Hedge Fund Tracking: Lee Ainslie's Maverick Capital - 13F Filing 3rd Quarter 2008 ~ market folly

Thursday, November 20, 2008

Hedge Fund Tracking: Lee Ainslie's Maverick Capital - 13F Filing 3rd Quarter 2008

(Note: Before reading this update, make sure you check out the preface to the series we're doing on Hedge Fund 13F's here).

This is the 3rd Quarter 2008 edition of our ongoing hedge fund tracking series. We've already covered Whitney Tilson's T2 Partners, Peter Thiel's Clarium Capital, Bill Ackman's Pershing Square, and Stephen Mandel's Lone Pine Capital. Next up, we have Maverick Capital. Lee Ainslie started Maverick Capital back in 1993 with $38 million. Nowadays, the fund is worth $10 billion. Ainslie, like many of the other fund managers we've profiled, has a background rooted in learning from legendary great Julian Robertson at Tiger Management. These proteges (nicknamd 'Tiger Cubs') learned from the best and have had great success running their own funds. Some contacts over at Maverick have explained that their strategy is straight up stock picking, both long and short. They made it clear though, that they do not employ pairs trades. Although, some of their long/short setups might be in the same sector.

They try to hedge their positions like the name hedge fund implies by picking out the shining stars in certain sectors, as well as identifying the pieces of garbage. Now, of course, this presents us with a problem in that the 13F filings only show long positions (unless they're holding puts on a name, we can see those). So, a good amount of Maverick's portfolio (the entire short side) is unbeknownst to us, because they have reported zero put positions. But, let's look on the bright side in that we can see all their long positions. Maverick uses a value approach (obviously learned from Julian) and one of their most popular metrics is finding companies and comparing their enterprise value to sustainable free cash flow.

As we noted in our October hedge fund performance numbers update, one of Maverick's funds was -6.34% in October and is now -26.47% year-to-date. (You can check out their most recent investor letter). We suggest checking out Maverick's 2nd quarter '08 portfolio holdings so you can get a sense as to how they were shifting around their portfolio recently. Also, we recently noted that Maverick recently sold out of their entire Under Armour (UA) position via a 13G filing.

So, now that we've got a background on Ainslie and Maverick, let's take a quick look at his portfolio highlights. We'd like to give a special thank you to Alex Prywes who has helped us with the 13f analysis so that we can cover more funds.

The following were Maverick's long equity and options holdings as of September 30th, 2008 as filed with the SEC.

New Positions (Brand new positions that Maverick initiated in the last quarter):
Apollo Group (APOL)
Amgen (AMGN)
Priceline (PCLN)
XTO Energy (XTO)
Activision Blizzard (ATVI)
Schering Plough (SGP)
Devry (DV)
HanesBrands (HBI)
Lender Processing (LPS)
Morgan Stanley (MS)
M&T Bank (MTB)
Yingli Green Energy (YGE)
Goldman Sachs (GS)
Freeport McMoran (FCX)
Las Vegas Sands (LVS)
J Crew (JCG)
Hudson City Bancorp (HCBK)
SalesForce (CRM)
Zale Corp (ZLC)
Nutrisystem (NTRI)
Sealy (ZZ)
Fortress Investment Group (FIG)
Hancock Holding Co (HBHC)
Bancorp Southern (BCSO)
Washing Mutual (WM)
Susquehanna Bancshares (SUSQ)

Added to (Positions Maverick already owned but added more shares)
Citizens Republic Bancorp (CRBC): Increased position by 293%
Berkshire Hathaway (BRK.B): Increased position by 112%
MSCI Inc (MXB): Increased position by 87%
Southern Financial Group (AFN): Increased position by 80%
Universal American Corp (UAM): Increased position by 58.5%
Marvell (MRVL): Increased position by 45%
Cigna (CI): Increased position by 43%
Netapp (NTAP): Increased position by 35%
Cognizant Tech (CTSH): Increased position by 33%
GMarket (GMKT): Increased position by 27%
First Solar (FSLR): Increased position by 22%
Lorillard (LO): Increased position by 21%
Dish Network (DISH): Increased position by 20%
MetroPCS (PCS): Increased position by 19%
CVS Caremark (CVS): Increased position by 14%
AthenaHealth (ATHN): Increased position by 12.7%
Leap Wireless (LEAP): Increased position by 12%
Textron (TXT): Increased position by 9.9%
Monsanto (MON): Increased position by 7%
Digital River (DRIV): Increased position by 4.6%
Thermo Fisher Scientific (TMO): Increased position by 3.8%
Gilead Sciences (GILD): Increased position by 1.3%
Berkshire Hathaway (BRK.A): Increased position by 0.16%
Cypress Biosciences (CYPB): Increased position by 0.05%

