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Maverick Capital Goes Big on Bank of America

BOSTON ( TheStreet) -- Maverick Capital, the $9.4 billion hedge fund run by Lee Ainslie, initiated a big stake in Bank of America (BAC - Get Report) in the fourth quarter. The firm dumped Family Dollar Stores (FDO - Get Report), now the focus of a private-equity buyout.

The Maverick fund, which has a 76-stock portfolio, held 9.5 million shares of Family Dollar, a chain of self-service retail discount stores aimed at low- and middle-income consumers, at the end of the first quarter of 2010. The fund trimmed it to 2.9 million shares at the end of the third quarter and then eliminated it by year-end, according to a Securities and Exchange Commission filing.

Activist investor Nelson Peltz offered to buy Family Dollar for about $7 billion in cash this week, setting its shares on a run. Hedge fund manager John Paulson, who earned $5 billion for himself last year by betting on gold, also exited Family Dollar.

Lee Ainslie

But Maverick hasn't missed out on much. Family Dollar's shares rose 81% in 2010, so it took the cream off the top. This year they're down about 14%.

During the fourth quarter, the fund's managers also soured on upscale clothier Abercrombie & Fitch (ANF), dropping its stake from 6.7 million shares in the previous quarter to 2.2 million at year-end.

Coincidentally, the retailer just closed out one of its strongest quarters ever, reporting a profit increase of 95% to $92.6 million. It attributed that to sharply higher international sales and a continued recovery in the U.S., when it lost market share to lower-priced teen retailers during the recession.

Among the continued biggest holdings of the fund are Marvell Technologies (MRVL - Get Report), a manufacturer of mixed-signal and digital-signal processing integrated circuit for high-speed, high-density, digital data storage and broadband digital data networking markets, at 20 million shares, and Qualcomm (QCOM - Get Report), a maker of digital wireless communications products and services based on the company's patented CDMA digital technology, at 7.1 million shares.

Big holdings in the financial services sector include JPMorgan Chase (JPM - Get Report), at 8.5 million shares, and a new holding, Huntington Bancshares (HBAN), at 13 million shares.

Ainslie, based in Dallas, sent out his annual investors' newsletter summarizing 2010 activity within the past two weeks and in it he reported that Maverick's main fund returned 11.2% for 2010, while its Levered Fund returned 30.1%. The S&P 500 returned 15% last year.

On the following pages is a closer look at Maverick's holdings.

>>View Maverick Capital's Portfolio

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