In this article, we will take a look at Billionaire Lee Ainslie’s top 10 stock picks.
Hedge fund managers are known for investing in various asset classes in the race to unlock value in the market. But not Lee Ainslie, a billionaire who has made a name for himself as a value investor focusing purely on stocks.
Ainslie does not like betting on commodities, currencies or bonds. Instead, he leverages in-depth fundamental and technical analysis to place long and short bets on stocks he thinks will generate significant returns during different market cycles. When he was just 28, he founded Maverick Capital, a Dallas-based hedge fund.
The $4.4 billion hedge fund boasts a diversified portfolio, with technology stocks accounting for the largest share of its portfolio. Ainslie accrued significant returns amid the artificial intelligence boom due to its exposure to Nvidia, Meta Platforms, and Amazon. Likewise, the head fund is heavily invested in the service financial, consumer goods, and healthcare sectors.
Maverick Capital has been one of the standout hedge funds commonly followed for insights into the overall market direction. The hedge fund gained 16.3% during the COVID-19 pandemic in 2020. It returned an average of 13% annually between 1995 and 2014, further affirming Ainslie and other managers’ edge in picking stocks capable of outperforming the overall market.
In early 2023, Ainslie had a quarter to forget as the hedge fund incurred a 22.9% loss compared to a 4.6% gain for the S&P 500. The loss could be attributed to the fund’s significant holding on Coupang. Biotech stocks under pressure also contributed to the losses.
Ainslie has also sought exposure to emerging startups with tremendous upside potential. Since 2021, Maverick Capital has invested in venture bets through its $7 billion Tiger Club. However, some investments have turned sour, forcing the hedge fund to mark down some of its investments hurt by the high interest rates.
Lee Ainslie of Maverick Capital
Our Methodology
We scanned Maverick Capital’s Q3 portfolio and picked the fund’s top 10 stock picks.
Billionaire Lee Ainslie’s Top Stock Picks
10. Microsoft Corporation (NASDAQ:MSFT)
Maverick Capital’s Equity Stake: $104.7 million
Year-to-date gain: 54%
Maverick Capital has been buying and selling shares in the company since 2015. It held stakes worth $104.7 million in the company as of Q3 2023.
In its Q3 2023 investor letter, Baron Technology Fund provided the following commentary regarding Microsoft Corporation (NASDAQ:MSFT):
“Microsoft Corporation is the world’s largest software company. Microsoft was traditionally known for its Windows and Office products, but over the last five years, it has built an over $60 billion cloud business, including its Azure cloud infrastructure service and its Office 365 and Dynamics 365 cloud-delivered applications. The stock detracted from performance because Microsoft is the Fund’s largest holding and shares retreated 7.0% after strong first half performance. For the June quarter, Microsoft reported better-than-expected Azure results for the third straight period, highlighted by Azure revenue growing 27% in constant currency. Its computing division also beat expectations, with Windows revenue benefiting from an early back-to-school inventory build. Microsoft’s September quarter revenue guidance came in below Street expectations; however, with Azure effectively in line and demonstrating stabilization, but computing seeing the negative sequential impact of the pull-forward in back-to-school purchases. Looking at the big picture, Microsoft continues to execute at a high level, navigating a challenging macro backdrop while aggressively investing in long-term growth, and we remain confident that Microsoft is well positioned to leverage AI over the medium to long term as it infuses Open AI and other generative AI technologies across its entire product portfolio.”
9. Nu Holdings Ltd. (NYSE:NU)
Maverick Capital’s Equity Stake: $105.6 million
Year-to-date gain: 126%
Nu Holdings Ltd. (NYSE:NU) is a financial services company offering a digital banking program and digital financial services. Its product line includes Nu credit and debit cards and other mobile payment solutions. Nu Holdings Ltd. also offers a savings solution under Nu Personal Accounts.
Nu Holdings Ltd. remains one of billionaire Lee Ainslie’s top stock picks, going by the 126% gain year to date.
8. Visa Inc. (NYSE:V)
Maverick Capital’s Equity Stake: $110.1 million
Year-to-date gain: 20%
Visa Inc. (NYSE:V) is a financial services play in Maverick Capital’s portfolio. It operates as a payment technology company. Visa offers a transaction processing network that enables the authorization, clearing and settlement of payment transactions. Visa Inc. also provides credit, debit and prepaid card products.
Visa Inc., up about 20% for the year, has benefited from the company’s solid financial results amid increased consumer spending. Consequently, Ainslie increased Maverick Capital’s stakes in Visa Inc. to 478,510 shares, accounting for 2.48% of the portfolio.
Baron FinTech Fund shared its thoughts on Visa Inc. in its Q2 2023 investor letter:
“We modestly trimmed Visa Inc., Mastercard Incorporated, and Accenture plc to manage the position sizes and raise capital to fund purchases elsewhere. These stocks remain full-sized positions and high-conviction ideas in the Fund.
