Billionaire Lee Ainslie’s New Picks Start the New Year off Right

We recently updated Lee Ainslie’s Maverick Capital’s performance for the first quarter of 2015 with the firm achieving returns of 8.4% in its 44 long positions in stocks with a $1 billion market cap or more. Our calculations are approximations of Maverick’s long book’s performance as we assume that the fund hasn’t drastically changed its portfolio during the first quarter. This compares with the S&P 500 ETF (SPY) first quarter return of 0.9%. Again, Ainslie is a “Tiger Cub” and known for his simplistic investing approach of just being purely long/short equities without dabbling in commodities, currencies, bonds, or derivatives. So we can really get an insight into his view on the market. What’s really interesting is the number of new long positions Maverick Capital added into year-end of 2014. We already talked about Google Inc (NASDAQ:GOOG), one of his new positions, and how he didn’t just tip-toe into the stock but “barged” right in making it one of the firm’s top holdings.


But first, another quick word on why all of this is important. With hedge funds returning so little in recent years (1.4% in 2014, 11.1% in 2013 and 4.8% in 2012 compared to the S&P 500 ETF (SPY) which returned 13.5% in 2014, 32.3% in 2013, and 16% in 2012), we hope to get the best picks from the best managers and not pay them a dime! Managers pocket somewhere between 30%-80% of their total returns as management and performance fees. Investors can avoid these fees by imitating their top small-cap picks themselves. Historically this approach beat the market by an average of 95 basis points per month. We have also been live testing the performance of this approach since the end of August 2012. The 15 most popular small-cap stocks among hedge funds returned 137% through the end of March 2015 and beat the market by more than 82 percentage points (see the details here).

In the last quarter of 2014 Ainslie purchased for Maverick Capital 7 million shares of Commscope Holding Company Inc (NASDAQ:COMM) at a total value of $161 million.  Commscope Holding Company Inc (NASDAQ:COMM) provides internet communication products and made headlines back in January for its $3 billion acquisition of TE Connectivity. As more and more consumers use more mobile devices, investors are betting on Commscope Holding Company Inc (NASDAQ:COMM) to be a leader in the industry. Value investors John Shapiro and Joel Greenblatt are among top 5 hedge fund holders of the stock which returned 2.5% in the first quarter.

Last November oilfield services giant Halliburton Company (NYSE:HAL) made headlines by agreeing to acquire Baker Hughes Incorporated (NYSE:BHI) for $34.6 billion. But as oil declined, so did Halliburton Company (NYSE:HAL) and the stock dropped from the mid $60’s to the low $50’s. Ainslie saw value in Halliburton Company (NYSE:HAL) and purchased for Maverick 2.9 million shares for an investment of $114 million dollars. At 1.8% of Maverick’s portfolio, it is a starter position. But amid declining oil prices, other value investors were also adding to Haliburton including Jeffrey Ubben’s Valueact and Glenn Greenberg’s Brave Warrior Capital.

Another new item in Maverick’s portfolio is Priceline Group Inc (NASDAQ:PCLN). Ainslie added 111,000 shares for an investment of $126.5 million accounting for a 2% position of the firm’s holdings. Priceline Group Inc (NASDAQ:PCLN) returned only 2.1% during the first quarter, which is still pretty short from the return of some of its peers. For example, Expedia Inc (NASDAQ:EXPE) jumped by 10.50% during the same period. Ainslie likes Priceline Group Inc (NASDAQ:PCLN) because of its 20% plus annual earnings growth rate. Billionaires David Tepper and John Griffin are among other billionaires with large positions in Priceline.

In the last quarter of 2014, Ainslie began to favor Walgreens Boots Alliance Inc (NASDAQ:WBA) by purchasing 1.2 million shares for an investment allocation of $92 million. This came out to about 1.5% of the firm’s portfolio which seems to be the way he likes to start off his investments. The company recently had a solid fiscal quarter beating expectations on EPS and revenue and also sports a 60 year track record of increasing its dividends.

Walgreens completed its merger with Switzerland based Alliance Boots GmbH in late December last year. It was a two step merger that started in August 2012 when Walgreens invested approximately $4.0 billion in cash and 83.4 million shares of its common stock in exchange for a 45 percent equity ownership stake in Alliance Boots. The second step involved acquiring rest of Alliance Boots stake for $5.3 billion in cash and 144.3 million shares of stock. 70 hedge funds had invested $7.0 billion in Walgreens Boots Alliance Inc (NASDAQ:WBA) by the end of 2014 as compared to 79 firms with $5.7 billion a quarter earlier. Andreas Halvorsen’s Viking Global held 18.93 million shares valued at $1.44 billion.

Another interesting pick from Ainslie is Universal Health Services, Inc. (NYSE:UHS), a stock we haven’t mentioned in a while. Universal Health Services, Inc. (NYSE:UHS) is a company specialized in operating different healthcare facilities, such as acute care hospitals, or behavioral health centers. UHS returned 5.9% during the first quarter. Ainslie bought for Maverick 834,000 shares for an investment of $92.8 million accounting for 1.45% of the firm’s portfolio. Another hedge fund manager bullish on Universal Health Services, Inc. (NYSE:UHS) is Highline Capital Management’s Jacob Doft. His fund holds 909,000 shares valued at a little over $100 million accounting for 4.2% of the firm’s portfolio as of the latest filing.