In this installment of my analysis of purchases made my major hedge funds, I will look at five stocks bought by the Maverick Capital using the latest available SEC filings of the fund. Maverick Capital is led by Lee Ainslie and has equity positions worth $8 billion. I performed preliminary valuation analysis for the 35 new purchases made by Ainslie and have presented five stocks that offer a minimum return of 20% from current levels. I have also estimated the price Maverick Capital might have paid to acquire the shares.
Industries represented on the list include retail, electronic instruments and controls, biotechnology and drugs, and software and programming.
- Macy's, Inc. (M): This Cincinnati, OH, based company operates under two brands, Macy's and Bloomingdale's, and has a market cap of $14.5 billion. Maverick Capital initiated a new position by acquiring approximately 4.1 million shares at an estimated average price of $27. The company currently trades at $34. Analysts expect the company to grow at an annual rate of 12% during the next five years. Based on the mean 2012 EPS estimate of $3.23, applying my preliminary P/E estimate of 13, a price target of $42 is obtained. A return of 21% is possible from current levels.
- Citrix Systems, Inc (CTXS): Maverick Capital initiated a new position in CTXS during Q3 2011 by acquiring approximately 3.91 million shares at an estimated average price of $63.79. At its current price of $66.6, one can acquire CTXS shares at a slightly higher price than that paid by Maverick Capital. The company is expected to grow its earnings at an annual rate of 18% during the next five years compared with the 20% average annual growth rate of the industry. Applying a P/E of 34.6 to FY 2012 EPS estimate of 2.33, my price target for CTXS is $81 a share. Similar to Macy's, a return of 21% is possible from current levels.
- Corning Incorporated (GLW): Corning was an underperformer during the last five years with the stock down approximately 30% compared with the 10% decline in the broader S&P500 (SPY) index. Although the earnings did grow at an annual rate of 11%, this was not reflected in the stock price. Going forward, analysts expect the company to grow its earnings at an annual rate of 4%. Maverick Capital added approximately 2.75 million shares, a change of 12%, at an average price of $14.87 very similar to the current price of $14.3. Applying a P/E of 10 to 2012 EPS estimate of $1.69, my price target for GLW is $17 a share.
- McKesson Corporation (MCK): MCK is the most attractive name on this list with a return potential greater than 35%. This provider of medicines, pharmaceutical supplies, information and care management products and services grew its earnings at an annual rate of 15% during the last five years and is expected to have a fairly consistent growth rate of 13% during the next five years. Maverick Capital initiated a new position in MCK by purchasing 4.4 million shares at an estimated price of $78 a share. Applying a multiple of 15 to 2012 EPS estimate of $7.09, a preliminary price target of $106 a share is obtained.
- Kohl's Corporation (KSS): With a market cap of $11.9 billion, KSS is one of the bigger discount retailers in the world. The company operates about 1,100 stores in 49 states and caters to men, women and children. Good times are ahead for the company. The company, which grew it earnings at an annual rate of 3% during the last five years, is now projected to increase its earnings at an annual rate of 13%. Perhaps that is reason why Maverick Capital acquired 1.6 million shares of KSS at an estimated average price of $48.88. My price target of $60 a share is obtained by applying a P/E of 12 to 2012 EPS estimate of 4.96 a share. A return of 25% is possible from current levels.
As always, please use this list as a first step for further research and do not treat this list as a "buy" recommendation. Of the companies listed, I consider MCK, M and KSS as very attractive for possible investment at current levels.