Lee Ainslie's Maverick Capital Focused On Technology & Health Stocks: 13F Filing ~ market folly

Monday, February 22, 2010

Lee Ainslie's Maverick Capital Focused On Technology & Health Stocks: 13F Filing

(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 13F filings.)

Next up is Lee Ainslie's hedge fund Maverick Capital. Maverick focuses on intensive fundamental research to identify positions on both the long and short side of the portfolio, but they do not employ pairs trades. Positions typically do not exceed 5-8% of the portfolio as Ainslie's big focus is on risk management. Maverick looks at enterprise value to sustainable free cash flow and their analytical team is segmented by sector.

Ainslie founded Maverick after leaving Julian Robertson's legendary hedge fund Tiger Management. As such, Ainslie's hedge fund is a part of the Tiger Cub Portfolio created with Alphaclone where you can replicate the portfolios of some of the top hedge funds around. Additionally, you can read more about Lee Ainslie in our profile of Maverick Capital.

For Ainslie's recent take on the economy and markets, we highly recommend reading Maverick's recent investor letter as well as our post on Ainslie's appearance at a prominent hedge fund panel. The positions listed below were their long equity, note, and options holdings as of December 31st, 2009 as filed with the SEC. All holdings are common stock unless otherwise denoted.

Brand New Positions
Bank of America preferred (BAC-S)
Oracle (ORCL)
Express Scripts (ESRX)
Wells Fargo (WFC)
Commscope (CTV)
Brocade Communication (BRCD)
Autodesk (ADSK)
Mead Johnson (MJN)
Family Dollar Stores (FDO)
Autozone (AZO)
State Street (STT)
Banco Santander (BSBR)
Dish Network (DISH)
Viacom (VIA.B)
Citrix (CTXS)
Target (TGT)
Illumina (ILMN)
Healthnet (HNT)
Carnival (CCL)
Green Mountain
Coffee Roasters (GMCR)
Ericsson (ERIC)
Longtop Financial (LFT)
Dollar General (DG)
American International Group (AIG)

The rest of their brand new positions are less than 0.5% of reported assets each: American Public Education (APEI), Vanceinfo Tech (VIT), Artio Global (ART), Discovery Communication (DISCK), Northwest Banchsares (NWBI), China Nuokang (NKBP), & Anadys Pharma (ANDS)

Increased Positions
Perfect World (PWRD): Increased by 530.6%
Sears Holdings (SHLD): Increased by 320.6%
Expedia (EXPE): Increased by 176.2%
DirecTV (DTV): Increased by 153.6%
Winnebago (WGO): Increased by 123.3%
Fedex (FDX): Increased by 97.8%
Apollo Group (APOL): Increased by 82.4%
Wellpoint (WLP): Increased by 67.6%
Digitalglobe (DGI): Increased by 55.2%
Brinks Home Security (CFL): Increased by 30.9%
Cypress Biosciences (CYPB): Increased by 30.5%
Macys (M): Increased by 26.1%
Pfizer (PFE): Increased by 21.2%
Bluefly (BFLY): Increased by 21.2%

Reduced Positions
Priceline (PCLN): Reduced by 73.6%
Bank of America (BAC): Reduced by 63.7%
America Movil (AMX): Reduced by 63.4%
Infinera (INFN): Reduced by 58.4%
Qualcomm (QCOM): Reduced by 55.9%
Discovery Communications (DISCA): Reduced by 47.6%
Berkshire Hathaway (BRK.A): Reduced by 37%
Home Inns & Hotels (HMIN): Reduced by 35.5%
Covidien (COV): Reduced by 32.4%
Corning (GLW): Reduced by 32.2%
RenaissanceRe (RNR): Reduced by 30%
Equinix (EQIX): Reduced by 29.5%
Itron (ITRI): Reduced by 28.7%
Visa (V): Reduced by 28.5%
Cablevision (CVC): Reduced by 28.1%
Berkshire Hathaway (BRK.B): Reduced by 24.7%
Athenahealth (ATHN): Reduced by 24.6%
Pepsico (PEP): Reduced by 24.5%
Black & Decker (BDK): Reduced by 22%
Amgen (AMGN): Reduced by 20.1%
Lender Processing (LPS): Reduced by 19.8%
XTO Energy (XTO): Reduced by 17.3%

