By Adam Barnett
Longview Asset Management is an employee owned Chicago-based investment manager, run by James Star. As their recent 13F filing indicates, the fund does indeed take a "long view," focusing on a small number of equity positions. Only four equity positions are reported in the current 13F, and these have been carried across from the prior quarter, although as we shall see some adjustments to the size of the fund's positions have been made. See the original 13F here, and discover the secrets of why it's important to pay attention to hedge fund sentiment on Insider Monkey.
Three out of four ain't bad
In the latest 13F, the fund's largest holding is in the aerospace and defense giant General Dynamics Corporation (NYSE:GD), with a 33,399,076 common stock stake worth about $2.3 billion at the time of filing, with no significant change in the size of the fund's holding from the prior quarter. Price action has been remarkably bullish in the past month, rising from a low of around $66 to $75.70 at the time of writing, a 52-week high. The company reported 2013 Q1 net earnings of $571 million, which work out to $1.62 per share on a diluted basis. This compares with net earnings of $564 million, or $1.57 per diluted share during the corresponding quarter of 2012. Its forward P/E Ratio is estimated at a value-friendly 11.12.
Longview's next most valuable holding is the Nasdaq listed pet-store retailer PetSmart (NASDAQ:PETM). According to the latest 13F, the fund has 6,653,008 shares worth approximately $413 million, a significant increase in stake from the prior quarter, when only 5,992,940 shares were held. Price action so far this year has been bullish, rising from a low of around $62 during January to $70.51 at the time of this writing. The company has yet to announce 2013 Q1 earnings, but has declared a dividend of 16.5 cents per share for this quarter, perhaps a promising sign.
According to the recent 13F, Longview holds a smaller stake in agricultural equipment manufacturer Alamo Group (NYSE:ALG), with the fund holding 1,700,100 shares worth about $65 million, carrying over a holding of the same size in the prior quarter. Net sales for 2013 Q1 were $158.4 million compared with net sales of $155.9 million for the corresponding 2012 quarter, a 2% increase. Earnings per share were $0.57 per diluted share, compared with $0.56 per diluted share for the prior year's corresponding quarter. YTD price action has been very bullish, rising from a low of about $34 in January to $43.23 at the time of writing. The P/E ratio is 18.01, and a forward P/E of 16.89 is particularly attractive.
By contrast with these high performers, Longview also holds a substantial stake in battery-maker Polypore (NYSE:PPO). The 13F states that Longview held 3,502,554 shares of Polypore common stock, worth approximately $$140.7 million, during the quarter. This is a slight fall from a holding of 3,520,699 in 2012 Q4. YTD Price action has not been attractive for PPO, with the stock hitting a 52-week high of $48.42 in January before selling off to $39.73 as of the time of this writing. The company also reported disappointing results for this quarter: net income was $9.0 million or $0.19 per diluted share, compared with $18.8 million or $0.40 per diluted share in the corresponding quarter of the prior year.
Longview's equity portfolio seems to reflect an investment philosophy of 'buy-and-hold'; the fund has maintained or increased all four of these positions over the past quarter, reflecting a long-term confidence in the prospects of these companies. The winning performance of ALG, PETM and GD seem to more than counterbalance the disappointment of PPO, although it is noteworthy that the fund has only made a small downward adjustment in its stake size for the 'loser.' Definitely an interesting portfolio for those with a 'long-view' attitude to stocks, rather than active traders (continue preparing for 13F-filing season here).