Day: February 29, 2012

On Fourth Quarter 13Fs

On Fourth Quarter 13Fs

I often look through 13F filings to get investment ideas.? The last time I did it, one of my readers asked a question like this:

It?s nice to see how large the positions are of the investors that you track, but wouldn?t it be better to track the changes in positions?? After all, new allocations are more indicative of better value than older holdings.

That?s probably correct, though for my own investing it might not be as accurate, because I rank current positions against challengers ? my current positions have to justify their existence to stay in the portfolio.

But I thought it would be worth trying to do that, and also do it as a percentage of each stock?s market capitalization.

Now, there are difficulties in doing an analysis like this:

  • CUSIP changes
  • M&A (takeovers, spinoffs
  • CUSIP formats (some managers make it difficult to read)
  • Deliberately difficult formatting
  • One firm fills out the from wrong, swapping fields
  • Multiple holders within a given firm
  • You have to create a CUSIP/ticker database (paid my 13-year old assistant $50 to do that.)
  • In short, a lot of data scrubbing.

Now the results of looking at 13Fs can be valuable, and there is a small cottage industry doing so.? Mebane Faber has done good work with this, as has Insider Monkey, Manual of Ideas and Street of Walls.? Following the ideas of some of the best investors leads to better returns, even if there is a lag involved.

And the lag doesn?t matter much.? Most of these investors invest for years not months, so if you get a signal it should be valid for some time after it is received.

Anyway, I calculated the positions for 74 investors that I have some respect for (listed at the bottom).? My objective is to look at them as a group.? For the most part, I don?t care which of them is investing in a given company.

Following this are a variety of tables with some commentary on what might be going on.? I think you might find some valuable ideas in the companies where ?there are large additions or holdings as a proportion of market capitalization.

Tables

Stocks with the most new investors:

New Ticker Name

9

DLPH Delphi Automotive PLC

6

LVLT LEVEL 3 COMMUNICATIONS INC

6

LMCA LIBERTY MEDIA CORP NEW

5

ORCL Oracle Corp

4

TRIP TRIPADVISOR INC

4

KORS MICHAEL KORS HLDGS LTD

3

BAC BANK OF AMERICA CORP

3

CVX CHEVRON CORP NEW

3

DELL Dell Inc

3

EP EL PASO CORP

3

VRUS PHARMASSET INC

3

TDC TERADATA CORP

 

Stocks that had the most investors increase positions (including new owners):

Increased Ticker Name

15

GOOG GOOGLE INC.

9

DLPH Delphi Automotive PLC

9

AAPL APPLE INC

8

ORCL Oracle Corp

7

LMCA LIBERTY MEDIA CORP NEW

7

C CITIGROUP INC

7

LOW LOWES COS INC

7

PEP PEPSICO INC

7

MSFT MICROSOFT CORP

7

V Visa Inc-Class A Shares

6

LVLT LEVEL 3 COMMUNICATIONS INC

6

INTC Intel Corporation

6

SYY SYSCO CORP

 

Stocks that have the most owners at the end of the fourth quarter:

Owned Ticker Name

22

GOOG GOOGLE INC.

21

MSFT MICROSOFT CORP

17

AAPL APPLE INC

14

CSCO CISCO SYS INC COM

14

WMT WAL-MART STORES INC

14

WFC WELLS FARGO & CO NEW

13

JNJ JOHNSON & JOHNSON

12

ORCL Oracle Corp

12

C CITIGROUP INC

12

MA Mastercard Inc – Class A

11

BAC BANK OF AMERICA CORP

11

BRK.B BERKSHIRE HATHAWAY INC-CL B

11

BRK.A BERKSHIRE HATHAWAY INC-CL A

 

Stocks with the most selling out entirely (including M&A-related):

Sold Ticker Name

6

EXPE Expedia Inc.

6

LVLT Level 3 Communications

5

C CITIGROUP INC

5

SINA SINA CORP

5

Acquired NALCO HOLDING COMPANY

4

EBAY EBAY INC

4

CVI CVR Energy Inc

4

CCE COCA COLA ENTERPRISES INC NE

3

LINTA LIBERTY INTERACTIVE CORP-A

3

CVS CVS CAREMARK CORPORATION

3

AMZN AMAZON COM INC

3

VIAB Viacom Inc Cl B

3

EXC Exelon Corp

3

DVN DEVON ENERGY CORPORATION

3

COV COVIDIEN PLC

3

XOM EXXON MOBIL CORP

3

MOS The Mosaic Company

3

RL RALPH LAUREN CORP

3

IRM IRON MTN INC

3

HFC HOLLYFRONTIER CORP

3

GR GOODRICH CORP

3

CTXS CITRIX SYS INC

3

Acquired CEPHALON INC

3

ELNK EARTHLINK INC

3

TIN TEMPLE INLAND INC

 

