Maverick Capital
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DESCRIPTION:

Date updated:05-11-2008

As of 12-31-07 filing.

New positions: MO, BAX, RIMM

Maverick Capital is a $10 billion hedge fund with offices in Dallas and New York. It has long been known as one of the largest and most consistently successful hedge funds. It was started in 1993 with $38M in capital by Lee S. Ainslie III, who was a protégé of the legendary investor Julian Robertson at Tiger Management, one of the most successful hedge funds in history.

Maverick is a little different than many of today’s hedge funds as it relies on old fashioned stock picking for its returns. In a recent interview with McKinsey Quarterly, Ainslie said “Maverick is more of a traditional hedged fund, investing only in equities and maintaining a balance of long and short positions.” Maverick's investment team generates performance by understanding which stocks will be the best and worst performers in each sector and region, rather than by trying to time market movements.” Ainslie also noted that Maverick “uses many different valuation methodologies, but the most common is to compare sustainable free cash flow to enterprise value.” The fund looks to hold stocks on average between 1 and 3 years.

Ainslie is also disappointed in the lack of good capital allocation strategies among public companies. In general, he thinks corporate America is underleveraged. From a recent interview with CFO magazine:

“What are positives on a CFO's track record?
Number one is good capital-allocation decisions. We, and other equity investors, have been rather frustrated by the record levels of corporate cash when the real cost of money is as cheap as it's ever been. Last fall, we had negative real rates in the United States for the first time in 25 years. Yet we also have record-low levels of debt. So when we see an inefficient capital structure and there's no proactive program to find ways to return that capital through buybacks or dividends, we want to understand why.”

There is a concern, however, about the aggressive tactics some hedge funds use to gain information. How can companies avoid running afoul of Reg FD?
My best advice is to be as straight-forward as possible because we will cross-check information with peers within the company as well as competitors, suppliers, and customers. We certainly respect the need to comply with Reg FD and do not want to see a company’s adherence [put] in question. Now, unfortunately, we have no way of monitoring what a company has disclosed in a public forum and therefore it really is the company’s responsibility to maintain consistent disclosure. But if someone says, look it, I’d love to discuss this in more detail but unfortunately I can’t because of Reg FD, we certainly respect that response.
Does the proliferation of hedge funds bother you? We are up to 8,000 funds at this point.
Actually we’re up to 9,000….But does it concern me? We recognize it’s becoming a more challenging, competitive environment, but I think that’s only natural.
But there’s only a finite amount of investment opportunities, isn’t there?
The average hedge fund is less than $150 million… I'm more concerned about the competition from the larger, more thoughtful funds that have a greater depth of resources. At the end of the day, our job is to take advantage of the spread between the best and the worst performing stocks. Now if you just look at the S&P 500 and look at the performance of the top quartile and the bottom, the spread between them has averaged about 70 percent per year. And there's little evidence to demonstrate that these spreads have narrowed. But I would argue that the stocks that comprise the best and worst performers have changed. And as there’s more capital doing more work, like any other competitive business, it’s important that we try to stay a step ahead.

symbol name last price % change open
  • +
  • AAPL
    Apple Inc
  • $189.73
  • +1.86%
  • $186.78

No Analysis added

People owning AAPL also tend to own: AMDCSCODELLGOOGIBMINTCMSFT

TheStreet.com Rating: B What is this?

  • +
  • QCOM
    Qualcomm Inc
  • $45.00
  • +1.97%
  • $44.12

No Analysis added

People owning QCOM also tend to own: AAAAPLADBEBAMDVYGEHON

TheStreet.com Rating: B+ What is this?

  • +
  • CVS
    Cvs Caremark Cp
  • $43.19
  • +2.37%
  • $42.13

No Analysis added

People owning CVS also tend to own: CMEDELLEBAYGEGSLEHMCO

TheStreet.com Rating: A+ What is this?

  • +
  • AMX
    America Movil
  • $58.25
  • -0.43%
  • $58.50

No Analysis added

People owning AMX also tend to own: AMTAMZNCCICVCDISHGOOGHAR

TheStreet.com Rating: A- What is this?

  • +
  • GME
    Gamestop Corp
  • $55.45
  • +0.87%
  • $55.11

No Analysis added

People owning GME also tend to own: AAPLPGSLBBRCDCEBAYEMC

TheStreet.com Rating: A- What is this?

  • +
  • TMO
    Thermo Fisher Sci
  • $57.58
  • +0.26%
  • $57.22

No Analysis added

People owning TMO also tend to own: AHMAIZALBAMPAVTAXCABBI

TheStreet.com Rating: A What is this?

  • +
  • RTN
    Raytheon Co (new)
  • $65.83
  • +1.23%
  • $65.26

No Analysis added

People owning RTN also tend to own: ABMCOSTINFOJASLMTNOCQ

TheStreet.com Rating: A What is this?

  • +
  • MRVL
    Marvell Tech Grou
  • $14.83
  • +5.70%
  • $14.20

No Analysis added

People owning MRVL also tend to own: ACIWADMADSAZPNCERNCKFRCREE

TheStreet.com Rating: C- What is this?

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