Maverick Capital’s 13F Stock Holdings & Strategy

Published on October 22nd, 2020 by Nikos Sismanis

Founded by Lee Ainslie in 1993, Maverick Capital is a Texas-based long/short equity hedge fund. The fund’s humble beginnings were powered by Mr. Ainslie, raising $38 million in capital by the family of Texas tech-entrepreneur Sam Wyly. Ever since, Maverick has grown into one of the largest hedge funds in the state, holding more than $5 billion in total Assets Under Management (AUM).

Investors following the company’s 13F filings over the last 3 years (from mid-August 2017 through mid-August 2020) would have generated annualized total returns of 9.2%. 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 Maverick Capital current 13F equity holdings below:

 

Keep reading this article to learn more about Maverick Capital.

Table Of Contents

Maverick Capital’s Investing Strategy & Philosophy

Similarly to various hedge funds that we have covered over time, Maverick Capital shares little to no information regarding their operations. However, in a 2006 interview, Mr. Ainslie shared quite a bit of insight into how the fund conducts its business. Considering that these are some fundamental principles, it’s more than likely that they remain true to this date.

As he goes on to explain, Maverick’s analysts are initially trying to understand a company’s business model and whether its growth and return on capital are sustainable over the long term. The fund’s goal is to collect and act on high-quality information that the rest of the market lacks.

Maverick’s sector-specialists have decades of experience in the industry, which has helped them develop long-term relationships with various senior management and employees, giving Maverick that extra reach from its competition.

One of the fund’s core catalysts for allocating capital in a company, is the trust in its management. As Mr. Ainslie explains, excellent management is what matters the most and can often justify buying equities at a seemingly high valuation. The fund had previously considered investing in companies trading at a low multiple, but with uninspiring management teams, which later regretted doing so due to their poor execution. In terms of holding period, Maverick usually intends to hold its stakes from around 1 to 3 years, though this can easily change based on a company’s ongoing performance.

Maverick Capital’s Portfolio & 10 Most Significant Holdings         

Maverick’s portfolio is incredibly diverse, holding as many as 540 individual equities. Considering that the fund goes on to buy as few as 10s of shares in companies, with many of its stakes staying in the low $1000s, it seems that its capital allocation focused on creating a highly risk-adjusted portfolio, with multiple sector-hedges and most probably a statistics-intensive decision-making process.

At the same time, however, the company’s 10 most significant holdings account for a little over 50% of its total portfolio, which signals a strong and clear confidence when it comes to the fund’s high-conviction picks.

Source: Company Filings, Author

In terms of its sector exposure, Maverick holds significant Communications and Technology positions, following COVID-19’s staying-at-home-economy trend while avoiding more volatile sectors like Industrials and Energy.

The fund’s 10 most significant holdings are as follows:

Facebook (FB)

The social media giant is Maverick’s largest holding, accounting for nearly 9% of its portfolio. The fund’s long-term commitment to Facebook dates back to Q1 2015. Since then, Maverick has built its position gradually, with its latest f13 filing showing a huge jump in its stake by 177%. Such a substantial increase can hardly surprise since the company is one of the most reasonably valued in the tech/communications sector while still growing rapidly, despite 2.7 billion people using its services monthly.

Snap (SNAP) recently crushed its earnings, showing 52% revenue growth, further fueling confidence in Facebook’s upcoming Q3 report. With an average buying price of around $204, Maverick’s highest conviction pick has been surely paying off well enough.

Humana (HUM)

Humana, the $58 billion health and well-being company, occupies around 6.5% of Maverick’s portfolio and is the fund’s second-largest holding, despite trimming it by around 17% during the last quarter. While the company has razor-thin margins, its net income margins recently reached an all-time high of 5% due to economies of scale and effective cost management.

As analysts expect this margins expansion to continue, FY2020 consensus EPS estimates point towards $19, which implies a forward P/E of around 23, showcasing a relatively reasonable valuation at today’s sky-high multiples.

DuPont de Nemours (DD)

DuPont de Nemours provides various technology-based materials and ingredients such as electronics & imaging segment supplies, materials and solutions for the fabrication of semiconductors, and numerous other solutions.

COVID-19 has severely affected the company, as firms have been conservative with their spending on such cyclical materials. In the past two quarters, the company has lost $616 million and $2.48 billion, respectively, sending shares nearly to a decade-low valuation of just 1.2 times its book value.

