Maverick Capital's 614 Stock Portfolio: Top 10 Holdings Analyzed - Sure Dividend

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Maverick Capital’s 614 Stock Portfolio: Top 10 Holdings Analyzed


Updated on June 24th, 2021 by Nikolaos Sismanis

Founded by Lee Ainslie in 1993, Maverick Capital is a Texas-based long/short equity hedge fund. The fund’s humble beginnings were powered by Mr. Ainslie, raising $38 million of capital by the family of Texas tech-entrepreneur Sam Wyly. Ever since, Maverick has grown into one of the largest hedge funds in the state, holding more than $10.8 billion in total Assets Under Management (AUM).

Investors following the company’s 13F filings over the last 3 years (from mid-June 2018 through mid-June 2021) would have generated annualized total returns of 16.50%. For comparison, the S&P 500 ETF (SPY) generated annualized total returns of 18.60% over the same time period.

Note: 13F filing performance is different than fund performance. See how we calculate 13F filing performance here.

You can download an Excel spreadsheet with metrics that matter of Maverick Capital current 13F equity holdings below:

 

Keep reading this article to learn more about Maverick Capital.

Table Of Contents

Maverick Capital’s Investing Strategy & Philosophy

Similar to various hedge funds that we have covered over time, Maverick Capital shares little to no information regarding its operations. However, in a 2006 interview, Mr. Ainslie shared quite a bit of insight into how the fund conducts its business. Considering that these are some fundamental principles, it’s more than likely that they remain true to this day.

As he goes on to explain, Maverick’s analysts are initially trying to understand a company’s business model and whether its growth and return on capital are sustainable over the long term. The fund’s goal is to collect and act on high-quality information that the rest of the market lacks.

Maverick’s sector-specialists have decades of experience in the industry, which has helped them develop long-term relationships with various senior management and employees, giving Maverick that extra reach from its competition.

One of the fund’s core catalysts for allocating capital in a company is trust in its management. As Mr. Ainslie explains, excellent management is what matters the most and can often justify buying equities at a seemingly high valuation.

In terms of holding period, Maverick usually intends to hold its stakes from around 1 to 3 years, though this can easily change based on a company’s ongoing performance.

Maverick Capital’s Portfolio & 10 Most Significant Holdings

Maverick’s portfolio is incredibly diverse, holding over 600 individual equities. It seems that its capital allocation focused on creating a highly risk-adjusted portfolio, with multiple sector hedges and a statistics-intensive decision-making process.

At the same time, however, the company’s 10 most significant holdings account for nearly 45% of its total portfolio, which signals strong and clear confidence when it comes to the fund’s high-conviction picks.

Source: 13F Filings, Author

During the quarter, Maverick initiated a position in the following stocks:

New Buys (at least 0.01% of total holdings):

In terms of its sector exposure, Maverick holds significant Communications and Technology positions, following COVID-19’s staying-at-home-economy trend while avoiding more volatile sectors like Industrials and Energy.

Source: 13F Filings, Author

The fund’s 10 most significant holdings are as follows:

Facebook (FB)

The social media giant is Maverick’s largest holding, accounting for 8.3% of its portfolio. The fund’s long-term commitment to Facebook dates back to Q1 2015. Since then, Maverick has built its position gradually, showing great commitment to the company’s investment case. The company is one of the most reasonably valued in the tech/communications sector while still growing rapidly, despite more than 2.8 billion people using its services monthly.

Facebook is currently enjoying excellent financials, with a net cash position of $64.22 billion (nearly 7% of the market capitalization of the stock). Facebook is one of the extremely few companies that have no debt. This is a testament to the strength of its business model and its execution.

Moreover, even though half of the globe uses at least one of the apps of Facebook on a monthly basis, its user base is still growing at double-digit rates. The company has reported an all-time high bottom line of $33.7 billion over the past four quarters, amid user growth and snowballing ARPU (Average Revenue Per User.)

For these reasons, it would not be a complete surprise if Facebook paid a dividend at some point in the future.

Facebook remains one of the most cheaply valued growth stocks out there, still retaining 20%+ revenue growth but trading at a forward P/E of just 26.9.

Maverick held its position steady during the quarter.

Microsoft (MSFT)

Microsoft’s diversified portfolio of tech products and services has ruled the tech sector’s digital infrastructure. The company’s CEO Satya Nadella has transformed the company into a cloud powerhouse. As a result, Microsoft has managed to accelerate its growth and post all-time high earnings in the last two years.

Microsoft is now a mega-cap stock with a market capitalization of $1.95 trillion.

