One common objection to using hedge funds’ 13F filings to help find potential stock picks is that the information in these filings is a bit old; in most cases, the most recent wave of 13Fs discloses many of a fund’s long equity positions as of the end of March. However, we’ve found that it’s possible to use these filings to help develop investment strategies. The most popular small cap stocks among hedge funds, for example, generate an average excess return of 18 percentage points per year. By tracking quarterly filings in a database, we can also see which stocks an individual manager has owned for a long period of time, meaning it is more likely that they are still in the portfolio. Here are the five largest holdings from Lee Ainslie’s Maverick Capital’s most recent 13F which the fund had at least $140 million invested in at the end of March 2011 (or see the full list of Maverick’s stock picks over time).
Credit: Apple Inc. (NASDAQ:AAPL)
Ainslie and his team increased their holdings of Apple Inc. (NASDAQ:AAPL), a stock they have owned for the last couple years, by 27% during the first quarter of 2013. During Q1, Apple had regained its place as the most popular stock among hedge funds (find more stocks hedge funds loved). Earnings remain down from their levels a year ago despite higher sales, as the company’s margins have decayed. Apple Inc. (NASDAQ:AAPL) does have a sizable cash hoard (its dividend yield is close to 3%) and its market capitalization- which includes this cash- comes out to 10 times its trailing earnings.
In Q1 2011, QUALCOMM, Inc. (NASDAQ:QCOM) was Maverick’s largest holding; at the beginning of April, the fund’s 4.4 million shares made it the second largest position by market value. Qualcomm’s fiscal Q2 ended in March, during which both revenue and income from continuing operations were up about 20% versus a year earlier. Wall Street analysts expect earnings to increase over the next several years: QUALCOMM, Inc. (NASDAQ:QCOM)’s trailing and forward P/Es are 17 and 12, respectively, and the five-year PEG ratio is 0.8. We’d be interested in doing further research on the company given those metrics.
The fund reported a position of 7.2 million shares in $17 billion market cap hospital company HCA Holdings Inc (NYSE:HCA). Higher costs pushed HCA’s net income down 36% in its last quarterly report compared to the first quarter of 2012, and revenue numbers were stagnant. Between this weak performance and generally low multiples for the hospital industry, HCA Holdings Inc (NYSE:HCA) is arguably cheap- it is valued at 12 times trailing earnings. However, we would want to see the company’s financials stabilize before considering it as a potential value play.