Billionaire Stephen Mandel sold 46% of Lone Pine’s stake in Taiwan Semiconductor and is building himself into one of the world’s most famous consumer brands
Investors were faced with a near-impossible task in November to keep track of major data releases. Between earnings season, Election Day and the usual flurry of monthly economic reports, it would have been easy to miss a major announcement.
For example, investors may have overlooked that November 14 was the deadline for institutional investors with at least $100 million in assets under management (AUM) to file Form 13F with the Securities and Exchange Commission. A 13F gives investors a snapshot of what stocks Wall Street’s top money managers bought and sold in the last quarter.
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Investors can use 13Fs to reflect the trading activity of leading asset managers, such as Berkshire HathawayWarren Buffett, or they can use these documents as a means to discover which stocks, industries, sectors and trends are capturing the interest of Wall Street’s smartest investors.
One billionaire investor who has rightfully earned a lot of attention is Lone Pine Capital’s Stephen Mandel. At the end of September, Mandel oversaw $13.4 billion in assets under management across 29 stocks.
What’s particularly notable about Mandel’s trading is that he’s been steadily showing shares of the global chip maker Taiwanese semiconductor manufacturing(NYSE: TSM) to the door, as you pile into one of the most beloved global consumer brands.
No trend has been hotter in 2024 than the rise of artificial intelligence (AI). In Determine the pricePwC analysts predict a 26% increase in global gross domestic product by 2030, solely due to the effects of AI.
While direct players like it Nvidia While they have enjoyed the spoils of the AI ​​revolution, companies like Taiwan Semiconductor Manufacturing are playing a close second fiddle. With orders for Nvidia’s graphics processing units (GPUs) growing at a breakneck pace, Taiwan Semi is dramatically increasing its chip-on-wafer-on-substrate manufacturing capacity to help Nvidia and other GPU makers meet demand.
Despite Taiwan Semi’s seemingly perfect positioning as the world’s largest chipmaker, Mandel’s fund has been an active seller. Over the past four quarters (ending September 30), Lone Pine Capital has dumped 3,587,291 shares of its Taiwan Semi stock, representing a cumulative reduction of 46%.
While Taiwan Semi appears poised to benefit long-term from the continued surge in AI-accelerated data center infrastructure, there are three catalysts, beyond simple profit-taking, that could explain why Mandel and his top advisors have nearly halved their stake. in this chip manufacturing company worth billions.
The first potential concern for Lone Pine’s brightest investing minds is the possibility of an artificial intelligence bubble taking shape and bursting. There hasn’t been a next-big-thing innovation in at least thirty years that has avoided a bubble-bursting event early in the expansion. In other words, investors have a terrible habit of overestimating how quickly a new technology or innovation will be adopted by consumers/businesses and become widely useful. We are nowhere near mainstream adoption of AI, which opens the door to a potential demand cliff if the bubble bursts.
A second catalyst that may have forced Mandel and his team to send nearly 3.6 million shares of Taiwan Semi to the chopping block over the past year are regulatory concerns. The Joe Biden administration has made it difficult to ship powerful AI chips and equipment to China. Similarly, the new administration of Donald Trump is expected to impose tariffs on US imports. These gray clouds could keep Taiwan Semi from reaching its full potential.
The third and final impetus behind this selling activity could be the company’s valuation. On the surface, Taiwan Semiconductor Manufacturing still seems fairly cheap, at 23 times full-year earnings. But dig deeper and you’ll discover that Taiwan Semi is trading at a 50% premium to its average price-to-cash flow ratio over the past five years.
Mandel and his team have also made quite a bit of buying as the stock market’s major indexes have soared to new highs. Of Lone Pine Capital’s nine new additions during the quarter ended September, perhaps none stands out more than the world’s leading coffee chain Starbucks(NASDAQ:SBUX).
Lone Pine’s 13F shows that Mandel oversaw the purchase of 4,050,850 Starbucks shares during the third quarter, making it the fund’s 18th largest position by market value.
Mandel’s appeal to Starbucks probably has to do with the company working its way through some difficulties, which were reflected in the stock price until mid-August – this is a point I’ll elaborate on in a moment. Starbucks has struggled in China, the company’s second-largest market after the U.S., posting year-over-year same-store sales declines for three quarters in a row. Despite these challenges, there are reasons to believe Starbucks can get its act together and deliver results for its shareholders.
Starbucks’ biggest catalyst was undoubtedly alluring Chipotle Mexican Grill‘s former CEO Brian Niccol will be the new chief. Chipotle’s profits soared under Niccol’s tenure, with the company focusing on process efficiency and innovation to deliver outsized profits for shareholders.
Niccol was announced as the new CEO in mid-August, causing Starbucks shares to soar. Since taking over, he has created a multi-point plan to return Starbucks to its roots. In particular, Niccol plans to address in-store ordering bottlenecks by relying on technology, and by revamping the company’s supply chains to better meet store and customer needs.
Additionally, Niccol wants to simplify the company’s menu and rework its mobile ordering platform to make it less complex. Starbucks ended its fiscal year (ending September 29) with 33.8 million active US Rewards memberships, and it’s imperative that Niccol keeps these higher-margin customers coming back for more. Rewards members often have larger tickets than non-members, and are more likely to order on mobile, which helps move lines faster.
The other factor that shouldn’t be overlooked is that Starbucks has had to reinvent itself before, and it has succeeded before. This is a well-known global brand that often boasts exceptional pricing on the foods and beverages it serves and sells.
While Starbucks still has a lot to prove to grow to its current valuation after its recent missteps, its long-term track record and experienced CEO suggest it can.
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Sean Williams has no position in any of the stocks mentioned. The Motley Fool holds positions in and recommends Berkshire Hathaway, Chipotle Mexican Grill, Nvidia, Starbucks, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends the following options: Short December 2024 put $54 on Chipotle Mexican Grill. The Motley Fool has a disclosure policy.
Billionaire Stephen Mandel sold 46% of Lone Pine’s stake in Taiwan Semiconductor and is building himself into one of the world’s most famous consumer brands. originally published by The Motley Fool