Stocks with the most decreases in positions (including selling out in entire):

Decreased Ticker Name

12

MSFT MICROSOFT CORP

10

WFC WELLS FARGO & CO NEW

10

C CITIGROUP INC

8

BAC BANK OF AMERICA CORP

8

PFE PFIZER INC

8

EBAY EBAY INC

8

NWSA NEWS CORP

8

LINTA LIBERTY INTERACTIVE CORP-A

7

AAPL APPLE INC

7

CSCO CISCO SYS INC COM

7

WMT WAL-MART STORES INC

7

BRK.B BERKSHIRE HATHAWAY INC-CL B

7

CVS CVS CAREMARK CORPORATION

7

DELL Dell Inc

7

AON AON CORP

7

AMZN AMAZON COM INC

7

EXPE Expedia Inc.

 

With a few exceptions, the above reads like lists of common large cap stocks, with a few midcaps thrown in.? It doesn?t look that much different when the lists are done by dollar amount of change.? But what if we do this as a fraction of market capitalization?

(Please note, the 13F filings measure as of 12/31/2011, and my market caps are from mid-February.? That induces some distortion, but I don?t think that much.? Also note that large holdings as aproportion of market cap often come from one hedge fund and not necessarily many.

Here is a list of new purchases, in declining order of percentage of market capitalization:

New Ticker Name

16.50%

TRGT TARGACEPT INC

15.02%

DLPH Delphi Automotive PLC

10.73%

CMVT COMVERSE TECHNOLOGY INC

10.54%

NTK NORTEK INC

7.54%

ARO Aeropostale Inc

6.41%

MTG MGIC INVT CORP WIS

6.21%

HII HUNTINGTON INGALLS INDS INC

5.76%

IRE Bank of Ireland

5.64%

TRIP TRIPADVISOR INC

5.08%

LMCA LIBERTY MEDIA CORP NEW

4.75%

AVY Avery Dennison

4.58%

SEMG SEMGROUP CORP

4.41%

VPRT VISTAPRINT N V

4.25%

MPC MARATHON PETROLEUM CORP

3.92%

CSTR COINSTAR INC

3.49%

SBH SALLY BEAUTY HLDGS INC

3.44%

KMT Kennametal Inc.

3.34%

SIRO Sirona Dental Systms

3.18%

EP EL PASO CORP

3.10%

HGG HHGREGG INC

3.06%

CVI CVR Energy Inc

3.04%

NTAP NETAPP INC

 

Here is a list of position increases, including new purchases, in declining order of percentage of market capitalization:

Increased Ticker Name

16.50%

TRGT TARGACEPT INC

15.02%

DLPH Delphi Automotive PLC

10.77%

CP CANADIAN PAC RY LTD

10.73%

CMVT COMVERSE TECHNOLOGY INC

10.54%

NTK NORTEK INC

8.55%

WBMD WEBMD HEALTH CORP

7.54%

ARO Aeropostale Inc

6.57%

NAV Navistar International Corp

6.41%

MTG MGIC INVT CORP WIS

6.21%

HII HUNTINGTON INGALLS INDS INC

5.76%

IRE Bank of Ireland

5.74%

AVY Avery Dennison

5.64%

TRIP TRIPADVISOR INC

5.19%

LMCA LIBERTY MEDIA CORP NEW

4.58%

SEMG SEMGROUP CORP

4.48%

EPAX Ambassadors Group Inc.

4.44%

CBG CBRE GROUP INC

4.42%

CSTR COINSTAR INC

4.41%

VPRT VISTAPRINT N V

4.25%

MPC MARATHON PETROLEUM CORP

4.08%

PCLN PRICELINE COM INC

 

Here is a list of position decreases, including total sales, in declining order of percentage of market capitalization:

Decreased Ticker Name

-17.83%

VGR VECTOR GROUP LTD

-13.66%

EMMS EMMIS COMMUNICATIONS CORP

-10.43%

DIOD DIODES INC

-9.12%

CLX Clorox Co

-9.02%

NEWP NEWPORT CORP

-8.93%

IWM ISHARES TR

-8.61%

EXPE Expedia Inc.

