Maverick Capital Makes Silly Calculation Error ~ market folly

Thursday, April 2, 2009

Maverick Capital Makes Silly Calculation Error

In a recently further amended 13G filing with the SEC, hedge fund Maverick Capital has updated their position in CSII. In a very silly mistake, Maverick has noted in the amended filing that they "inadvertently reported a miscalculation of the percentage" (of shares beneficially owned by the reporting persons). In the initial amended 13G filing, Maverick had a 16.2% stake in the company, which is a miscalculation. Now, as you below, they are listed as owning 15.3%.

So, their shares owned amount remains the same, but the percentage ownership stake (as calculated by them) has been adjusted to correct their error. Maverick now shows a 15.3% stake in Cardiovascular Systems (CSII) with 2,228,441 aggregate amount beneficially owned. This just goes to show that while many hedge funds have some very talented minds, everyone makes mistakes and is human.

This was a new position for them as of March 10th, as they did not own it when we covered their portfolio prior to that. Again, please note, Maverick has not altered the amount of shares they own. They are simply amending the filing to correct their calculation error.

If you're unfamiliar with Maverick, here's their background: Lee Ainslie started Maverick Capital back in 1993 with $38 million. Nowadays, the fund is worth $4 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 (nicknamed 'Tiger Cubs') learned from the best and have had great success running their own funds. Some of the other Tiger Cubs include Stephen Mandel's Lone Pine Capital and Andreas Halvorsen's Viking Global. Maverick's strategy is straight up stock picking, both long and short. While they focus on both the long and short sides of the book, they do not employ pairs trades.

They try to hedge their positions like the true definition of a hedge fund. 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. Their Maverick Fund finished -26.2% for 2008, as noted in our year-end hedge fund performance numbers post.

Taken from Google Finance,

Cardiovascular Systems is "a biopharmaceutical company focused on discovering, developing, in-licensing and commercializing anti-infective products. The Company had been developing its product candidate REP3123, an investigational narrow-spectrum antibacterial agent for the treatment of Clostridium difficile (C. difficile) bacteria and C. difficile infection and its other anti-infective programs based on its bacterial deoxyribonucleic acid (DNA) replication inhibition technology."

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