Removed Positions (Sold out completely):
Hewlett Packard (HPQ)
JPMorgan Chase (JPM)
Liberty Media (LSTZA)
First Solar (FSLR)
Staples (SPLS)
Accenture (ACN)
Microsoft (MSFT)
Cummins (CMI)
Gap (GPS)
Williams Sonoma (WSM)
Palm (PALM)
Celgene (CELG)
Strayer Education (STRA)
Google (GOOG)
Whole Foods (WFMI)
King Pharma (KG)
Cognizant Technology (CTSH)
Cemex (CX)
Nii Holdings (NIHD)
Skechers (SKX)
Chicos (CHS)
First Advantage (inactive)
MB Financial (MBFI)

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

  1. Apple (AAPL): 3.7%
  2. Apollo Group (APOL): 3.5%
  3. Bank of America preferred (BAC-S): 3.0%
  4. DirecTV (DTV): 2.9%
  5. Oracle (ORCL): 2.8%
  6. Macys (M): 2.6%
  7. Marvell Technology (MRVL): 2.6%
  8. Corning (GLW): 2.5%
  9. Gilead Sciences (GILD): 2.3%
  10. Wellpoint (WLP): 2.1%
  11. Progressive (PGR): 2.1%
  12. Express Scripts (ESRX): 2.0%
  13. CVS Caremark (CVS): 2.0%
  14. Wells Fargo (WFC): 2.0%
  15. Pfizer (PFE): 1.9%

One thing you'll notice about Lee Ainslie's portfolio is that there are no highly concentrated positions. He is very big on risk management & position sizing and therefore you see a lot of holdings that each represent around the same percentage of their US equity exposure. To see how exactly Ainslie likes to construct his portfolio, head to our profile on Maverick Capital.

Their stakes in Apple and Apollo Group are the only two that are really sizable compared to the rest of the disclosed holdings. And, there's an interesting dynamic between those two positions. In Apple you have one of the most popular stocks amongst hedge funds. In Apollo Group you have some controversy and difference of opinion between hedgies. David Stemerman's Conatus Capital recently dumped their APOL while Chase Coleman's Tiger Global started a new APOL stake. Maverick sides with Tiger Global at the moment.

Lee Ainslie's hedge fund started brand new stakes in Bank of America preferreds, Oracle, Express Scripts & Wells Fargo and brought them all up to top 15 holdings. As you can see they made a lot of portfolio adjustments as they added to various holdings and sold partial positions in others. Of all the hedge funds we've covered thus far, they by far have the most position size changes on a quarter over quarter basis.
Maverick also sold out of a bunch of well-known large cap plays. Their most notable sale was in shares of HPQ because last time around it had been their 2nd largest US equity long position. Ainslie's hedge fund also dumped their 7th largest holding from the last 13F filing in JPMorgan Chase. Their sale of Palm (PALM) continues to mark a wave of pessimism and negativity that we've seen amongst hedge funds. Many funds are even shorting PALM as they seem to be losing ground in the fierce battle known as the smartphone industry. Additionally, we note their sale of their entire First Solar (FSLR) stake.

Assets reported on the 13F filing were $8.98 billion this quarter compared to $8.3 billion last quarter. Remember that these filings are not representative of the hedge fund's entire base of AUM.

We'll be tracking 40+ prominent funds in our fourth quarter 2009 hedge fund portfolio tracking series. We've already covered Seth Klarman's Baupost Group, Mohnish Pabrai's Investment Fund, Carl Icahn's hedge fund Icahn Partners, David Einhorn's Greenlight Capital, Stephen Mandel's Lone Pine Capital, John Griffin's Blue Ridge Capital, David Tepper's Appaloosa Management, Warren Buffett's portfolio, and John Paulson's hedge fund Paulson & Co. Check back daily for our new updates.

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