-6.86%

GEN GENON ENERGY INC

-6.60%

PANL UNIVERSAL DISPLAY CORP

-6.43%

LVLT GLOBAL CROSSING LTD

-6.32%

AAMRQ AMR Corp

-6.22%

NIHD NII HLDGS INC

-6.15%

CVI CVR Energy Inc

-6.03%

AMED AMEDISYS INC

-5.85%

CIS CAMELOT INFORMATION

-5.60%

SINA SINA CORP

-5.46%

CQB CHIQUITA BRANDS INTL INC

-5.44%

STE STERIS CORP

-5.37%

CJES C&J ENERGY SERVICES INC

-5.30%

PDLI PDL BIOPHARMA INC

 

Here is a list of positions sold out in entire, in declining order of percentage of market capitalization:

Sold Ticker Name

-17.83%

VGR VECTOR GROUP LTD

-13.66%

EMMS EMMIS COMMUNICATIONS CORP

-10.43%

DIOD DIODES INC

-9.08%

CLX Clorox Co

-9.02%

NEWP NEWPORT CORP

-7.41%

EXPE Expedia Inc.

-6.60%

PANL UNIVERSAL DISPLAY CORP

-6.56%

IWM ISHARES TR

-6.43%

LVLT GLOBAL CROSSING LTD

-6.32%

AAMRQ AMR Corp

-6.22%

NIHD NII HLDGS INC

-6.03%

AMED AMEDISYS INC

-5.85%

CIS CAMELOT INFORMATION

-5.60%

SINA SINA CORP

-5.27%

CQB CHIQUITA BRANDS INTL INC

-5.10%

CVI CVR Energy Inc

-4.97%

IT GARTNER INC

-4.90%

ACFC Atlantic Coast Financial Corp

-4.73%

BIDZ BIDZ.com Inc.

-4.55%

CVC CABLEVISION SYS CORP

-4.52%

SAFM SANDERSON FARMS INC

-4.32%

LEA LEAR CORP

-4.31%

TIN TEMPLE INLAND INC

-4.05%

WGO WINNEBAGO INDS INC

 

Holdings by Total Dollar Amount at the end of the Fourth Quarter

Held Ticker Name
? 15,763,863,000 KO COCA COLA COMPANY
? 13,896,920,000 WFC WELLS FARGO & CO NEW
? 11,801,570,000 IBM INTERNATIONAL BUSINESS MACHS
???? 7,498,749,000 AXP AMERICAN EXPRESS CO
???? 7,124,564,000 PG PROCTER & GAMBLE CO/THE
???? 5,561,149,000 WMT WAL-MART STORES INC
???? 4,965,749,000 KFT KRAFT FOODS INC-CLASS A
???? 4,828,136,000 MSFT MICROSOFT CORP
???? 4,720,375,000 GOOG GOOGLE INC.
???? 4,539,055,000 NWSA NEWS CORP
???? 4,504,224,000 AAPL APPLE INC
???? 4,007,205,000 HPQ HEWLETT PACKARD CO
???? 3,387,821,000 MSI MOTOROLA SOLUTIONS INC
???? 3,285,855,000 GLD SPDR GOLD TRUST
???? 3,261,413,000 GSK GLAXOSMITHKLINE PLC-SPON ADR
???? 3,137,451,000 JNJ JOHNSON & JOHNSON
???? 3,106,083,000 USB US BANCORP DEL
???? 3,089,445,000 FDX FEDEX CORP
???? 2,986,973,000 COF CAPITAL ONE FINANCIAL CORP
???? 2,869,898,000 EP EL PASO CORP
???? 2,836,729,000 IEP ICAHN ENTERPRISES LP
???? 2,809,578,000 SLB Schlumberger Ltd
???? 2,807,657,000 NVS NOVARTIS AG-ADR
???? 2,776,985,000 BK BANK OF NEW YORK MELLON CORP
???? 2,762,244,000 COP CONOCOPHILLIPS
???? 2,704,595,000 PEP PEPSICO INC
???? 2,620,576,000 CMCSA COMCAST CORP-CLASS A
???? 2,618,651,000 PFE PFIZER INC
???? 2,524,873,000 DELL Dell Inc
???? 2,475,713,000 GE GENERAL ELECTRIC CO
???? 2,321,383,000 OXY OCCIDENTAL PETE CORP DEL
???? 2,314,288,000 TWX TIME WARNER INC
???? 2,290,333,000 MRK MERCK & CO. INC.
???? 2,252,588,000 AON AON CORP
???? 2,246,712,000 DTV DIRECTV-CLASS A
???? 2,205,486,000 PCLN PRICELINE COM INC
???? 2,166,225,000 MMI MOTOROLA MOBILITY HLDGS INC
???? 2,124,678,000 SNY SANOFI-ADR
???? 2,075,367,000 QCOM QUALCOMM INC

