Maverick Capital Ltd is an employee-owned hedge fund with its headquarters in Dallas as well as several other offices throughout the United States. The firm was founded in 1993 by its current managing partner, Lee S. Ainslie, and billionaire Sam Wyly. Maverick Capital is well-known as one of the largest and most successful hedge funds ever. The team of experts at Maverick Capital has confidence in old-fashioned stock picking to manage the firm’s portfolio and creates only long and short positions in equities. The fund generated a compounded return of more than 13% annually in the period of 1995-2009. Even though the value of Maverick Capital’s portfolio dropped by almost 30% during the financial crisis of 2008, the majority of the fund’s clients remained loyal and continued to believe in the expertise of the fund’s stock picking experts. According to the most recent 13F filing, the value of the fund’s portfolio stood at roughly $6.21 billion and it opened new positions in the following companies during the first quarter, which we’ll look at in this article: Aramark (NYSE:ARMK), Baidu Inc. (NASDAQ:BIDU) and Micron Technology Inc. (NASDAQ:MU).
Most investors can’t outperform the stock market by individually picking stocks because stock returns aren’t evenly distributed. A randomly picked stock has only a 35% to 45% chance (depending on the investment horizon) to outperform the market. There are a few exceptions, one of which is when it comes to purchases made by corporate insiders. Academic research has shown that certain insider purchases historically outperformed the market by an average of seven percentage points per year. This effect is more pronounced in small-cap stocks. Another exception is the small-cap stock picks of hedge funds. Our research has shown that the 15 most popular small-cap stocks among hedge funds outperformed the market by nearly a percentage point per month between 1999 and 2012. We have been forward testing the performance of these stock picks since the end of August 2012 and they have returned more than 144% over the ensuing 32 months, outperforming the S&P 500 Index by nearly 85 percentage points (read the details here). The trick is focusing only on the best small-cap stock picks of funds, not their large-cap stock picks which are extensively covered by analysts and followed by almost everybody.
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Maverick Capital initiated a long position in Aramark (NYSE:ARMK) during the first quarter consisting of 11.12 million shares valued at $351.66 million as of March 31. The American foodservice, facilities, and clothing provider reported revenue of $3.59 billion for its fiscal second quarter of 2015, exceeding analysts’ estimates of $3.56 billion. Meanwhile, the net income generated by the company amounted to $0.24 per share and met Wall Street’s expectations. Year-to-date, Aramark’s shares have increased by 2%, however the stock could manage continued growth as the company has shown proven strong financial health. Aaron Cowen’s Suvretta Capital Management and Michael Lowenstein’s Kensico Capital represent two other hedge funds that opened sizable new positions in Aramark (NYSE:ARMK) during the first quarter.
Maverick Capital also reported the purchase of a new equity stake amounting to 1.09 million shares in Baidu Inc. (NASDAQ:BIDU), which was valued at $227.74 million at the end of the first quarter. According to its latest financial results, Baidu generated revenues of $5.15 million during the first quarter and achieved revenue growth of 34.4% year-over-year, which is dominated the industry average of 5.8%. However, the company’s earnings per share dropped by 6% when contrasted to the same figure in 2014’s first quarter. The stock of the company has declined by over 11% since the beginning of the current year, but a turnaround is not too far off according to analysts, who expect an improvement in the company’s future earnings. In the meantime, William Von Mueffling’s Cantillon Capital Management remains bullish on Baidu Inc. (NASDAQ:BIDU), owning 2.29 million shares as of March 31.
Lee Ainslie’s Maverick Capital acquired a new equity stake of 6.03 million shares in Micron Technology Inc. (NASDAQ:MU), with his fund’s position in the American producer of semiconductor devices being worth $163.57 million at the end of March. Despite the fact that Micron’s shares have declined by slightly more than 20% in 2015 as the company’s operations have been distressed by the strong U.S. dollar, it seems that the company is making a turnaround lately. Looking ahead, the volume of Micron’s products is expected to increase significantly in the upcoming months given the increasing use of memory in mobile devices. Indeed, the company’s performance is strongly linked to the revolution of the mobile device industry and Internet of Things, therefore, it’s probable that the stock could keep increasing over time. In addition to Ainslie, billionaires David Einhorn, Andreas Halvorsen and Seth Klarman are some of the investors who own sizable stakes in Micron Technology Inc. (NASDAQ:MU).
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