market folly

Stephen Mandel and Lone Pine Capital are wagering that those fuzzy, borderline ridiculous looking, viking-esque UGG boots are more than just a fashion trend. In a new 13G filing, Lone Pine Capital has disclosed an 8.4% stake in Deckers (DECK), the makers of the popular UGGs. The filing was made due to activity on February 20th, 2009 and they now show ownership of 1,092,072 shares. In their most recent 13F filing in which they disclosed their entire portfolio of long positions as of December 31st, 2008, Lone Pine did not show a position in DECK. And, they also did not show a position in their 13F from the period ending September 30th, 2008 either. So, they've come in an added this new position with size.

Assumming they made their initial purchase before February 25th, Lone Pine is already losing on the position. On February 25th, DECK traded around $55 and as of yesterday (March 2nd) trades around $37. It will be interesting to see if they increase their position size given the recent plunge after DECK released earnings and guidance. This sort of play is right up Mandel's alley, as it is a value play in the consumer sector that he is so vastly familiar with. Such a play on discretionary spending in the midst of a consumer recession could also be seen as contrarian. Or, maybe he feels that the brand's popular UGG boots are more than just a fashion fad. Either way, this play is very Lone Pine-esque as it combines their expertise in the consumer sector with their value oriented strategy.

You can view the rest of Lone Pine's portfolio holdings here, which we recently updated last week. Mandel's $7 Billion fund has returned over 25% annually since its inception in 1997. But obviously, last year was rough on them and many others, as noted in our list of 2008 year end hedge fund performance numbers. 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. Make sure to check out the rest of the prominent hedge funds we're covering in our Q4 portfolio tracking series as we cover a new fund each day.