 

And the greatest holdings by percentage of market capitalization:

Held/MC Ticker Name

73.30%

IEP ICAHN ENTERPRISES LP

71.98%

BAGL EINSTEIN NOAH REST GROUP INC

69.22%

HRG HARBINGER GROUP INC

65.92%

FDML FEDERAL MOGUL CORP

51.38%

SPB SPECTRUM BRANDS HLDGS INC

46.89%

ARII AMERICAN RAILCAR INDS INC

40.88%

CDCO Comdisco Holding

38.77%

NOA NORTH AMERN ENERGY PARTNERS

37.92%

DYN DYNEGY INC DEL

36.46%

BFLY BLUEFLY INC

32.11%

LEAP LEAP WIRELESS INTL INC

29.37%

QUAD QUAD / GRAPHICS INC

29.34%

TXI Texas Industries Inc.

28.92%

BIOF BIOFUEL ENERGY CORP

27.83%

ENZN ENZON PHARMACEUTICALS INC

27.56%

HPP HUDSON PAC PPTYS INC

27.54%

BKU BANKUNITED INC

27.54%

OSTK OVERSTOCK COM INC DEL

27.35%

SIX SIX FLAGS ENTMT CORP NEW

26.41%

DIN DINEEQUITY INC

26.27%

WPO Washington Post

26.04%

LORL LORAL SPACE & COMMUNICATNS INC

25.12%

LGF LIONS GATE ENTMNT CORP

25.00%

VSAT VIASAT INC

24.85%

JEF JEFFERIES GROUP INC NEW

24.71%

INS INTELLIGENT SYS CORP NEW

24.59%

LVLT LEVEL 3 COMMUNICATIONS INC

24.21%

ZLC ZALE CORP NEW

23.40%

ABH ABITIBIBOWATER INC

23.19%

CTO Consolidated Tomoka Land Co

22.71%

XCO EXCO RESOURCES

22.34%

THRX THERAVANCE INC

22.28%

MLI MUELLER INDS INC

21.96%

MSI MOTOROLA SOLUTIONS INC

21.49%

SNBC Sun Bancorp Inc

 

I appreciate the analysis as a portion of market capitalization, because it reflects the limitations of what managers can do.? Again, I will look most closely at current holdings and additions as a proportion of market capitalization.

Investor list:

  • Akre
  • Altai
  • Ancient Art
  • Appaloosa
  • Atlantic
  • Bares
  • Baupost
  • Blue Ridge
  • BP Capital (Pickens)
  • Brave Warrior
  • Breeden
  • BRK
  • Capital Growth
  • Centaur
  • Centerbridge
  • Chou
  • Coatue
  • Dodge & Cox
  • Dreman
  • Eagle Capital
  • Eagle Value
  • Edinburgh
  • Fairfax
  • Farallon
  • Fiduciary
  • Force
  • FPA
  • Gates
  • Glenview
  • GoldenTree
  • Greenhaven
  • Greenlight
  • H Partners
  • Harbinger
  • Hawkshaw
  • Hayman
  • Hound
  • Hovde
  • Icahn
  • Invesco Private
  • Jana
  • Jensen
  • Joho
  • Lane Five
  • Leucadia
  • Lone Pine
  • M3F
  • Markel
  • Matrix
  • Maverick
  • MHR
  • Montag
  • MSD
  • Muhlenkamp
  • PabraI
  • Parnassus
  • Passport
  • Paulson
  • Pennant
  • Perry
  • Pershing Square
  • Sageview
  • Scout
  • Soros
  • Southeastern
  • Third Point
  • Tiger Global
  • Tweedy Browne
  • ValueAct
  • Viking
  • Weitz
  • West Coast
  • Wintergreen
  • Yacktman

 

Full disclosure: Long WMT, ORCL, INTC, VOD, HPQ, COP, Short SPY

Notes on the 2011 Berkshire Hathaway Annual Report, Part 3 (On Acquisitions)

Notes on the 2011 Berkshire Hathaway Annual Report, Part 3 (On Acquisitions)

Though part of a series, this post is different.? I went back through the last 35 years of shareholder letters to analyze Buffett’s approach to acquisitions.? As Charlie Munger has said, Buffett is scary smart.? I say this because he adjusted through many different eras, while running a business that was part conglomerate, part closed-end fund.