Another fintech industry trend we’re seeing is a pickup in M&A activity, most notably in the payments sector. The year started with Nuvei’s $1.3 billion acquisition of Paya announced in January. In April, Network International received an initial takeover offer from a group of private equity firms, which was then topped by Brookfield Asset Management whose $2.8 billion offer was accepted by the Board in June. Following reports earlier this year of a bidding war between Visa Inc. and Mastercard Incorporated to acquire cloud-based issuer processor and core banking software provider Pismo, Visa announced its intention to acquire the Brazilian company for $1 billion in late June.”
7. Rocket Pharmaceuticals, Inc. (NASDAQ:RCKT)
Maverick Capital’s Equity Stake: $115.4 million
Year-to-date gain: 10.5%
Rocket Pharmaceuticals, Inc. (NASDAQ:RCKT) remains billionaire Lee Ainslie’s top stock pick in the healthcare sector, operating a multi-platform biotechnology company.
This is what Baron Health Care Fund said about Rocket Pharmaceuticals, Inc. in its Q3 2023 investor letter:
“The relative shortfall in biotechnology mostly had to do with not owning a few larger cap names, particularly AbbVie Inc., Amgen Inc., and Regeneron Pharmaceuticals, Inc., whose share prices were up double digits for the quarter as investors flocked to larger, safer, cash flow positive biotechnology companies as long-term interest rates rose. These losses were somewhat offset by strong performance from argenx SE and Rocket Pharmaceuticals, Inc..
In biotechnology, we continue to focus on select biotechnology companies that we believe have innovative products and are well funded and well positioned in a more difficult pricing environment. Examples include Rocket Pharmaceuticals, Inc., a developer of gene therapies for rare, undertreated diseases.”
6. Uber Technologies, Inc. (NYSE:UBER)
Maverick Capital’s Equity Stake: $118.9 million
Year-to-date gain: 125%
Ainsle’s hedge fund owns a stake worth $118.9 million in Uber as of the end of the third quarter of 2023.
Here is what RiverPark Advisors said about Uber Technologies, Inc. (NYSE:UBER) in its Q3 2023 investor letter:
“Uber Technologies, Inc.: UBER was the top contributor in the quarter following a better-than-expected 2Q23 earnings report and 3Q23 guidance. Gross bookings of $33.6 billion were up 16% year over year. Mobility gross bookings of $17 billion grew 25% over last year driven by a combination of product innovation and driver availability. Delivery gross bookings of $16 billion were up 12% from last year. 2Q Adjusted EBITDA of $916 million, up $552 million year over year, significantly beat Street estimates of $845 million and the company generated $1.1 billion of free cash flow. Management guided to continuing growth in 3Q Gross Bookings (17%-20% growth) and Adjusted EBITDA (of $975-1,025 million).
UBER remains the undisputed global leader in ride sharing, with a greater than 50% share in every major region in which it operates. The company is also a leader in food delivery, where it is number one or two in the more than 25 countries in which it operates. Moreover, after a history of losses, the company is now profitable, delivering expanding margins and substantial free cash flow. We view UBER as more than just ride sharing and food delivery, but also as a global mobility platform with the ability to sell to its 130 million users (by comparison, Amazon Prime has 200 million members) and penetrate new markets of on-demand services, such as package and grocery delivery, travel, and worker staffing for shift work. Given its $4.3 billion of unrestricted cash and $4.4 billion of investments, the company’s enterprise value of $95 billion equates to just over 20x next year’s estimated free cash flow.”
5. NVIDIA Corporation (NASDAQ:NVDA)
Maverick Capital’s Equity Stake: $145.8 million
Year-to-date gain: 244%
NVIDIA Corporation (NASDAQ:NVDA) is up by about 244% for the year. Ainsle’s fund trimmed its stakes in the company during Q3 to 335,211 shares from 452,379, accounting for 3.29% of the portfolio.
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4. Philip Morris International Inc. (NYSE:PM)
Maverick Capital’s Equity Stake: $172.4 million
Year-to-date gain: –9%
While Philip Morris International Inc. (NYSE:PM) is down by about 9% for the year, Maverick Capital increased its stakes by 307% in Q3 2023 to 1.8 million shares valued at $172.4 million.
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3. Amazon.com, Inc. (NASDAQ:AMZN)
Maverick Capital’s Equity Stake: $176.1 million
Year-to-date gain: 70%
Amazon.com, Inc. (NASDAQ:AMZN) has been one of the best-performing stocks in billionaire Ainslie’s portfolio, going by 70% year-to-date gain.
Here is what Polen Capital said about Amazon.com, Inc. in its Q3 2023 investor letter:
“Amazon continues to showcase it’s place as one of the most competitively advantaged companies in the world. The company has made significant progress in managing costs and better leveraging existing capacity, driving a strong recovery in its profitability. We think there’s additional room for improvement.
