Highside Capital Management, managed by Lee Hobson, maintains a balanced portfolio of equities focused in the service, technology, finance, and healthcare sectors, among others. The fund invests via a standard long/short strategy. Having completed his undergraduate studies at Princeton in 1987, Hobson went on to receive his M.B.A. from Harvard Business School in 1992. Before founding Highside Capital in 2003, Hobson worked as a partner at Lee Ainslie’s Maverick Capital from 1994 to 2003, during which time he specialized in consumer sector investments and was instrumental to some of the firm’s positions in Latin America. Prior to his work at Maverick Capital, Hobson was a business development associate at PepsiCo, Inc. (NYSE:PEP) and, prior to that, an analyst at Goldman Sachs Group, Inc. (NYSE:GS) in New York and Paris.
Below are a few of the top picks from Highside’s latest 13F current through June 30, 2012, the contents of which you can see here. Highside holds between 4 and 6 percent of its equity portfolio in each of these companies.
Motorola Solutions
Motorola Solutions Inc (NYSE:MSI) was spun off from Motorola Mobility Holdings in 2011. The latter is now a fully-owned subsidiary of Google Inc (NASDAQ:GOOG) following its May 2012 acquisition. Second quarter revenue was up 8 percent year-over-year for the firm, which has a great deal of success in obtaining government and enterprise contracts. The company also stands to benefit from a pick-up in European sales and economic conditions. The board has authorized a total of $5 billion in share repurchases, and the company also has an attractive $0.26 per share quarterly dividend, which comes out to a 2.1 percent annual yield.
Yahoo
As we noted in a previous article, Yahoo! Inc. (NASDAQ:YHOO) is positioning itself to reclaim its position as a content aggregator and provider in an internet that rejected the whole content aggregation idea. Activist hedge fund manager Dan Loeb also has a stake in the company valued at well over $1 billion and has recently upped his stake to nearly 6 percent ownership in the company. The recent Alibaba realignment might yield significant proceeds as the company buys back up to half of Yahoo’s stake in the company, a deal that might yield $7 billion for Yahoo! Inc. Yahoo has a very long way to go in its restructuring, but new CEO Marissa Mayer stands to be very promising—she was a former Google exec. Indeed, Twitter and Square founder Jack Dorsey has been very vocal about Mayer’s position in the company, calling her a new “founder” of the beleaguered website.
Express Scripts
Express Scripts Holding Company (NASDAQ:ESRX) is one of the largest pharmacy benefit management (PBM) organizations in the United States. In the second quarter, the company reported a 24 percent increase in earnings year-over-year, with an adjusted $0.88 earnings per share. Shares are trading at 13.9 times consensus 2013 earnings estimates, which compares well with CVS Caremark Corporation’s (NYSE:CVS) forward P/E of 12.2. The company recently merged with Medco, which was the third largest PBM prior to the merger.
AutoZone
AutoZone, Inc. (NYSE:AZO) has over 4,600 stores in the United States and is one of the most popular names in auto repair. The auto repair business runs counter-cyclical to auto sales: younger cars require fewer repairs. Indeed, shares hardly flinched during the Great Recession, and the stock has a beta of 0.35, suggesting low correlation with the market. The company’s operating margin continues to improve, up to 18.5 percent in 2011 from 17.9 in 2010. In the most recent quarter, AutoZone saw improved gross margins even from its 2011 numbers. Sales have increased by at least 20 percent over the last 8 reported quarters. This stock is a very interesting investment idea as a hedge against deteriorating auto sales.