In some ways the early years were different — more arbitrage, public investments take up more time in the shareholder letter.? But what I find fascinating is that from the earliest days, it didn’t matter to Buffett whether he owned whole businesses, or parts of them.

Part of this feeds off of Felix Salmon’s recent piece on acquisition language, where he contrasts tuck-ins and bolt-ons, correctly concluding that the difference is only one of size, even though that is an informal distinction.

But since the ’80s Buffett has always talked about acquisitions. Here’s a graph indicating Buffett’s use of the term acquisition(s):

 

You will note that his use of phrases like “tuck-in” and “bolt-on” occur only in the 2000s.? But the ideas were there long before that.? There were many cases in the ’90s, and to a lesser extent, the ’80s, where subsidiaries of BRK made acquisitions.? Buffett was always looking for ways to profitably deploy excess capital, and he knew that acquisitions facilitating organic growth was often far more effective than buying something totally new.? Buffett was doing tuck-in and bolt-on acquisitions for 15 years before he mentioned the terms.

Buffett always saw the public and private markets as being complementary.? He doesn’t care where he makes money; he just wants to make money.? Below there is a list of BRK acquisitions by year, with slight commentary.

One thing to understand about BRK is that full and partial ownership of private public businesses was always a part of the plan.? Growing out of a textile manufacturing business as a holding company, that should be obvious, as it should be when considering See’s Candies, BRK’s first acquisition.

Public and private, full and partial did not matter to Buffett.? He was simply interested in what could grow the intrinsic value of the the overall enterprise best, within the concept of a margin of safety.

1987-1989 was kind of an inbetween era for BRK, where Buffett would talk about his Sainted Seven private firms inside BRK, until he bought Borsheim’s in 1989, which gave him no good way to describe his private holdings with a simple moniker.

As it is, when he began doing more acquisitions, the 1991-1993 era included the “Shoe Group,” which was not among his finer moments.? But starting in 1995, with the purchase of the remainder of GEICO, is the start of the modern BRK.? Acquisitions become a regular part of the plan.? What makes that plain, was that post-1990 in years where BRK had no acquisitions, Buffett would discuss his theory on acquisitions for shareholders.? He did this because when there are few promising targets to invest in, it is usually a sign that valuations are stretched.

And in general, Buffett chose wisely with the private businesses.? Yes, there have been some that ended up being losers, or, not big winners, like the “Shoe Group,” and Scott & Fetzer’s untimely purchase of World Book, which was about to be obsoleted by Encarta, and then Wikipedia.

Buffett understood the need for sustainable competitive advantage.? He also knew how much he could afford to risk in acquiring private firms.? His “bite size” increased gradually until he could take down monsters like Burlington Northern.? He bought businesses that would be hard to obsolete.

One thing I found interesting about reading through the older letters of Buffett was that his ideas on acquisitions were developed early, long before BRK ceased to be predominantly a public company value investor, which is the way that many still regard BRK.

And as a result, it should be no surprise that as BRK grew, given Buffett’s desire for owning as much of great businesses as he could, that BRK became a conglomerate, albeit one dominated by its leading insurance businesses.

Though we can look at the different strategies employed by Buffett over the years, and see how some played a larger role early on like arbitrage and distressed investing, Buffett had a singular focus for the investments that offer decent returns in the size range that will make a difference for BRK investors.

Once BRK got big, that meant becoming a conglomerate, albeit a special one, was the logical outcome.? And I could be wrong, but that is the final corporate form for BRK.? There may come a day in a post-Buffett era when it may do many things, such as spin off companies, or centralize functions.? At present that won’t happen because BRK is the acquirer of choice for those that want to cash out, but don’t want the unique character of their organizations to change, which Buffett points at in the present Shareholders’ Letter as a unique competitive advantage.? BRK does not compete on price in acquisitions; it does compete by saying that unless something goes badly wrong, BRK will be more than happy to let the management do its thing.? It’s as if Buffett says, “Just make money, and send us back the excess.? If you have need of cash for promising opportunities, let us know.”

And then, it lets a thousand flowers bloom, and a thousand schools of thought contend, so long as you make money and grow the value of the business.? BRK is a unique business, and reflects the character of its founders (including Munger here).? No other large firm that I know of offers as much latitude to its operating units.

One final note: Buffett has also had a very good nose for sniffing out good insurance enterprises.? That’s the backbone of BRK.? It’s interesting to see over the years how he assembled the various pieces.? It would be interesting to see pre-1977 data on the insurance side, to look at how Buffett initially entered the insurance business, and transisted out of running a textile firm.

Tomorrow should have my final installment on BRK.? I will review the 10-K and provide commentary.

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