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Lee Ainslie of Maverick Capital’s Top 5 Buys in Stellar Year
Posted by: guruhl (IP Logged)
Date: August 24, 2012 04:35PM

Lee Ainslie, founder of Dallas-based Maverick Capital, is rebounding nicely from last year’s almost 15% loss – his second down year in 16, and a year in which global hedge funds lost 8.87% on average. His biggest fund gained 20% through July, according to Bloomberg.

Ainslie founded Maverick in 1993 with $38 million, after working at Julian Robertson’s Tiger Management Corp., qualifying him along with the rest of the firm’s alumni as a “tiger cub.” Now, Ainslie’s firm has about $9 billion in assets under management.

An all-time-high stock price correlation accounted at least in part for the down year, Ainslie explained in his 2011 letter. While the pattern broke in January 2012, he said "equities have maintained correlation above the long-term average for almost six years now, creating a sustained, unfavorable headwind for fundamental investors." Unprecedented macro conditions such as globalization, high levels of debt, uncertain regulatory environments, extreme monetary policies, unsustainable fiscal policies and resulting currency uncertainties were also unlikely to desist, he said, creating an environment ripe for further volatility.

In 2012’s second quarter, Ainslie bought 19 stocks from an array of industries. Each of the five new additions to the portfolio has gained since he bought them, except Yahoo (YHOO). They are: Schlumberger Ltd. (SLB), Ralph Lauren Corp (RL), Visa (V), NVR (NVR) and Yahoo.

Ainslie purchased 2,566,940 shares of Schlumberg Ltd. (SLB) at an average price of $67 as his largest new holding of the quarter, giving it a 2.4% weighting. The stock ventured to a few dollars shy of its 52-week low in the second quarter, and has gained 12% from his average purchase price.

Schlumberger Limited is a global technology services company consisting of two business segments, Schlumberger Oilfield Services and SchlumbergerSema. Schlumberger Ltd. has a market cap of $99.73 billion; its shares were traded at around $74.5 with a P/E ratio of 18.2 and P/S ratio of 2.5. The dividend yield of Schlumberger Ltd. stock is 1.5%. Schlumberger Ltd. had an annual average earnings growth of 1.9% over the past five years.

In the second quarter, the company’s revenue increased to $10.5 billion from $9.9 billion the prior year, amid downward revisions of GDP growth and oil demand, and inventory builds from higher OPEC production that brought oil prices lower. Schlumberger repurchased 7.5 million shares of its stock at an average price of $66.30, for a total of $499 million, during the quarter.

Ainslie purchased 973,184 shares of Ralph Lauren Corp (RL) at an average price of $157 during the quarter.

Ralph Lauren Corporation is engaged in designing, marketing, and distributing men's, women's and children's apparel, accessories, fragrances, and home furnishings. Ralph Lauren Corp has a market cap of $14.81 billion; its shares were traded at around $159.58 with a P/E ratio of 22 and P/S ratio of 2.2. The dividend yield of Ralph Lauren Corp stocks is 1%. Ralph Lauren Corp had an annual average earnings growth of 11.4% over the past 10 years. GuruFocus rated Ralph Lauren Corp the business predictability rank of 5-star.

Ralph Lauren shares dropped about 20% in May, from what the Baron Funds called “concerns surrounding its products’ exposure to European consumers.” The firm also commented in its second-quarter letter, “The company's first quarter results were otherwise strong - highlights included 14% growth in sales and 32% growth in earnings. We believe that Ralph Lauren continued to reap benefits from its ongoing investments in sourcing, distribution, and e-commerce initiatives.”

Ralph Lauren doubled its dividend in the second quarter and on August 9 announced a $500 million stock repurchase program, in addition to the $277 million available at the end of the first quarter of 2013 under its old program.

Ainslie purchased 966,275 shares of Visa (V) at an average price of $119 during the quarter. The stock has gained 6% since.

Visa operates the world's largest retail electronic payments network and is one of the most recognized global financial services brands. Visa Inc has a market cap of $104.39 billion; its shares were traded at around $126.66 with a P/E ratio of 21.7 and P/S ratio of 11.4. The dividend yield of Visa Inc stocks is 0.7%.

Robert Susman of Baron Funds commented on Visa in the firm’s second quarter letter: “The outperformance was driven by its strong fiscal second quarterly earnings report in April and increasing expectation of a favorable legal settlement with merchants (which did occur in July after the quarter ended).We remain long-term believers in Visa, as it is the dominant payments network in the world (over 55% of all credit/debit card transactions) with high barriers to entry and a long organic growth runway as plastic continues to gain transaction/volume share from cash and/or checks.”

Visa may face increased competition as PayPal announced Wednesday that it will team up with Discover to enable consumers to use PayPal at the point of sale at physical locations. The service will be available to millions of participating merchant locations through their existing relationship with Discover.

Ainslie purchased 111,335 shares of NVR (NVR) at an average price of $783 in the second quarter.

NVR Inc. is a holding company that operates in two business segments; the construction and marketing of homes and in financial services. The company’s home construction units are Ryan Homes, NVHomes and Fox Ridge Homes.

NVR Inc. has a market cap of $4.28 billion; its shares were traded at around $819.42 with a P/E ratio of 31.1 and P/S ratio of 1.6.

NVR announced solid second quarter results, with new home orders up 6% and mortgage loan production up 9% from the sale period last year. The company’s net income increased 22%, and consolidated revenues increased 11% in the same period.

NVR’s stock plunged over $120 in July, the day the Commerce Department announced U.S. housing starts declined 5% in June to their lowest level since October 2009. It has since been rebounding and is up almost 20% year to date.

Ainslie purchased 5,562,932 shares of Yahoo (YHOO) at an average price of $15 during the quarter. The stock is down 1% from his buy price and 7.5% year to date.

Yahoo! Inc. is a global Internet communications, commerce and media company that offers a comprehensive branded network of services. Yahoo! Inc. has a market cap of $18.39 billion; its shares were traded at around $14.91 with a P/E ratio of 15.5 and P/S ratio of 3.7.

Yahoo’s second quarter revenue slipped 1% year over year, and net earnings per share increased 2% in the same period. The struggling company also named former Google executive Marissa Mayer chief executive officer and investor Daniel Loeb of Third Point capital as a board member during the quarter. Share of the company fell more than 3 percent in August when the company disclosed in SEC documents that the new CEO was rethinking the decision to return cash from the sale of its stake in Chinese Internet company Alibaba Group to shareholders. Instead, Mayer is reviewing the possibility of spending cash on acquisitions or other strategies to “enhance long-term shareholder value.”

The company bought back 30 million of its shares during the quarter at a total cost of $456 million.

See Ainslie’s portfolio here. Also check out the Undervalued Stocks, Top Growth Companies and High Yield stocks of Lee Ainslie.




Guru Discussed: Lee Ainslie: Current Portfolio, Stock Picks
Stocks Discussed: YHOO, SLB, RL, V, NVR,
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