Updated April 6, 2021 by Nikolaos Sismanis

CAZ Investments is an investment management company based in Houston, Texas that focuses on providing high net worth individuals access to exclusive investment opportunities.

CAZ Investments was founded in 2001 by Christopher Zook. Growing to manage a fortune of ~ $ 1.45 billion and was 16th Largest wealth manager in Houston at the end of 2020.

Investors who filed the company’s 13F filings in the past three years (from mid-February 2018 to mid-February 2021) would have earned a total annual return of 12.20%. For comparison: the S&P 500 ETF (SPY) achieved an annualized total return of 12.50% over the same period.

Note: The 13F filing performance differs from the fund performance. See here how we calculate the 13F filing capacity.

You can download an Excel spreadsheet with metrics relevant to the current 13F holdings of CAZ Investments:

Keep reading this article to learn more about CAZ Investments.

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CAZ’s investment strategy

The basic idea of ​​CAZ Investments is to give investors access to investment opportunities that they would otherwise not have. This usually means private equity, hedge fund and venture capital deals.

CAZ Investments creates private funds with a specific investment theme and invests in opportunities that correspond to the respective investment theme. The most recent investment themes identified by CAZ Investments are shown in the figure below.

CAZ investment themes

A brief description of a sample of CAZ Investments funds is given below. The company currently has 29 different funds based on its latest ADV brochure:

  • CAZ AI Fund, LP that invests in various securities (stocks, convertibles, warrants, etc.) from Lucid Holdings.
  • CAZ Co-Investment Opportunities Fund, LP – Didi Portfolio, which invests as a limited partner in Paulson Investment Company LP, which in turn invests in shares of Xiaoju Kuaizhi and operates as Didi Chuxing, a Chinese transportation network with significant mobile taxi and private market share of auto services in China.
  • CAZ Co-Investment Opportunities Fund, LP – Lyft Portfolio that invested as a limited partner in Paulson Investment Company II LP, which in turn invested in Lyft prior to going public. This fund is currently in liquidation mode as Lyft is publicly traded.
  • CAZ Co-Investment Opportunities Fund, LP – VEP portfolio that invests with Vista Equity Partners. Vista Equity Partners is an investment firm that focuses exclusively on enterprise software.
  • CAZ Distressed Secondary Fund, LP, which invests in Dorchester Capital Secondaries III, LP Dorchester Capital is a Houston-based hedge fund.
  • CAZ Energy Infrastructure Fund, LP, which invests in the EnCap Energy Infrastructure Fund, LP EnCap Investments LP, which manages the EnCap Energy Infrastructure funSUMOd, is a venture capital company for independent energy companies.

CAZ Investments has invested directly or indirectly in the well-known companies and funds shown in the picture below.

CAZ Representative Investments

CAZ’s Portfolio & Top 10 Holdings

During the period that CAZ filed the last 13F filing, the Fund initiated and discarded the following entries:

New purchases:

  • Sprott Inc (SII)
  • Sixth Street Specialty Lending Inc. (TSLX)
  • Owl Rock Capital Corp (ORCC)
  • Ares Capital Corp (ARCC)

New sales:

  • Aberdeen Standard Platinum ETF (PPLT)

CAZ’s portfolio is fairly concentrated, comprising just 30 individual stocks, of which the top 10 account for almost 86% of the total. The fund’s largest single holding is Lyft, which accounts for around 37.4% of the total portfolio.

Source: f13 documents, author

In terms of industry exposure, financials and consumer discretion (including the Lyft stake) combined make up 86% of the total portfolio due to the limited number of stocks held.

Source: 13F documents, author

The 10 most important holdings of CAZ are as follows:

Lyft (LYFT):

By far the fund’s largest investment is its $ 25.2 million stake in Lyft, which currently represents 37.4% of CAZ’s total public holdings. It’s also worth noting that CAZ has no interest in Uber, which would have been a sensible choice in terms of diversification. CAZ’s position has remained relatively stable since the company’s IPO, which is a strong belief towards the transportation giant.

CAZ’s bet is quite risky as the company is still facing financial problems and there is no clear way how to get a positive result. During the fourth quarter, the company recorded sales of $ 569 million, a decrease of -44% year over year as the ongoing pandemic reduced consumer demand for transportation. In this regard, the company is under extreme pressure as its growth has been completely wiped out. Revenue per active driver increased 14% compared to the third quarter.

However, the company was still seeing -51% fewer trips compared to last year, suggesting it is still a long way from meeting pre-pandemic trip volume, let alone getting a positive result. Because of this, investors shouldn’t expect a Lyft dividend anytime soon.

