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Why Maverick Capital Just Bought Merit Medical (MMSI): A Hidden Winner for 2026 Rate Cuts
When Lee Ainslie’s Maverick Capital—a $7B+ long/short hedge fund known for sharp fundamental bets— initiated a brand-new position in Merit Medical Systems (NASDAQ: MMSI) during Q1 2025, it personally raised more questions than answers.
Primarily, what the heck is Merit Medical?
Maverick, one of my favorite funds to follow, doesn’t typically chase small/mid-cap medical device names unless there’s a well-defined catalyst or structural dislocation (i.e., a spin-off, major asset sale, etc..). So what gives? Here’s what could be driving this under-the-radar move—and why you might want to pay closer attention.
What Is Merit Medical (MMSI)?
MMSI is a mid-cap medtech firm (~$3.5B market cap) specializing in disposable devices for diagnostic and interventional procedures—especially in cardiology, radiology, oncology, and endoscopy. Its product suite spans catheters, embolization coils, drainage devices, and vascular access tools.
Key characteristics:
- High recurring revenue due to disposable nature of products
- Stable gross margins (~45–50%)
- Historically steady top-line growth (5–8%) with operating leverage over time
In short: a cash-generative, niche medtech compounder that isn’t flashy—but is predictable, which is presumably attractive when the macro backdrop is far from predictable.
Why Might Lee Ainslie Be Interested?
Here are the most plausible, data-backed reasons why Maverick Capital might’ve added a brand new position in MMSI:
1. MMSI Is a Classic Rate-Sensitive “Duration Asset”
Medical device names with consistent cash flows and mid-single-digit growth tend to re-rate higher when interest rate expectations point to gradual decline. With the Fed signaling rate cuts in late 2025 or early 2026, MMSI’s future cash flows become more valuable–especially in a low-beta, low-volatility medtech context. I will also briefly mention that while I am not the biggest proponent of technical analysis, in looking at MMSI’s chart during inflation-heavy 2022, it performed incredibly well, substantiating Ainslie’s interest in this particular firm during this particular period.
As bond yields fall, MMSI’s 2026–2030 growth looks cheaper on a DCF basis.
2. Operating Margin Expansion Story Is Underappreciated
MMSI has quietly been executing on gross margin expansion and SG&A leverage, with recent commentary pointing to 200+ bps margin expansion over the next 12–18 months. If this plays out, EPS could grow far faster than revenue—something fundamental-oriented hedge funds love to front-run.
From Q1 2025 call: “We continue to see scale efficiencies in our global supply chain. This should translate to meaningful margin improvement through 2026.”
Translation: You’re paying for a 6–7% grower, but might be getting a 15–20% EPS grower.
3. Acquisition Target Potential
MMSI operates in niche but attractive verticals—vascular access, embolics, and oncology intervention—which are highly complementary to larger medtech consolidators like BDX, BSX, or MDT. With a clean balance sheet, stable EBITDA, and <3.5x leverage, MMSI could easily be:
- Bought for strategic tuck-in synergy
- Valued on an EV/EBITDA takeout basis (~14–15x) vs. current 11–12x
Ainslie may be playing a long-shot M&A optionality angle that could get unlocked in a falling rate environment.
4. Strong Fundamental Setup vs. Weak Price Action
MMSI underperformed the broader medtech sector in 2023–2024 despite hitting most of its financial targets. That kind of setup—fundamentals outpacing price—is exactly what seasoned long/short managers look for.
Comparably underperforming chart + improving cash flow = quietly asymmetric upside.
The Maverick Angle
Maverick is known for:
- Data-driven investing
- Looking for underappreciated earnings inflection points
- Taking quiet, scalable positions ahead of consensus
In that context, MMSI checks all the boxes:
Stable recurring business
Margin upside inflection
Valuation gap vs. strategic value
Long-duration cash flow stream in a gradual rate-cutting setup
This may be a classic Maverick “value-with-a-catalyst” long, particularly attractive at a time when few are paying attention.
Final Thought: It’s Not Sexy—But It Doesn’t Need to Be
Lee Ainslie and co. obviously didn’t just throw a dart at MMSI. This is likely a conscious, risk-adjusted bet on margin expansion, macro tailwinds, and optionality—all wrapped in a low-drama medtech stock that could quietly re-rate higher as 2026 approaches.
Sometimes the best trades aren’t about hype—they’re about timing, asymmetry, and capital efficiency. MMSI may be just that kind of trade.
DISCLAIMER: This analysis of the aforementioned stock security is in no way to be construed, understood, or seen as formal, professional, or any other form of investment advice. We are simply expressing our opinions regarding a publicly traded entity.
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