AWS growth seems to be stabilizing even while management continues to work with clients to optimize their infrastructure spend. Roughly 90% of global IT spending remains on premise. We believe this will eventually flip, with most IT spending ultimately moving to the cloud over time. We think AWS will be a significant beneficiary of this transition.
Further, our investment case on company profitability driven by AWS and advertising continues to unfold, delivering nearly $8 billion in free cash flow over the trailing twelve months and a net margin of 5%. We expect both to move higher with the mix shift of more profitable businesses growing fastest continuing to take effect.
At Amazon’s current price, we believe the company is well positioned to deliver a mid-teens or higher total shareholder return for our clients over the next five plus years without a Herculean effort from the business. It simply needs to continue executing on current businesses and growing into the capacity it built during and immediately after the pandemic.”
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2. Meta Platforms, Inc. (NASDAQ:META)
Maverick Capital’s Equity Stake: $176.2 million
Year-to-date gain: 179%
Meta Platforms, Inc. (NASDAQ:META) has been one of the best-performing stocks in Ainslie’s portfolio, a trend likely to continue into 2024 as the overall market remains bullish.
Maverick Capital increased its stakes in Meta Platforms, Inc. in Q3 2023 to 586,892 shares valued at $176.2 million, accounting for 3.97% of the portfolio.
In its Q3 2023 investor letter, Davis Funds said the following about Meta Platforms, Inc.:
“In big technology, the huge price volatility of leaders like Meta Platforms can come with opportunity—trimming when prices are high and adding when they are low. For example, we added significantly to Meta last year at less than half of today’s price and have recently trimmed our position in Alphabet as its shares swung back into favor. For many years, we have referred to the leading online platforms such as Alphabet as the blue chips of tomorrow. Their economies of scale, network effects, strong competitive positions and profitable business models combine to make them some of the best businesses we have ever seen. Because of this success, these juggernauts have attracted waves of regulatory scrutiny and relentless negative press coverage. As a result of the ebb and flow of these controversies, investor sentiment can swing precipitously from euphoria to disgust, which can provide opportunities for price-conscious investors. While we are not short-term traders, the enormous price volatility of these online tech leaders has led us to be opportunistic, trimming when prices are high and adding when they are low. Recently, as these companies have swung back into favor, we have trimmed our holdings in Meta Platforms.”
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1. Coupang, Inc. (NYSE:CPNG)
Maverick Capital’s Equity Stake: $1.31 billion
Year-to-date gain: 6.07%
Coupang, Inc. (NYSE:CPNG) remains billionaire Lee Ainslie’s top stock pick heading into 2024 as a consumer-cyclical play that owns and operates a commerce business through mobile applications and internet websites in South Korea.
Here is what Baron Funds, an investment management firm, said about Coupang, Inc. in its Q3 2023 investor letter:
“Coupang is a leading Korean e-commerce company founded in 2010. It went public in March of 2021, and we have been investors in this Fund since the IPO. After spending half a day with management, touring the company’s fulfillment center, asking questions, and learning more about the reasons behind the remarkable success the company has achieved over the last 13 years, we decided we wanted to own it in this Fund as well. When we originally invested in Coupang, our thesis was constructed around the company’s wide product selection, low prices, and unrivaled convenience thanks to its investments in an end-to-end infrastructure that covers over 70% of Korea’s population, enabling over 99% of orders to be delivered within one day or less, rather than the industry norm of two to three days, driving customer satisfaction, which translates to higher customer retention rates and lifetime value. We thought that Coupang would continue to gain market share in the U.S. $500 billion-plus Korean retail market, while expanding its offerings into additional categories, expanding its ecosystem via a third-party marketplace, and continuing to invest in infrastructure density to further capture inefficiencies, enhancing the customer experience, and improving profit margins. The company has since outperformed our expectations, growing its market share to 25% (#1 in the industry), despite not being a first mover, while building an unrivaled user experience with 99.8% of products delivered the next day (with the majority of them by dawn) and becoming profitable significantly faster than we expected. Our biggest takeaway from the visit was that despite all of Coupang’s success, there is still a long runway of growth ahead. For example, while most of the facility we visited is operated with pickers going to shelves to pick up items for orders, there was one room in which shelves drove themselves to pickers on the back of autonomous robots, which increased picker productivity by 3x. Additionally, while Coupang has been striving to reduce its reliance on distributors, which enables them to expand margins while lowering prices for consumers, a significant opportunity remains for further reduction. Lastly, we got plenty of examples of out-of-the-box thinking (no pun intended) from the company’s singulation process (improves the picking process by reducing the constraint to search for items order by order), decreasing use of boxes (80% of shipments are now boxless), enabling grocery delivery without cold-chain logistics (thanks to end-to-end supplychain efficiency), or how Coupang is able to fill trucks so that each carries more than 2x the parcels a UPS or a FedEx truck can, despite being half the size. The 4% free-cash-flow yield, which is also negatively impacted by the significant reinvestments the company is making into its emerging offerings, also contributed to our decision to add to our Coupang position upon returning to New York.
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