Steve Mandel is a Tiger Cub who founded Lone Pine Capital in 1997. He invests in public equity markets across the globe using a long/short strategy. The firm uses a fundamental, bottom-up process to build each portfolio. He returned ~23% during the past 11 years. He has a higher turnover than most of the investors we follow, however, his results and ability to seek out high-quality investments speaks for itself.
Here are three companies from Mandel’s portfolio that we find interesting:
Visa (V) – FCF Yield of 3.14%, EV/EBIT of 19.90, Dividend Yield of 0.63%, No Debt
Visa is the global leader in credit / debit card transactions. Based on credit/debit cards in circulation, dollar volume, and transaction, Visa has the largest electronic payments platform. 50% of all transaction are debit card related and this number is expected to grow.
Barriers to entry can be tough as competitors need multiple things to compete adequately: brand recognition, stringent fraud systems in place, and merchant/customer acceptance. Visa’s relationship with financial institutions and merchants allows them to extend no credit, which in turn, allows them to assume no credit risk. In addition, Visa’s main revenue model provides built-in inflation protection because its fees are based on the percentage of the total purchase.
Visa has a fortress balance sheet with $6 billion in cash and very little debt. This allows them plenty of opportunity and flexibility to take advantage of strategic acquisitions, organic growth, and repurchasing of shares. It will be very difficult to kill this company.
The company’s shares are up 22% over the past 12 months and trade at $79.31 per share (near all-time highs). Shares are not overly appealing at current levels with a FCF Yield of 3.14%, EV/EBIT of 19.90, and Dividend Yield of 0.63%. Shares appear to be fully valued at current levels offering very little in a margin of safety. Our preference is to wait for lower prices, but investors could do worse in owning this compounder at current levels.
