CAZ Investments’ Stock Holdings & Investment Strategy

Updated on October 5th, 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 ~$1.5 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 August 14th, 2017 through August 14th, 2020) would have generated annual total returns of -2.9%. For comparison, the S&P 500 ETF (SPY) generated annualized total returns of 11.9% 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 52 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 $14.6 million equity stake in Lyft, which accounts for more than ¼ of its 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. One the one hand, in its most recent Q2 results, the company’s revenues declined by a massive 61% YoY, due to restricted public movement due to COVID-19. Further, active riders plummeted by 60% YoY, to 8.7 million, considerably lower than the 10.5 million consensus estimates. In that regard, the company is under extreme pressure, as its growth status has been utterly wiped because of the pandemic. During the quarter alone, Lyft booked $437 million of net losses.

On the other hand, the company’s future may not be completely dark. Management reported that July’s rides were 78% higher than their April’s lows. Further, while its loss was steep, it’s also worth noting losses remained quite similar to its previous quarters, despite the massive decline in sales. As a result, as ride volumes normalize, it’s quite likely that Lyft will start experiencing expanding margins, as per higher revenues. The company ended Q2 with $2.8 billion in cash and equivalents in terms of liquidity, which should help sustain some additional short term losses before it manages to turn profitable.

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 bolt 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.

PayPal (PYPL), Microsoft (MSFT), Alibaba, (BABA), Alphabet (GOOGL), Salesforce (CRM):

PayPal, Microsoft, Alibaba, Alphabet, and Salesforce, make up for CAZ’s top tech holdings, weighing around 6.3%, 6.0%, 5.4%, 5.0%, and 4.1% of its public equity holdings, respectively. CAZ rode the sector’s prolonged rally over the past few months, picking shares in every one of those companies.

In fact, PayPal and Alibaba are entirely new holdings, quickly reaching the fund’s top holdings, despite CAZ just initiating a position. The two picks have been wildly successful so far, considerably gaining over the past two months, as online payments and global e-commerce have become increasingly more integrated with consumers’ purchasing habits, boosted by COVID-19.

With Alphabet, CAZ increased its position by around 466%, taking advantage of a rapidly growing behemoth trading at an attractive valuation. At a forward P/E of around 30, Alphabet remains one of the few reasonably priced tech companies, offering a significant margin of safety for current investors. A similarly impressive increase was the case with CAZ’s Microsoft stake, which also jumped by 1210%, as well. CAZ must have bought shares around $180 during this period, already enjoying some paper gains within a short period of a couple of months. Finally, the company enjoys a cash-heavy balance sheet with $121 billion, which management is aggressively returning to shareholder though stock buybacks. Alphabet remains extremely investable at its current price levels, bellow $1500/share.

Finally, the fund increased its position in Salesforce by around 626%, which has already ended up being a winning choice, amid the company’s inclusion to the Dow Jones Industrial Average. The company’s quarterly revenues hit a new all-time high during Q3, at $5.15 billion, with no signs of slowing down. Shares are currently trading near record levels, as a result, despite the rich valuation.

Broadcom (AVGO):

The semiconductor giant has navigated the pandemic with little challenges, as demand for its products and infrastructure software services have remained robust during this period. Despite its growth prospects, shares have also been providing fantastic steam of income to shareholders, currently yielding around 3.53%, boasting a 5-year DPS CAGR of 55.5%. CAZ took advantage of the stock’s recent dip to scoop up 7400 shares, boosting its stake by 822%. Currently trading at all-time highs, Broadcom is another one of the fund’s successful picks during the past quarter.

The Travelers Companies (TRV), The Blackstone Group (BX):

The two largest CAZ investments in the financial sector are The Travelers Companies and The Blackstone Group, collectively accounting for just 10% of the fund’s total holdings. CAZ increased its stakes by 1110% and 169%, respectively, doubling down on the sector’s recent lagging. Currently trading at attractive valuations, around 15 times their earnings, while yielding a 3%+ in dividends, the fund’s increased exposure in the sector through these two quality companies should be proven to be a reasonable choice.

iShares NASDAQ Biotechnology ETF (IBB), and SPDR S&P Oil & Gas Exploration & Production ETF (XOP):

To gain exposure in two speculative sectors, CAZ Investments choose not to mess with individual picks that much, and rather bet on the industry as a whole succeeding in the medium term. The biotechnology sector should remain quite volatile in the short term, as the upcoming Presidential Election should significantly affect the ETF’s components. Additionally, the Oil & Gas is in deep trouble, as traveling restrictions remain tough on a worldwide scale. Therefore, the fund’s decision two invest in a broad basket of stocks in regards to these sectors may be the better option for identifying the potential long-term winners.

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 August 2020 13F filing shows that it has only ~$106 million invested in individual equities not including ETFs.  This is under 7.3% of the firms’ assets.

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