Stephen Mandel’s Investment Check-List


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An eternal optimist, Liu-Yue built two social enterprises to help make the world a better place. Liu-Yue co-founded Oxstones Investment Club a searchable content platform and business tools for knowledge sharing and financial education. also provides investors with direct access to U.S. commercial real estate opportunities and other alternative investments. In addition, Liu-Yue also co-founded Cute Brands a cause-oriented character brand management and brand licensing company that creates social awareness on global issues and societal challenges through character creations. Prior to his entrepreneurial endeavors, Liu-Yue worked as an Executive Associate at M&T Bank in the Structured Real Estate Finance Group where he worked with senior management on multiple bank-wide risk management projects. He also had a dual role as a commercial banker advising UHNWIs and family offices on investments, credit, and banking needs while focused on residential CRE, infrastructure development, and affordable housing projects. Prior to M&T, he held a number of positions in Latin American equities and bonds investment groups at SBC Warburg Dillon Read (Swiss Bank), OFFITBANK (the wealth management division of Wachovia Bank), and in small cap equities at Steinberg Priest Capital Management (family office). Liu-Yue has an MBA specializing in investment management and strategy from Georgetown University and a Bachelor of Science in Finance and Marketing from Stern School of Business at NYU. He also completed graduate studies in international management at the University of Oxford, Trinity College.

Lone Pine’s Stephen Mandel is widely regarded as one of the best bottoms-up fundamental portfolio managers out there. He also has a great reputation for managing his employees well, which is rare in the hedge-fund industry.

One of the keys to Mandel’s success is he gives check-list guidelines for his analysts to follow in what he wants for longs and shorts. Given Lone Pine’s success over the years, I would say the guidelines are working.

For long ideas Mandel wants:

-sold return on capital
-good cash flow
-prudent balance sheet
-competitive barriers (aka moat)
-strong management team

Mandel focuses on the long-term opportunity market size. He wants to see a long runway for growth where a company can reinvest capital at a high rate of return. That’s why he loves retail roll-out stories because if a retailer is successful in one region it is likely to be successful nation-wide.

For short ideas Mandel wants:

-avoid private equity targets (companies with good cash flow etc.)
-competitively challenged (aka no moat)
-fads, 1 product companies
-falling knives (results will be much worse than consensus)

For his price targets on solid growth companies, Mandel’s analysts model earnings 2 years out and are willing to put a 25Xs earnings multiple on that forecast. The game-plan is one year later the company will be valued at 25Xs forward earnings with the stock hitting the analyst’s price target as consensus catches up to Mandel’s analyst earnings estimate.

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