market folly

Next up in our notes from Invest For Kids Chicago is Steve Mandel of Lone Pine Capital.  His presentation focused on how "technological change creates winners and losers" and how there is "no bigger disruptive market force than the Internet."


Mandel's Pitch on VeriSign (VRSN)

•    Lone Pine owns 9% of the company.  We revealed Lone Pine's initial stake in VRSN that they took in August (back then they owned 5.5% of the company)
•    VeriSign is the registry operator for .com and .net & handles the queries of each day
•    Thesis is combo of 5% to 7% growth in domains and 5% increases in price
•    This should lead to 25x EPS growth over next few years
•    This business should not be trading at 13x
•    CEO built RSA before founding VeriSign.  The board brought founder back in 2008 to focus on the business after a handful of non-core acquisitions
•    Management has been divesting non-core operations and now the company has operating margins of 50%
•    15 years of strong operating performance
•    Defense community views VeriSign as important to national security
•    If no price increases are allowed by the government the downside is low even in draconian case

His last point is noteworthy mainly because recently shares of VRSN sold off when it was announced that the Commerce Department and Department of Justice have been reviewing VRSN's .com Registry Agreement pricing terms.  The government may not complete its review in time before the current agreement expires on November 30th.

The fear is that the contract might not allow for price increases or they'll have to re-negotiate.  However, Mandel still thinks this stock is appealing even if price increases aren't allowed.

VeriSign (VRSN) was analyzed in the most recent issue of our premium newsletter: Hedge Fund Wisdom. A new issue is only two weeks away so be sure to sign-up.


For the rest of the hedge fund presentations from the event, head to notes from Invest For Kids Chicago.