The Maverick roller coaster at Ohio's Cedar Point goes up and down.
Maverick Capital aims for its investments to just go up. Image: Craig Lloyd, Flickr.
Every quarter, many money managers have to disclose what they've bought and sold, via "13F" filings. Their latest moves can shine a bright light on smart stock picks.
Today let's look at Maverick Capital, founded by Lee Ainslie and Sam Wyly in 1993. Avoiding bonds, commodities, currencies, and options, it sticks with stocks, holding both long and short positions. It employs fundamental analysis and examines management closely.
The company's reportable stock portfolio totaled $6.2 billion in value as of March 31.
Interesting developments
So what does Maverick Capital's latest quarterly 13F filing tell us? Here are a few interesting details: The company more than tripled the size of its position in Priceline Group Inc. (BKNG -0.47%), its top holding. It also added lots of new positions, such as in Baidu Inc. (BIDU 0.98%) (its 11th-largest holding) and United Therapeutics Corporation (UTHR 1.08%) (its 40th-largest).
Image: Priceline Group
Priceline Group Inc. has seen its shares slump over the past year, but that's just made it more of a buying opportunity in many investors' eyes. Over the past 15 years, it has averaged annual gains of 11%, and a whopping 47% over the past decade. Now with a market value around $60 billion, Priceline Group is the leading online travel company, encompassing priceline.com, Booking.com, Kayak, agoda.com, rentalcars.com, and OpenTable. In its fourth quarter, the company posted revenue growth of 19%, spurred in part by robust international bookings. The following quarter featured 12% growth which was still above company projections. The stock has seemed hard to beat in the past, but there's more cause for concern these days, as Amazon.com enters its market, with Amazon Destinations. Another concern is Expedia's acquisition of Travelocity, a well-regarded travel site, followed by gobbling up Orbitz.
Priceline is far from doomed, though, despite the current strong dollar compressing revenue earned abroad. Net profit margins are huge, at about 28%, while Priceline invests aggressively in further growth and still generates some $2.8 billion in free cash flow. It's aiming to expand its business in China via a growing stake in Ctrip.com International. Priceline currently owns about 10.5% of Ctrip, with the ability to boost that to 15%.
Baidu Inc. is also growing in China, as it's based there and is the top Chinese-language online search service. Its stock has averaged annual gains of 39% over the past eight years, while its revenue and net income have averaged annual gains of more than 65%. Profit margins have been shrinking in recent years, causing some concern, but free cash flow has surged to more than $11 billion annually. Baidu is also investing in building and expanding its business, with some new businesses featuring lower profit margins, putting pressure on its current overall margins. For example, it has recently invested in content discovery specialist Taboola, which serves "more than 200 billion monthly content recommendations to over 550 million users across some of the Web`s most innovative publisher sites in the U.S., U.K., France, Germany, Italy, Thailand, India, Japan, and Israel. The company is reportedly also looking into bidding for Nokia's mapping operations.
Baidu has already met with success in developing its mobile business, as it generated about half of all revenue in its last quarter. My colleague Brian Stoffel has noted that Baidu is also "developing an ecosystem that can support closed-loop transactions, which could prove lucrative for the company." Like plenty of companies before it, Baidu is forgoing some current profits in order to set itself up for greater growth down the line. That should be an attractive proposition for investors.
Image: United Therapeutics
United Therapeutics Corporation, a biotech company with four drugs on the market treating pulmonary arterial hypertension, has been serving its investors well, averaging share growth of 22% annually over the past decade. Its largest drug, Remodulin, was the object of a favorable legal ruling in 2014, upholding its exclusivity until 2017. That's good news, as Remodulin generated 45% of revenue in the company's last quarter, but 2017 isn't that far away, which means the company needs new profitable drugs, or approvals for new indications for existing drugs.
On that front, United Therapeutics received FDA approval in March for its cancer drug Unituxin to be used to treat children with high-risk neuroblastomas. The company's first-quarter results featured a 13% jump in revenue because more patients are taking its drugs and because of new sales of its Orenitram drug, but its bottom line was red as the company increased its spending on R&D and on marketing.
United Therapeutics' stock might seem pricey with its recent P/E of about 50 well above its five-year average of 34, but its forward-looking P/E of 11 suggests a lot of expected growth and reflects a more appealing valuation for long-term believers.
We should never blindly copy any investor's moves, no matter how talented the investor. But it can be useful to keep an eye on what smart folks are doing, and 13F forms can be great places to find intriguing candidates for our portfolios.
