What Was Lee Ainslie Betting on Last Quarter?

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Maverick Capital recently filed its 3Q 13F with the SEC. These filings are useful for individual investors to track, as they reveal the holdings of hedge funds and other notable money managers. Lee Ainslie founded Maverick in 1993, and prior to that he worked for Julian Robertson's Tiger Management. Ainslie focuses on equities, taking both long and short positions. He has managed to beat the S&P 500 by around 6% annually since starting Maverick. In his fund's latest 13F filing, the most notable themes were an interest in health care, and an overall bullish bet on the rebounding economy. Maverick took four major new positions and made a key increase in another.

Priceline.com (NASDAQ: PCLN) was a big increase during 3Q for Maverick, increasing their 2Q shares over 100%. Priceline is now Maverick’s 9th largest 13F holding. The online travel site is expected to see very positive revenue growth by the end of the year at 20%, falling slightly to 15% in 2013. Priceline made key acquisitions in Europe that have played an important part in making the travel site an overseas market leader. Priceline’s recent purchase of Kayak will provide various synergies, most notably an expanded mobile presence.

Mastercard (NYSE: MA) was a new pick for Maverick in 3Q, now 23rd in their 13F portfolio. Revenue for the payments company is expected to grow 10% in 2012 and 12% in 2013. MasterCard also expects to drive future revenue growth by entering new high-growth markets, including mobile payments. Compared to its largest competitor, Visa, MasterCard trades at only 28x earnings, while Visa is at a multiple of 79x.

Two new health care picks for Maverick last quarter were Express Scripts (NASDAQ: ESRX) and UnitedHealth Group (NYSE: UNH). Express and UnitedHealth are now the fund's 14th and 16th largest 13F holdings respectively. Express is expected to see strong revenue growth on the back of its Medco acquisition from earlier this year, although it saw a pullback this month, as management noted that analysts' 2013 estimates may be overly aggressive. Express remains an industry leader, and coupled with its Medco acquisition, the duo now owns 40% of the pharmacy benefits market. Express also appears to be trading cheap at 12x forward earnings, compared to a trailing P/E of 31x.

UnitedHealth is expected to see operating revenues up 8% in 2012 and 9% in 2013. The company's primary revenue driver will be the addition of new members, including commercial, Medicare and Medicaid customers. UnitedHealth trades at the low end of the industry at 10x earnings. Meanwhile, the health care company is expected to grow five-year EPS at over 10% annually and trades at a PEG ratio below 1.0. Both Express and UnitedHealth are top picks by hedge funds in the health care industry.

Last but not least, Macy’s (NYSE: M) was Maverick’s biggest new bet, taking the 11th spot in their 13F portfolio at the end of the quarter. Macy’s Bloomingdale’s business has shown positive momentum despite a poor economy, which in part will help drive an expected 3-4% same store sales growth in 2013. Revenue growth will mostly be driven by JC Penney’s continued weakness, where Macy’s should be able to continue to capture market share. Macy’s also trades on the low end when compared to other specialty retailers; the stock sports an attractive trailing P/E of 12x, while Nordstrom and Saks are at 17x and 21x earnings respectively.

We believe that Maverick has made solid moves with the majority of its recent shakeups. Priceline will get a boost from Kayak in the mobile atmosphere, and the travel site is also revenue diversified, with over half its top line coming from overseas. Mastercard is seeing much better growth opportunities than conventional credit card companies given its ability to form partnerships for mobile payments, and the fact that it has no credit risk. The duo of pharmacy benefits companies we've discussed should see growth from an aging population, and Macy’s has shown an ability to perform well even in a down economy. Check out all of Maverick’s top picks in the third quarter.


This article is written by Marshall Hargrave and edited by Jake Mann. They don't own shares in any of the stocks mentioned in this article. The Motley Fool owns shares of Express Scripts, MasterCard, and Priceline.com. Motley Fool newsletter services recommend Express Scripts, Priceline.com, and UnitedHealth Group. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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