On the other hand, the company’s future may not be entirely dark. The recovery in ridesharing is continuing, albeit a long way from pre-pandemic levels. Additionally, Lyft’s contribution margin (earnings metric per trip) was nearly 55.5%, which means the company has great prospects of becoming profitable if it gets a sufficient number of monthly trips.

The company ended the year with $ 2.25 billion in cash ($ 2.45 billion in the third quarter) in terms of liquidity, which should help offset some additional short-term losses before the company needs further increases. However, this should only take a few years. From this point on, investors should expect further dilution.

Overall, Lyft remains a risky investment. Together with its colleague Uber (UBER), the company is facing increased checks of driver / driver rights and increased pressure from local authorities. The duo recently received a reprieve in California. According to media reports, the order to classify its drivers as employees rather than contractors has been delayed. Nevertheless, the regulation remains very fluid and could easily become in favor of or hostile to driver-sharing companies.

CAZ’s bold bet could result in massive losses or potentially massive gains in the future. While positive catalysts remain, the stock is also in a fairly speculative position. At the time of CAZ’s last 13F filing, Lyft’s position remained stable.

Short-term ETFs

At the time of the last 13F filing, CAZ held three different ETF positions in short-term funds and shifted its capital allocation from its tech holdings to highly liquid assets, with a possible correction expected soon.

These include:

  • Janus Henderson Short Duration Income ETF (VNLA)
  • JPMorgan Ultra-Short Income ETF (JPST)
  • Blackrocks iShares Ultra Short-Term Bond ETF (ICSH)

The 3 ETFs together take up almost 30% of the fund portfolio.

Invesco (IVZ), JP Morgan Chase & Co (JPM) and The Blackstone Group (BX)

Invesco, JPMorgan Chase & Co and The Blackstone Group own approximately 5.4%, 3.1% and 2.0% of the CAZ portfolio, respectively. Invesco’s position was reduced by only 1% while the other two holdings remained intact. Still, they moved into CAZ’s largest positions as the fund trimmed its previously higher positions. A shift to higher exposure to financials appears to be a cautious move for CAZ as the sector currently remains quite undervalued relative to its historical valuation multiples.

The three companies delivered robust results with strong results in the fourth quarter. Should these gains ultimately lead to higher stock prices, CAZ should benefit significantly.

Stryker Corp (SYK):

With a position of just over $ 2 million, Stryker Corp is CAZ’s sixth largest holding and the only notable holding in the healthcare sector, accounting for approximately 3.2% of its portfolio. CAZ kept its position stable compared to the previous quarter. Meanwhile, Stryker reported a brilliant 2020 fiscal year with $ 1.6 billion in profits as its essential medical devices are paramount in the current environment. In a great year, stocks are currently trading near all-time highs, around $ 243 / share.

PayPal (PYPL)

PayPal is CAZ’s eighth-largest position and the largest fintech holding and accounts for around 2.2% of the total portfolio. The pandemic increased the need for online payments and increased PayPal’s network of users and the total number of transactions to new highs. Annual sales thus reached a new record of US $ 21.45 billion.

PayPal is a mega-cap stock with a market capitalization of over $ 200 billion.

Net income was the highest in the company’s history at $ 4.20 billion, while maintaining robust margins. The constant and growing performance of PayPal makes it a very attractive choice in the technology space. However, investors should be wary of the stock’s current valuation, which is well above its historical level and 53.3 times its future earnings.

CAZ held the position stable during the quarter.

iShares MSCI Emerging Markets ETF (EEM)

Around 2.1% of CAZ’s portfolio is invested in the emerging market ETF from iShares. The position was reduced by 39% in the quarter. With US markets arguably overvalued, it makes sense for CAZ to look for more attractively priced securities, possibly overseas. The fund is also a great diversification tool holding some international blue chips such as Alibaba (BABA), Tencent (TCEHY) and Taiwan Semiconductor Manufacturing (TSM).

The ETF is currently trading around 0.85% higher than its net asset value (NAV), so investors should be careful not to overpay for their assets.

Final thoughts

CAZ Investments’ value proposition is to give investors access to opportunities that they would otherwise not have. As a result, the company is committed to partnering with world-class private equity, venture capital and hedge funds to provide the best opportunities for its clients.

The company’s February 2021 13F filing reveals that it has only invested ~ $ 67 million in individual stocks excluding ETFs. This is less than 5.0% of the company’s assets.

You can download an Excel spreadsheet with metrics relevant to the current 13F holdings of CAZ Investments:

Additional resources:

37 Lone Pine Capital’s equity portfolio: Top 10 of the analyzed investments

20 Slate Path Capital Stock Portfolio: Top 10 stocks analyzed

534 Athanor Capital’s equity portfolio: Top 10 analyzed holdings

75 Viking Global Stock Portfolio: Top 10 stocks analyzed

26 Akre Capital’s equity portfolio: Top 10 holdings analyzed

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