Supported by the company’s strong profitability, management has been consistently raising buybacks over the past decade to further reward its shareholders. The amount allocated to stock repurchases has reached new all-time highs over the past four quarters, at nearly $26B.

Revenue growth remains in the double-digits, so it’s likely to see capital returns accelerating moving forward. The company is also growing the dividend at a double-digit rate, though at the current yield, which stands below 1%, investors should expect the majority of their future returns in the form of capital gains.

Despite that, Microsoft’s cash position has been growing continually, with the company currently sitting on top of a massive $125 billion cash pile.

Further, while many companies have chosen to utilize the current ultra-low interest rates to raise cheap debt and buy back stock, Microsoft’s approach has been prudent and thoughtful. Not only are current earnings extensively covering buybacks (59% buyback “payout ratio”), but long-term debt has been substantially reduced from $76 billion in mid-2017 to around $55 billion as of its last report.

Maverick trimmed its position by 16% during the quarter. It now accounts for 5.7% of its total holdings.

Amazon.com Inc. (AMZN)

Amazon climbed swiftly to the third position among Maverick’s largest holdings due to the fund hiking its equity stake by a massive 70% during the past quarter.

The company seems unstoppable both in terms of its physical and digital infrastructure capabilities. Amazon delivered another spectacular quarter recently, with Q1 AWS net sales up 32% YoY to $13.5B, topping the 22.5% growth rate consensus estimate. Revenue grew to $108.52 billion, a 43.7% increase YoY, contributing to all-time high LTM (Last Twelve Month) sales of $419 billion.

Due to scaling its operations, the company’s net income margins have constantly been evolving, reaching 6.42% during this period, turning Amazon into an increasingly profitable growth monster. The stock is currently trading at a forward P/E of 58.5, but considering its EPS growth, it could be a reasonable valuation multiple.

The stock accounts for 5.6% of Maverick’s total holdings.

Alphabet (GOOGL)(GOOG)

Alphabet offers several well-known products, such as Google, Android, Chrome, Google Cloud, Google Maps, Google Play, YouTube, as well as technical infrastructure. While the company’s expansion has lasted for more than a decade and a half, it is still a high-growth stock.

Revenue growth has re-accelerated, with its most recent quarter posting growth of nearly 35%, despite the deceleration caused during the first couple of quarters during the initial pandemic outbreak. The company is one of the most attractively priced stocks in the sector as well, trading at around 28.8 times its forward earnings, despite its consistent growth, massive moat, and strong balance sheet.

With its robust profitability, Alphabet has accumulated a cash and equivalents position of $135.1 billion. As a result, the company can comfortably afford to burn up cash for its long-term bets, such as Waymo, and in the meantime return ample dollars back to its shareholders through buybacks. Alphabet has repurchased nearly $34 billion worth of stock over the past year, retiring shares at an all-time high rate.

Maverick trimmed its position by 24% during the quarter, likely to book some gains following the stock’s prolonged gains. The stock accounts for around 4.9% of its portfolio.

Netflix, Inc. (NFLX)

Netflix makes up around 3.9% of MAverick’s portfolio and is the fund’s fifth-largest holding. Despite years of double-digit growth, the streaming giant continues to break new revenue and net income records at a rapid pace. Revenues grew by 24% to arrive at $7.16 billion in the company’s latest results, in line with management’s expectations and slightly ahead of consensus for $7.14 billion.

Due to its larger subscriber base, the company’s production and licensing fees per user have been declining, widening its net income margins, leading to all-time high EPS levels.

As a result of its profitability reaching higher levels, the company expects to maintain $10B-$15B in gross debt, with the board approving repurchasing up to $5B in shares. This marks the first time Netflix will potentially repurchase shares. At 46.8 times its forward net income, the stock may be the cheapest it has been in years, relatively to its past multiples.

However, its growth has significantly slowed down, while competition has been increasing. Apple TV, HBO Max, Disney+, Amazon Prime, and multiple other competitors have been gaining market share in the streaming market, which could potentially hurt Netflix in the future.

Maverick took advantage of Netflix’s dip last quarter, increasing its position by 40% during this time.

Applied Materials, Inc. (AMAT)

Applied Materials is Maverick’s sixth-largest position, declining from the fund’s second-largest position due to a 55% stake reduction. The company has been capitalizing on the growing demand for semiconductors, seeing steady growth over the past few years.

Management has been rewarding shareholders primarily through stock buybacks, having repurchased around 45% of AMAT’s total shares outstanding over the past 15 years. As a supplementary return, the company pays a miniature dividend, currently yield under 1%.

