WWII 120: What the Gurus are Buying and Selling Now
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Main Topic: What the Investment Gurus are Buying and Selling Now
If you recall, in episode 82 about Idea Generation, I pointed out that following investment gurus by a method called coat-tailing was the quickest and easiest way to get started generating ideas to research.
One of the ways to find these ideas is to peruse the 13-F filings for these gurus via the Edgar database on the SEC website, a tool I discussed in episode 16 of the podcast.
I also laid out some ideas that I discovered on various 13-Fs in a number of episodes:
- Episode 23 about Seth Klarman and Baupost Group
- Episode 29 about Warren Buffett's personal portfolio
- Episode 35 about Bill Gates personal portfolio
- Episode 44 about Carlo Cannell the King of Small-Cap
- Episode 46 about Ruanne Cunniff and the Sequoia Fund
- Episode 53 about Michael Price
- Episode 60 about Mason Hawkins
- Episode 76 about David Dreman
On this episode, I use one of my favorite websites GuruFocus.com, which I talked about in episode 19, to find some high quality ideas to research. Let's find out what the investment gurus are buying and selling now.
GuruFocus.com makes it easy to discover new Guru ideas through their menu item "Gurus." Just click on it and select menu item "Latest Guru Picks" and you are off and running.
Lets start with Mason Hawkins of Southeastern Asset Management. He has been adding ticker symbol $PK recently. This company is Park Hotels & Resorts, Inc. Park Hotels & Resorts Inc is a lodging real estate company. It portfolio consists of approximately 67 premium-branded hotels and resorts with over 35,000 rooms located in prime United States and internationally. So Mason has found a REIT that he likes that is selling for less than book value and slightly less than 2x Free Funds from Operations, which is a cash flow measure used by REITS.
Moving on the Seth Klarman, Baupost Group has been buying $ATRA a company called Atara Biotherapeutics. The company's focus lies on developing therapies addressing serious-life threatening diseases in the United States. This doesn't surprise me because Baupost has developed a bit of an expertise in this type of company. I had read about one of their other holdings that was basically a company whose only assets were patents on drugs and therapies. Seth is also selling $CASC Cascadian Therapeutics Inc, which is going through a buyout currently.
Lets continue with an idea from Carl Icahn, the master activist investor. Uncle Carl is buying $NWL Newell Brands Inc which is engaged in the household products market. Its products include stationery material such as pens and markers, food storage products and hygiene systems. Newell Brands appears to be selling at a very low multiple of earnings and book value, but we need to be careful about these metrics. Companies have been writing down or writing up the value of tax assets and liabilities, temporarily impacting earnings. The company is actually selling at 20x normalized earnings, not the 5x earnings the website is showing.
Leucadia National has been buying $FRGI Fiesta Restaurant Group recently. Fiesta Restaurant Group Inc owns two fast-casual restaurant brands: Pollo Tropical, which offers Caribbean-inspired food, and Taco Cabana, which offers Mexican food. Collectively, the company owns and operates more than 300 restaurants in the southern United States. Roughly three quarters of all Pollo Tropical restaurants are located in Florida. Taco Cabana restaurants are located almost exclusively in Texas. The company also franchises restaurants in Central and South America, which account for a very small portion of total company revenue. $FRGI is selling for more than 2x book and 19x normalized earnings of $1 per share. The P/E multiple isn't showing because last years earnings were negative so the ration can't be calculated.
Bill Nygren of the Oakmark Fund has been buying $CVS, and idea I suggest everyone take a look at. I have been pondering $CVS for a while now but haven't pulled the trigger yet. CVS Health Corp. CVS Health has vertically integrated one of the largest retail pharmacy chains in the United States with one of the largest pharmacy benefit managers. This combination makes it one of the premier healthcare firms in the U.S. The company processes approximately 1.3 billion prescriptions per year and operates more than 10,000 retail pharmacies across the U.S. The firm is now seeking to acquire Aetna, which will further extend its vertical reach and create the most integrated healthcare player in the U.S. Bill is selling $JPM, $WHR, and $DLPH.
Tweedy Brown has been buying $WPP. Headquartered in the U.K., WPP is the world's largest ad holding company, based on annual revenues. WPP's services, which include traditional and digital advertising, public relations, and consulting, are provided worldwide, with over 70% of its revenue coming from more developed regions such as the North America, U.K., and Western Europe. This idea also had some impact to earnings, so calculate your own multiples on this one.
Lou Simpson, who used to work at Berkshire Hathaway, started his own fund called SQ Advisors, LLC and has been buying $CHTR Charter Communications. Charter Communications Inc is the fourth- largest cable company in the United States. The firm provides television, Internet access, and telephone services to 5.5 million subscribers in 29 states. Charter was founded in 1999 through a series of small cable system acquisitions. Charter Communications, the firm that is publicly traded, owns nearly 50% of Charter Communications Holding Company, which owns the cable assets.
DISCLOSURES: I/We are Long LUK, JPM, WHR
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I understand that your strategy when markets are at all time highs is to hold 30% cash and slowly deploy that cash as markets correct. I wonder if its more efficient to be fully invested but allocate a smaller portion of the portfolio into put options as insurance. Have you considered this approach before and if yes, how would be a good way to implement it ?
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