Reduced Positions (Positions Maverick sold some shares of)
Cardinal Health (CAH): Reduced by 55%
Covidien (COV): Reduced by 54%
Western Union (WU): Reduced by 51%
National City (NCC): Reduced by 51%
Marsh & Mclennan (MMC): Reduced by 44.7%
Potash (POT): Reduced by 44%
Baxter (BAX): Reduced by 36%
Burlington Northern (BNI): Reduced by 35%
Advanced Micro Devices (AMD): Reduced by 34%
America Movil (AMX): Reduced by 29%
Under Armour (UA): Reduced by 29% - Note: They have since sold off their entire position
DirecTV (DTV): Reduced by 28%
Dicks Sporting Goods (DKS): Reduced by 25%
Trubion Pharmaceuticals (TRBN): Reduced by 22%
Infinera (INFN): Reduced by 9.7%
Wyeth (WYE): Reduced by 9.6%
Home Inns & Hotels (HMIN): Reduced by 9.4%
Resmed (RMD): Reduced by 9%
Palm (PALM): Reduced by 7.8%
Citrix (CTXS): Reduced by 7.2%
Liberty Media (LMDIA): Reduced by 5.6%
Apple (AAPL): Reduced by 4.8%
Raytheon (RTN): Reduced by 3%
Fidelity National Info (FIS): Reduced by 2.9%
Comscore (SCOR): Reduced by 2.7%
Research in Motion (RIMM): Reduced by 2.2%

Positions with no change
Lamar Advertising (LAMR)
VMWare (VMW)
Newstar Financial (NEWS)
BPW Acquisition (BPW)
First Advantage Corp (FADV)
Bluefly (BFLY)
First Marblehead (FMHD)
Ultra Clean Holdings (UCTT)
Vivus Inc (VVUS)

Removed Positions (Positions Maverick sold out of completely)
American Capital Strategies (ACAS)
Amylin Pharma (AMLN)
Avon Products (AVP)
Bank of New York Mellon (BK)
China Nepstar (NPD)
Corcept Therapeutics (CORT)
Discovery Holdings (DISCA)
Forest Labs (FRX)
Gamestop (GME)
Genentech (DNA)
Google (GOOG)
Hansen Natural (HANS)
ITT Educational (ESI)
JP Morgan Chase (JPM)
Lexmark (LXK)
Lumber Liquidators (LL)
Macys (M)
Mylan (MYL)
Nordstrom (JWN)
Polo Ralph Lauren (RL)
Sohu (SOHU)
Suntrust Banks (STI)
Viacom (VIA)
Visa (V)
Zimmer Holdings (ZMH)

Top 20 Holdings (by % of portfolio)

  1. Lorillard (LO): 3.98% of portfolio
  2. Apple (AAPL): 3.58% of portfolio
  3. First Solar (FSLR): 3.38% of portfolio
  4. America Movil (AMX): 3.29% of portfolio
  5. Raytheon (RTN): 3.22% of portfolio
  6. Marvell (MRVL): 3.2% of portfolio
  7. Apollo Group (APOL): 3.19% of portfolio
  8. Research in Motion (RIMM): 3.16% of portfolio
  9. Amgen (AMGN): 3.15% of portfolio
  10. Gilead (GILD): 2.8% of portfolio
  11. Netapp (NTAP): 2.79% of portfolio
  12. CVS Caremark (CVS): 2.76% of portfolio
  13. Baxter (BAX): 2.54% of portfolio
  14. Citrix (CTXS): 2.38% of portfolio
  15. Thermo Fisher Scientific (TMO): 2.33% of portfolio
  16. Advanced Micro Devices (AMD): 2.3% of portfolio
  17. Liberty Media (LMDIA): 2.09% of portfolio
  18. Monsanto (MON): 1.9% of portfolio
  19. Priceline (PCLN): 1.85% of portfolio
  20. XTO Energy (XTO): 1.79% of portfolio

This is the fifth hedge fund we've covered in our 3rd quarter 2008 edition of our hedge fund tracking series in which we're tracking 35+ prominent funds. We've already covered Whitney Tilson's T2 Partners, Peter Thiel's Clarium Capital, Bill Ackman's Pershing Square, and Stephen Mandel's Lone Pine Capital. Stay tuned this week and next week as we detail the portfolio holdings of more funds. Overall, its been one of the worst years ever for hedge funds, as we noted in our recent October hedge fund performance update. Thus, the recent moves they've made in their portfolios become all the more interesting given the way the market has played out. Here are some funds to look forward to that we will be tracking: David Einhorn's Greenlight Capital, Paul Tudor Jones' Tudor Investment Corp, Louis Bacon's Moore Capital Management, and many, many more.

More on Ainslie & Maverick:
- October Hedge Fund Performance numbers
- Maverick's recent Investor Letter
- Maverick's 2nd quarter '08 portfolio holdings & 13f analysis
- Ainslie's Maverick Capital sells entire Under Armour (UA) stake
- 'Tiger Cub' hedge fund panel
- Julian Robertson (Ainslie's mentor) reveals some recent buys

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