While it is a quality company, AMAT’s forward P/E has expanded considerably lately, and is currently in the high teens. Considering the cyclical nature of semiconductors, the stock could be slightly expensive at its current levels.

The stock accounts for 3.4% of Maverick’s portfolio.

Lam Research Corporation (LRCX)

Semiconductor giant Lam Research was not materially affected by the ongoing pandemic, displaying resilient cash flows in its past quarters as demand for electronics remained sky-high. The fund has been holding shares since 2016, featuring an average purchasing price of around $324, making Lam Research one of its most profitable picks as of lately. However, Maverick cut its equity stake by a massive 49% during the quarter. This should mostly be likely due to rebalancing purposes.

Shares are currently trading near all-time highs, with a forward P/E of around 18.2, which is a relatively pricey valuation multiple for the industry. As a result, investors should be wary about buying at the stock’s current levels. Like Applied Materials, management has been rewarding shareholders primarily through stock buybacks and a tiny dividend.

Lam Research accounts for 3.3% of Maverick’s portfolio. It is its seventh-largest position.

T-Mobile US, Inc. (TMUS)

T-Mobile is one of Maverick’s newest holdings, with the fund initiating its position last quarter. With T-Mobile acquiring Sprint last year, the company should be able to actively compete with AT&T (T) and Verizon (VZ). As a result of the synergies to be unlocked, the company should undergo a growth phase over the next few quarters. Revenues rose by 78% to $19.8 billion in the most recent quarter, with service revenues growing to $14.2 billion.

Management raised its merger synergy forecasts following the ongoing integration progress (around 50% of Sprint’s customer traffic is now carried on the T-Mobile network, while approximately 20% of Sprint customers have been moved over). It now expects merger synergies of $2.8-$3.1 billion for FY2021 (up from $2.7-$3 billion), which amounts to double last year’s synergies.

The stock currently occupies around 3.1% of Appaloosa’s portfolio. It is now Maverick’s eighth-largest holding.

FLEETCOR Technologies, Inc. (FLT)

FLEETCOR provides digital payment solutions for businesses to manage purchases and make payments. The company provides corporate payments solutions, such as accounts payable automation, virtual cards, employee expense management solutions, etc.

FLEETCOR’s revenues have yet to fully recover from the impact of the ongoing pandemic, which is likely attributable to the competition skyrocketing during the past year.

Similar to many of Maverick’s holdings, whose management teams focus on stock buybacks as the primary method of capital returns, FLEETCOR uses any excess cash it generates towards repurchasing its own stock.

Due to the competition risks and lack of adequate growth, the stock’s valuation is quite inexpensive compared to its industry peers. Still, Maverick slashed its position in FLEETCOR by 44% during the quarter. It is now the fund’s ninth-largest holding, accounting for around 2.9% of its portfolio.

XP Inc. (XP)

XP Inc. is a Brazil-based financial services company offering securities brokerage, private pension plans, commercial and investment banking products, and various other financial services. The company has been snowballing over the past few years, tapping into the growing demand for financial services due to Brazil’s increased banked population (due to its unbanked population rate).

XP has been accelerating its growth through the acquisition of smaller companies in the space. Over the past year, the company has acquired or invested in more than 7 companies, increasing its offerings and proposition value for its customers.

While the forward P/E of 43.6 may look pricey, this valuation multiple could be well-justified considering that the company grows its top line by around 50% YoY while enjoying gross margins near 70%.

Maverick increased its position by 78% during the quarter. It is now the fund’s tenth-largest holding.

Final Thoughts

Maverick’s operations and investing principles remain relatively unknown. Still, Mr. Ainslie’s 14-year old interview sheds plenty of light on how the fund’s capital allocation is executed, including assigning a high significance to a company’s management team.

The fund’s portfolio is quite enormous, containing hundreds of equities. However, the company’s 10 largest significant holdings occupy nearly 45% of its total AUMs, making for some compelling picks for retail investors to consider.

 

Additional Resources

Alkeon Capital Management’s 121 Stock Portfolio: Top 10 Holdings Analyzed

Bridgewater Associates’ 411 Stock Portfolio: Top 10 Holdings Analyzed

Baker Brothers’ 93 Stock Portfolio: Top 4 Holdings Analyzed

Appaloosa Management’s 35 Stock Portfolio: Top 10 Holdings Analyzed

Viking Global’s 75 Stock Portfolio: Top 10 Holdings Analyzed

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