On Sale: Buy This Genomics Powerhouse Cheaper than Lone Pine Capital

Stephen Mandel's Lone Pine Capital was said to have a rough August like most other hedge fund peers. However, the $29 billion hedge fund's near-term and long-term track record speaks for itself, including the firm's December 2014 private placement in Uber. The various funds inside Lone Pine are said to be up around 7-8% year-to-date. Given the recent market malaise you now have an opportunity to buy one of Lone Pine Capital's recent big bets at a discount to prices they paid. The stock in question is Illumina (NASDAQ: ILMN).

Lone Pine initiated a 2.9 million share long position in Illumina in Q1 of 2015. That stake grew to 5.7 million shares by the end of Q2.

Illumina started Q1 at $184.58/share and ended at $185.64. Most of the quarter shares were in the $190s. For Q2, shares started at $185.64, traded as high as $223 and ended at $218.36. Most of the trading was well north of $200 during the quarter. This data would suggest Lone Pine has a cost basis in the low $200s. The current price is $198.

Illumina is growing sales and EPS at a fast clip and is poised to continue. In the company's second quarter, revenue grew 21% to $539 million and non-GAAP EPS grew 40% to $0.80. Gross margin in the second quarter of 2015 was 69.8% compared to 67.1% in the prior year period.

For fiscal 2015,Illumina continues to project approximately 20% total revenue growth, including a 3% negative impact from foreign exchange assuming current currency exchange rates. The Company also increased its projections for non-GAAP earnings per diluted share to $3.39 to $3.45.

While the company's near-term results look fantastic, the company is also thinking longer-term. Illumina recently announced Helix, a consumer-focused genomics company, with private equity partners Warburg Pincus and Sutter Hill Ventures, and the Mayo Clinic, which analysts are calling a long-term play on consumer genomics.

Canaccord Genuity analyst Mark Massaro called it the "digital hub" for consumer genomics which will allow third parties (initially LabCorp and the Mayo Clinic) to build "genomics apps", akin to the Apple app store. "Net, net, we think as consumers begin to embrace and use genomics in their everyday lives, we expect another leg of growth ahead for Illumina's wide range of industry-leading sequencing products," Massaro said in an August 20th note to clients. The firm reiterated a Buy rating and $250 price target on ILMN at that time.

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