Lee Ainslie's Maverick Capital Bullish on CVS Caremark (CVS) & Technology: 13F Filing Q1 2010 ~ market folly

Thursday, May 20, 2010

Lee Ainslie's Maverick Capital Bullish on CVS Caremark (CVS) & Technology: 13F Filing Q1 2010

(This post is part of our series on tracking hedge fund portfolios. If you're unfamiliar with tracking investments they disclose via SEC filings, check out our series preface on hedge fund filings.)

Next up is Lee Ainslie's hedge fund Maverick Capital. Lee founded the firm with seed capital from the Wyly Family in Texas after he left Julian Robertson's hedge fund Tiger Management. Maverick focuses on intensive fundamental research on both the long and short sides of the portfolio, but doesn't employ pairs trades. Ainslie likes to focus on risk management and positions typically do not exceed more than 8% of the portfolio. Maverick's analytical team is divided up by sector and place an emphasis on enterprise value to sustainable free cash flow.

Maverick is part of the Tiger Cub Portfolio created with Alphaclone where you can replicate the holdings of some of the top hedge funds in the game. For recent market insight from Ainslie, we covered Maverick's investor letter where Ainslie saw a decline in the price of risk. Additionally, he gave some of his thoughts at a hedge fund panel. To learn more about Ainslie, head to our profile of Maverick Capital.

The positions listed below were Maverick's long equity, note, and options holdings as of March 31st, 2010 as filed with the SEC. All holdings are common stock unless otherwise denoted:

Brand New Positions
Abercrombie & Fitch (ANF)
Dell (DELL)
Google (GOOG)
Hewlett Packard (HPQ)
Ironwood Pharmaceuticals (IRWD)
JPMorgan Chase (JPM)
Men's Wearhouse (MW)
Office Depot (ODP)
PNC Financial (PNC)
Solarwinds (SWI)
Stanley Black & Decker (SWK)

Increased Positions
Qualcomm (QCOM): Increased position by 269.7%
Bank of America (BAC): 159.3%
Pfizer (PFE): Increased by 125.8%
Expedia (EXPE): Increased by 95.4%
Family Dollar Stores (FDO): Increased by 88%
CVS Caremark (CVS): Increased by 85%
Davita (DVA): Increased by 68.8%
Wellpoint (WLP): Increased by 67.1%
Marvell Technology (MRVL): Increased by 60.9%
Corning (GLW): Increased by 56.9%
Visa (V): Increased by 48.6%
DirecTV (DTV): Increased by 30.6%
Mead Johnson Nutrition (MJN): Increased by 39.3%
Dish Network (DISH): Increased by 9.5%

Reduced Positions
Berkshire Hathaway (BRK.A): Reduced position by 99.6%
Gilead Sciences (GILD): Reduced by 47.2%
Healthnet (HNT): Reduced by 43.8%
Express Scripts (ESRX): Reduced by 42.2%
FedEx (FDX): Reduced by 30.6%
Athenahealth (ATHN): Reduced by 29.2%
Tyco International (TYC): Reduced by 22%

Positions They Sold Out of Completely
Autodesk (ADSK)
Amgen (AMGN)
American Movil (AMX)
Anadys Pharmaceuticals (ANDS)
Apache (APA)
Autozone (AZO)
Brocade (BRCD)
Berkshire Hathaway (BRK.B)
Banco Santander (BSBR)
Citigroup (C)
Citrix (CTXS)
Cablevision (CVC)
Discovery Communications (DISCK)
Equinix (EQIX)
Green Mountain Coffee Roasters (GMCR)
Illumina (ILMN)
Infinera (INFN)
Lorillard (LO)
Priceline (PCLN)
Pepsico (PEP)
Parker Hannifin (PH)
RenaissanceRe (RNR)
Rovi (ROVI)
Sears Holdings (SHLD)
State Street (STT)
Target (TGT)
South Financial Group (TSFG)
Ultra Clean Holdings (UCTT)
Wells Fargo (WFC)
XenoPort (XNPT)
XTO Energy (XTO)

Top 15 Holdings (by percentage of assets reported on 13F filing)

1. CVS Caremark (CVS): 4.04%
2. Marvell Technology (MRVL): 3.89%
3. Apple (AAPL): 3.88%
4. Corning (GLW): 3.88%
5. Qualcomm (QCOM): 3.82%
6. Pfizer (PFE): 3.80%
7. Wellpoint (WLP): 3.75%
8. Apollo Group (APOL): 3.73%
9. Family Dollar Stores (FDO): 3.73%
10. DirecTV (DTV): 3.67%
11. Hewlett Packard (HPQ): 3.54%
12. Progressive (PGR): 2.29%
13. Expedia (EXPE): 2.78%
14. Google (GOOG): 2.71%
15. Visa (V): 2.62%

CVS Caremark is Maverick's largest stake and here's a brief history with their position: Back in the first quarter of 2009, we actually saw Ainslie sell out of CVS and buy into rival Walgreens. Then in the fourth quarter of 2009, we posted on our Twitter account that Ainslie mentioned he was very keen on shares of CVS at an investment conference as it was one of his highest conviction picks. That much is now evident in his portfolio as CVS sits as Maverick's largest holding as of the first quarter in 2010. CVS was also mentioned on a list of analysts' best stock picks for 2010.

Earlier this morning we saw that John Griffin's Blue Ridge started a huge new position in Google (GOOG). Maverick did the same, albeit on a slightly smaller scale. So you have two very prominent hedge funds adding shares of GOOG in size and the stock now trades below any price they would have purchased at this past quarter. Additionally, we see that both Maverick & Blue Ridge sold out of data center play Equinix (EQIX). It should also be highlighted that Ainslie started a sizable stake in tech bellwether Hewlett Packard (HPQ) as well.

We also see Maverick sold over 40% of their Express Scripts (ESRX) position which is interesting because fellow Tiger Cub hedge fund Viking Global favors it as one of their top picks. If we were to hazard a guess, we'd say Maverick reduced this position because they have CVS (another pharmacy benefit management company) as their top holding. We also wanted to highlight Maverick's Family Dollar Stores (FDO) position because this is a name we've seen popping up on numerous 13F filings as of late as it attracts hedge fund interest (and as you'll see in our continuing coverage). Lastly, we make note of Ainslie's departure from some high flying stocks such as Priceline (PCLN) and Green Mountain Coffee Roasters (GMCR).

On a sector basis, Maverick's largest weightings are in technology and consumer services. This is along the lines of what we saw last quarter from Maverick as they bet on technology then as well. Assets reported on the 13F filing were $9.3 billion this quarter. Data from the SEC is aggregated and sorted automatically by Alphaclone, our source for hedge fund tracking, replicating, and performance backtesting (Market Folly readers can receive a special free 30 day trial). Remember that these filings are not representative of the hedge fund's entire base of AUM.

This post is part of our daily hedge fund portfolio tracking series. We've already detailed activity from numerous managers so click the links below to be taken to the respective portfolio updates: Seth Klarman's Baupost Group, Warren Buffett's Berkshire Hathaway, Stephen Mandel's Lone Pine Capital, and Bill Ackman's Pershing Square, David Einhorn'sGreenlight Capital, Eddie Lampert's RBS Partners, David Tepper's Appaloosa Management, Mohnish Pabrai's Investment Fund, and John Griffin's Blue Ridge Capital. Be sure to check back daily for new hedge fund updates.

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