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.