fund managers who have already done this include Stephen Mandel, who manages $9 billion equity hedge fund Lone Pine Capital, and Daniel Och, who manages New York-based Och Ziff Capital Management, an $11.5 billion hedge fund.

According to the Glocap survey, investment professionals besides the chief investment officer at most big hedge funds pocket base salaries in the six figures, but for employees who do not have equity in a firm, the real money comes from their bonuses. For investment professionals -- in other words, anyone making an investment decision, such as portfolio managers and analysts -- with five to nine years of experience, bonuses jumped from $212,000 in 2003 to an average of $287,000 in 2004. Traders with 10 or more years of hedge fund trading experience saw their bonuses increase 38 percent from $313,000 in 2003 to $433,000 in 2004. source

Resource #5: Hedge fund Lone Pine Capital LLC reported on Monday that it has taken a 5.4 percent stake in teen clothing retailer American Eagle Outfitters Inc (AEO.N).
The fund disclosed in a filing with the U.S. Securities and Exchange Commission that it owns 11.6 million shares, but did not state when it bought the shares or the purpose behind the acquisition of the stake. source

Resource #6: How hard is it for a hedge fund to string together stellar returns for two years in a row? Pretty hard, according to an analysis by the New York Post. A lot of funds that fared well last year are suffering in the red this year. The Tontine Overseas Fund for example was up 40 percent last year but is down 17 this year. Lone Cedar, from Lone Pine Capital, was up 44 percent last year but is down 6 percent this year. But there are always some exceptions. One of the biggest winners last year was Paulson & Co.'s Paulson Advantage, which was up 100 percent. This year, it is hanging tough with a 22 percent gain. Harbinger Capital Partners Offshore was up 112 percent last year and is up another 41 percent this year. We'll see how long this can last. source

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