Apple Inc. (NASDAQ:AAPL) remains Maverick Capital’s top stock pick, making up 4.7% of the hedge fund’s 13F portfolio. Manager Lee Ainslie graduated from UNC and joined Julian Robertson’s Tiger Management in 1990. In 1993, Ainslie founded Maverick Capital and now runs a solid long/short equity strategy, not trading bonds, currencies, commodities or options.
After reviewing Maverick’s recent 13F with the SEC – which are filings that are useful for individual investors to track as they reveal the holdings of hedge funds and other notable money managers – we have identified the fund’s top five holdings (check out all of Maverick’s bullish bets).
Sitting in Maverick’s No. 1 slot, Apple Inc. (NASDAQ:AAPL) is quite the leader in the tech field, and 2013 can be a monumental year if rumors of an Apple TV are true. Apple trades on the very cheap end of its tech peers at 12x earnings; Microsoft is at 15x and Google is at 21x. Couple the tech company’s valuation with its industry leading 5-year EPS growth of 20% and its 40% return on equity, and it is hard to deny Apple as a ‘growth at a reasonable price’ opportunity.
In addition to an entry into the living room, some other possible growth drivers that Cupertino bulls can look forward to next year include: (1) a deal to sell the iPhone via China Mobile, (2) a dividend boost, with Apple Inc. (NASDAQ:AAPL)’s near $120 billion pile of cash, (3) a blowout Q1 earnings release, and (4) a lower-cost iPhone to appeal to emerging market consumers.
Qualcomm, Inc. (NASDAQ:QCOM) is one of the best value opportunities in the semiconductor market. The tech company makes up 4.5% of Maverick’s 13F. Qualcomm is expected to see revenue growth of 25% in FY2013 and 9% in FY 2014. The company’s long-term EPS growth rate is also expected to be robust at 15%.
Qualcomm should see solid chipset sales in the coming year as the economy slowly improves, and continued growth in the smartphone market continues to boost this outlook. The stock’s forward P/E comes in at 13x, which is well below other major semiconductor companies like Broadcom (26x) and Texas Instruments (20x). Qualcomm’s greatest opportunity, though, may come from its development of LTE chipsets, and the development of LTE networks in developed nations. Billionaire Ken Fisher – founder of Fisher Asset Management – is one of the company’s key supporters (check out Ken Fisher’s big bets).
Avago Technologies Ltd (NASDAQ:AVGO) makes up 3.9% of Maverick’s 13F portfolio. Avago is also in the semiconductor industry, though it trades at less than a tenth of the market cap of Qualcomm. Avago sports an earnings multiple of 14x, below close competitors like Skyworks Solution (19x) and Hittite Microwave (26x). This tech company has one of the best returns on equity at 25%, and has a robust 5-year EPS growth rate of 12%. Compared to Maverick’s other top picks, Avago pays the highest dividend at 2.2%, with only a 24% payout.
What about Lee Ainslie’s No. 4 and 5 picks?