To mitigate its risks, Maverick slashed its position by 48%. Still, its stake accounts for 6% of its total holdings. Thankfully, with an average purchase price of around $56, the fund has not lost any money on the stock, on aggregate.

Microsoft (MSFT)

Found in most non-thematic hedge funds’ top holdings, investors just can’t get enough of the tech behemoth Microsoft. The company has been taking cloud computing by storm, with its Azure segment reporting 47% revenue growth as of its latest earnings report.

Visionary Satya Nadella’s digital transformation plans are globally expanding, as the company invests billions in ensuring its domination in every part of the world. Examples include Microsoft recently investing $1 billion in Poland and another $1 billion in Greece to be used mainly towards datacenters.

Maverick has been too late on the stock’s prolonged rally, holdings shares since 2017, while its average purchase price stands at around $134, displaying great paper-gains so far. The fund increased its position by 16% as of its latest f13 filing, boosting its stake to around 6% of its total holdings.

Alphabet (GOOGL)(GOOG)

Alphabet’s latest earnings report marked the first time ever the company posted negative revenue growth by 1.7%. While this may have worried some investors, these results are likely temporary, as COVID-19 has boosted online traffic. Since advertisers have effectively nowhere else to advertise besides the web, analysts expect a quick resumption in Alphabet’s growth.

Further, the company remains one of the few reasonably priced in the tech sector, with an FY2021 (E) P/E ratio of around 27. Maverick trimmed its stake by 11%. The reduction in shares is most certainly for rebalancing purposes since the fund has consistently been long in the stock since 2014. The company accounts for around 5.6% of its total holdings.

Amazon (AMZN) & Alibaba (BABA)

Amazon & Alibaba collectively occupy around 10% of Maverick’s portfolio, with the fund betting on e-commerce and digital infrastructure’s long-term success. The two companies have been expanding rapidly in the western and eastern world, respectively, offering consumers swift deliveries of their products at incredibly competitive prices.

As COVID-19 continues to persist, it’s more than likely that e-commerce and demand for essential products being delivered to our doorsteps will remain robust in the medium term. At the same, as demand for online content increases, services like AWS should continue thriving amid the staying-at-home economy. Similarly to Microsoft’s Azure, AWS is also growing rapidly, reporting revenue growth of around 30% during Amazon’s latest quarter.

While Maverick increased its stake in Amazon by 155%, it also slashed its Alibaba position by 43%. If we had to guess, it’s perhaps because of the antitrust issues surrounding Chinese equities and Maverick rebalancing its risk-taking.

Netflix (NFLX)

On the one hand, COVID-19 has been a positive catalyst for the streaming giant, as staying inside has boosted its subscriber base. On the other hand, the company’s recent backlash regarding its “Cuties” film has reportedly caused many analysts to project that subscribers would cancel due to the show’s controversy.

Despite analysts expecting mixed results, the company managed to deliver a staggering 22.7% revenue growth, adding 2.2 net subscribers during the quarter. Additionally, management guided for 201 million paid memberships for Q4, suggesting an increase of 20.4%.

Maverick increased its stake by 16% during the quarter, growing its stake to around 4.5% of its portfolio holdings.

Dollar Tree (DLTR) 

As we mentioned, COVID-19 has greatly boosted the demand for essentials and various other consumer staples, resulting in retailers having some of the best quarters ever. Dollar Tree was no different, reporting an all-time high net income of $261 million during the last quarter.

In contrast, shares have remained relatively flat over the past 5 years, causing Dollar Tree to trade at a forward P/E of around 18, making it one of the cheapest stocks amongst its peers. This is probably the reason Maverick increased its stake by around 56% during the quarter, pushing the stock to reach 3.8% of its portfolio.

Crown Holdings (CCK)

Not many investors are aware of Crown Holdings, but the company is one of the greatest achievers of compound shareholder returns over the past 20 years. Since 2001, the stock has delivered CAGR returns of 17%, which is utterly amazing considering the length of the time frame.

Maverick trimmed its stake by around 34% during the last quarter, likely reflecting mitigating the more cyclical businesses’ risks.

Final Thoughts

Maverick’s operations and investing principles remain relatively unknown. Still, Mr. Ainslie’s 14-year old interview sheds plenty of light on how the fund’s capital allocation is executed, including assigning a high significance to a company’s management team.

The fund’s portfolio is quite enormous, containing hundreds of equities. However, company’s 10 largest significant holdings occupy more than half of its total AUMs, making for some compelling picks for retail investors to consider assessing.