Billionaire ‘Tiger Cub’ Lee Ainslie’s 5 Favorite Stocks

Maverick Capital is a Dallas, Texas-based long/short equity hedge fund founded by ‘Tiger Cub’ Lee Ainslie in 1993. Apart from making investments in the equity markets, the fund also invests in venture-backed biotech and technology companies. Prior to founding Maverick, Mr. Ainslie worked for hedge fund legend Julian Robertson’s Tiger Management. Over the last ten years the fund has managed to post an average annual return of 7.7%. Maverick Capital’s recently submitted 13F filing with the SEC reveals that its U.S equity portfolio was worth over $5.8 billion at the end of September. The filing also revealed that stocks from the information technology sector accounted for 29% of that value. Since Mr. Ainslie is renowned as a value investor with a penchant for investing in technology companies, in this article we will focus on Maverick Capital’s top five stock picks going into the fourth quarter.

But let’s first take a step back and analyze how tracking hedge funds can help an everyday investor. Through our research we discovered that a portfolio of the 15 most popular small-cap picks of hedge funds beat the S&P 500 Total Return Index by nearly a percentage point per month on average between 1999 and 2012. On the other hand the most popular large-cap picks of hedge funds underperformed the same index by seven basis points per month during the same period. This is likely a surprise to many investors, who think of small-caps as risky, unpredictable stocks and put more faith (and money) in large-cap stocks. In forward tests since August 2012 these top small-cap stocks beat the market by an impressive 53 percentage points, returning 102% (read the details here). Follow the smart money into only their best investment ideas all while avoiding their high fees.

#5 Sabre Corp (NASDAQ:SABR)

– Shares Owned by Maverick Capital (as of September 30): 11.025 Million

– Value of Holding (as of September 30): $300 Million

Shares of Sabre Corp (NASDAQ:SABR) have had a phenomenal run this year, gaining 14.55% during the third quarter and currently trading up by 44.35% year-to-date. The gains the stock made during the third quarter along with Maverick Capital’s 13% hike to its position in Sabre Corp (NASDAQ:SABR) pushed the stock up seven spots in Ainslie’s portfolio, to fifth. However, this spectacular run in its stock price hasn’t been helping Sabre Corp to increase its popularity among hedge funds. The number of funds covered by Insider Monkey that owned a stake in Sabre Corp dropped to 34 from 35 during the third quarter. On November 25, the company announced that it will be buying Trust Group of Cos., a revenue management, central reservations, and hotel marketing firm, for $154 million. Billioanire Israel Englander‘s Millennium Management increased its stake in Sabre Corp by 228% to over 1.5 million shares during the July-to-September period.

#4 Commscope Holding Company Inc (NASDAQ:COMM)

– Shares Owned by Maverick Capital (as of September 30): 12.35 Million

– Value of Holding (as of September 30): $371 Million

Maverick Capital increased its stake in Commscope Holding Company Inc (NASDAQ:COMM) by 710,519 shares during the third quarter. After a spectacular rise in January, shares of Commscope Holding Company Inc (NASDAQ:COMM) remained range-bound throughout much of 2015, but took a big hit recently after the company reported its third quarter results. Nonetheless, shares still trade up by 25% year-to-date. While the EPS of $0.53 that the company reported for the third quarter was above analyst expectations of $0.50, the revenue of $972.60 million was more than $97 million lower than the $1.07 billion that analysts had expected. Of the 41 hedge funds covered by us that reported owning a stake in the company as of the end of September, Bob Peck and Andy Raab‘s FPR Partners was a fund that also initiated a stake in Commscope Holding Company Inc during the third quarter.

#3 Alphabet Inc (NASDAQ:GOOG)

– Shares Owned by Maverick Capital (as of September 30): 742,641

– Value of Holding (as of September 30): $451.84 Million

It seems the 16.88% spike that Alphabet Inc (NASDAQ:GOOG)’s shares saw during the third quarter and Google’s decision to restructure itself into the holding company Alphabet during the same period made the company even more attractive in the eyes of Maverick Capital, with the fund upping its stake by 20% during the July-to-September period. Shares of the company have climbed by over 15% since it reported its third quarter results on October 22 and currently trade up by 44.09%. Alphabet Inc (NASDAQ:GOOG) reported EPS of $7.35 on revenue of $18.68 billion for the third quarter, whereas the Street was expecting the company to report EPS of $7.21 on revenue of $18.54 billion. On November 22, analysts at Robert W. Baird reiterated their ‘Outperform’ rating and $780 price target on the stock. Ken Griffin‘s Citadel Investment Group also upped its Alphabet holding during the third quarter, by 60%; it held 803,793 shares of the company on September 30.

#2 Aramark (NYSE:ARMK)

– Shares Owned by Maverick Capital (as of September 30): 15.6 Million

– Value of Holding (as of September 30): $462.8 Million

Though shares of Aramark (NYSE:ARMK) have mostly traded in the $30-to-$34 range throughout the year, Maverick Capital believes that the stock will do well in the future, which can be gauged from the fact that the fund increased its stake in the company by 26% during the third quarter. Moreover, a lot of hedge funds seem to agree with Maverick Capital’s view, as 53 funds covered by Insider Monkey disclosed owning a stake in Aramark (NYSE:ARMK) as of the end of September, compared to just 41 as of the end of June. On November 18, the company reported its fiscal year 2015 fourth quarter results, declaring EPS of $0.44 on revenue of $3.50 billion. For the same quarter of the 2014 fiscal year the company reported EPS of $0.39 on revenue of $3.95 billion. Barry Rosenstein‘s JANA Partners initiated a stake in Aramark during the third quarter by purchasing over 3.3 million shares of the company.

#1 Liberty Global plc – Class C Ordinary Shares (NASDAQ:LBTYK)

– Shares Owned by Maverick Capital (as of September 30): 12.14 Million

– Value of Holding (as of September 30): $498 Million

Finally, after increasing its stake in Liberty Global plc – Class C Ordinary Shares (NASDAQ:LBTYK) by 86% during the second quarter, Maverick Capital again hiked its stake, this time by an additional 128%. Shares of Liberty Global plc have declined gradually since the start of the second-half of the year and are now down by almost 14% year-to-date. The company has been one of the most popular stocks among hedge funds this year, with 89 of the more than 700 investment firms that we cover reporting owning a stake in it as of September 30. For the third quarter, the company reported EPS of $0.05 on revenue of $4.6 billion. For the same period of last year, Liberty Global plc – Class C Ordinary Shares (NASDAQ:LBTYK) reported EPS of $0.09 on revenue of $4.5 billion. With ownership of over 30 million shares of the company at the end of September, Boykin Curry‘s Eagle Capital Management was its largest shareholder among the funds we track.

Disclosure: None