CAZ Investments’ Stock Holdings & Investment Strategy

Updated on November 27th, 2020 by Nikos Sismanis

CAZ Investments is an investment management company located in Houston, Texas that focuses on giving high net worth individuals access to exclusive investment opportunities.

CAZ Investments was founded in 2001 by Christopher Zook.  It has grown to manage ~$1.45 billion in assets and was the 16th largest Houston asset manager as of 2020.

Investors following the company’s 13F filings over the last 3 years (from mid-November 2017 through mid-November, 2020) would have generated annual total returns of 0.3%. For comparison, the S&P 500 ETF (SPY) generated annualized total returns of 12.20% over the same time period.

Note:  13F filing performance is different than fund performance.  See how we calculate 13F filing performance here.

You can download an Excel spreadsheet with metrics that matter of CAZ Investments current 13F equity holdings below:

 

Keep reading this article to learn more about CAZ Investments.

Table Of Contents

CAZ’s Investing Strategy

The general idea behind CAZ Investments is to provide investors with access to investment opportunities they otherwise would not have access to.  This typically means private equity, hedge fund, and venture capital deals.

CAZ Investments creates private funds that have a specific investment theme and invest in opportunities that match the specific investment theme.  Recent investment themes CAZ Investments has identified are shown in the image below.

CAZ Investment Themes

A brief description of a sampling of CAZ Investments funds are below.  The company currently has 29 different funds based on its most recent ADV brochure.:

CAZ Investments has invested directly or indirectly in the notable companies and funds shown in the image below, among others.

CAZ Representative Investments

CAZ’s Top 10 Holdings

Lyft (LYFT):

The fund’s largest investment, by far, is its $16 million equity stake in Lyft, which currently accounts for 33% of CAZ’s total public-equity holdings. It’s also worth noting that CAZ holds no interest in Uber, which would have been a sensible choice in terms of diversification. CAZ’s position has remained relatively steady since the company’s IPO, placing a strong conviction towards the transportation giant.

CAZ’s bet is rather risky, as the company is still struggling financially, as the challenges to reach a positive bottom line persist. During Q3, the company recorded revenues of $499.74M, a -47.7% year-over-year, as the ongoing pandemic has restricted public movement. In that regard, the company is under extreme pressure, as its growth status has been utterly wiped because of the pandemic. Amid COVID-19’s staying-at-home economy, revenue per active rider dropped by 7%. While active riders increased by 44% compared to last year, which is quite positive in terms of Lyft being able to meet its future ride-demand needs, that potential demand is still absent, causing Lyft to book $459 million of net losses in Q3 alone.

On the other hand, the company’s future may not be completely dark. Rideshare recovery continues. From April’s lows, which recorded a 75% decline in rideshare rides, this figure has improved every month, climbing to a 47.4% year-over-year decline as of October 2020. Furthermore, Lyft’s contribution margins (per-ride profit metric) stood at nearly 50%, which means that the company has great prospects to become profitable if it reaches a sufficient scale of monthly rides.

The company ended Q3 with $2.45 billion in cash and equivalents ($2.8 billion in Q2) in terms of liquidity, which should help sustain some additional short term losses before it manages to turn profitable. Still, this should only last for a couple of years before management needs to raise additional cash, further diluting the current shareholders.

Overall, Lyft remains a risky investment. Along with its peer Uber, the company faces increased scrutiny in terms of driver/rider rights, as well as increased pressure by the local authorities. The duo recently won a reprieve in California, amid media reports that the order on classifying its drivers as employees rather than contractors has been delayed. Still, such positive new could quickly turn around over the next few months.

CAZ’s bold bet could end up booking massive losses, or potentially massive gains, in the future. While positive catalysts remain, the stock is quite a speculative position as well. As of CAZ’s latest f13 filing, Lyft’s position was trimmed by a trivial 1%.

Short-term ETFs (VNLA)(JPST)(ICSH)

As of its latest f13 filing, CAZ initiated three different ETF position in short-term funds, switching its capital allocation from its tech holdings towards highly liquid assets, possibly expecting for correction to occur soon.

These include:

The 3 ETFs collectively occupying nearly 30% of the fund’s portfolio.

PayPal (PYPL), Microsoft (MSFT), Alphabet (GOOGL):

PayPal, Microsoft, and Alphabet make up for CAZ’s top tech holdings, weighing around 2.0%, 1.9%, and 2.2% of its public equity holdings, respectively. CAZ reduced its position in these three stocks by 70%, 67%, and 64%, respectively, reducing its tech exposure. In fact, its Alibaba (BABA) and Salesforce (CRM) positions, which were previously two major tech holdings were sold entirely. Considering that the company drastically reduced its tech exposure while massively shifting capital on short-term securities, management likely expects for the prolonged tech rally to finally end and for investors to report to safer options. The fund is likely to expect a considerable correction, holding sufficient liquidity in short-term bond funds to re-buy whenever stock prices become attractive again.

The Blackstone Group (BX), JPMorgan Chase & Co (JPM), Invesco (IVZ)

The Blackstone Group, JPMorgan Chase & Co, and Invesco occupy around 2.1%, 3.5% and 5.0% of CAZ’s portfolio respectively. Blackstone’s position was slashed by 50% while the two other holdings were left intact. Still, they rose to CAZ’s largest positions due to the fund trimming its previously higher holdings. A shift to higher exposure in financials seems like a prudent move by CAZ, since the sector currently remains quite undervalued compared to its historical valuation multiples. The three companies delivered robust result during Q3, with hefty bottom lines. Should these profits eventually translate to higher stock prices, CAZ should significantly benefit.

Stryker Corp (SYK):

Holding a nearly $2 million position, Stryker Corp is CAZ’s 7th largest holding, and the only notable holding in the healthcare sector, making up around 4% of its portfolio. CAZ held its position steady from the previous quarter. In the meantime, Stryker reported an excellent Q3, reporting $621 million of net income, as its essential medical devices are of prime importance during the current environment. Amid a great quarter, shares are currently trading at all-time highs, around $233/share.

iShares MSCI Emerging Markets ETF (EEM)

Another 4% of CAZ’s portfolio is invested in iShares’ Emerging Market ETF. The position was also held steady during the quarter, but now makes for a larger holding due to CAZ’s tech sales. With the U.S. markets arguably overvalued, it makes sense that CAZ would look for more attractively priced securities, possibly overseas. The fund also makes for a great diversification vehicle holding some international blue-chips such as Alibaba (BABA), Tencent (TCEHY), and Taiwan Semiconductor Manufacturing (TSM).

Final Thoughts

CAZ Investments value proposition is to give investors access to opportunities they otherwise would not have.  As a result, the firm seeks to partner with top-tier private equity, venture capital, and hedge funds to provide the best opportunities to its clients.

The firm’s November 2020 13F filing shows that it has only ~$31 million invested in individual equities not including ETFs. This is under 1.0% of the firms’ assets.

You can download an Excel spreadsheet with metrics that matter of CAZ Investments current 13F equity holdings below: