This article is first in a series that provides an ongoing analysis of the changes made to Glenn Greenberg's US stock portfolio on a quarterly basis. It is based on Greenberg's regulatory 13F Form filed on 08/14/2013. Glenn Greenberg co-founded Chieftain Capital Management in 1984 and posted annual returns averaging 18% until 2010 when the firm was split into two entities as a result of conflict among partners. The original firm was renamed Brave Warrior Advisors while co-founder John Shapiro, and partners Tom Stern and Joshua Slocum launched a new investment firm that retained the Chieftain name. Brave Warrior follows the same investment philosophy as Chieftain: a value-investing style that focuses on holding a small number of high-conviction long stock positions. The average number of positions in his portfolio over the years has been around 12 and he generally invests upwards of 5% per security. It is not uncommon to have an allocation of over 20% to a single security. With respect to stock selection, the focus is on seeking out "good businesses" (consistently strong cash-flow generation along with a support system of capable management able to smartly allocate capital) that are immune to macro factors and are selling for a "low price" (discounted cash flow model should reveal a large margin of safety to qualify).
This quarter, Greenberg's US long portfolio increased around 14% from $1.90B to $2.16B. The number of holdings decreased from 12 to 11. The top three holdings represent over 50% of the portfolio while the top-five exceeds two-thirds of the value of the entire portfolio. The largest holding is Valeant Pharmaceuticals (VRX) which has been in the portfolio since Q1 2011 and now accounts for 26.53% of the portfolio.Stake Disposals:
US Bancorp (USB): USB was a 3.14% of the US long portfolio position that was disposed of this quarter at prices between $32 and $36. The first purchase happened in Q4 2012, but the vast majority was bought last quarter at prices between $32.75 and $34.40. The stock currently trades at $37. The quick turnaround indicates a bearish bias.New Stakes:
Google Inc. (GOOG): GOOG was a ~8% position purchased in Q1 2010 at prices between $525 and $602. The stake was increased substantially in 2011 and 2012. By Q2 2012, GOOG was the largest stake at 15.85% of the portfolio and the share count stood at around 386K. Since then, the stake has been trimmed. This quarter, the position was reduced substantially to a 5.33% position at prices between $765 and $915. Greenberg is harvesting the large gains from this position.
Fiserv Inc. (FISV): FISV has been in the portfolio since Q2 2010. The original position was purchased at prices between $50 and $54.40. The position size peaked at over 2.2M shares in Q2 2012 and since then has been trimmed. This quarter, the stake was reduced by 22% to a 4.54% of the US long portfolio position at prices between $81 and $91. Here again, Greenberg is harvesting large gains from the position.
Higher One Holdings Inc. (ONE): ONE has been in the portfolio since Q1 2012. The original position was a 6.5M share stake established at prices between $15 and $18. The position was trimmed marginally this quarter at prices between $8.75 and $11.75 to a 3.41% stake. The minor stake reduction does not indicate a clear bias.Stake Increases:
Valeant Pharmaceuticals : VRX is Greenberg's largest position at 26.53% of the US long portfolio. The stake was increased marginally this quarter at prices between $71.50 and $92 following a pattern of purchases over numerous quarters. The original position consisted of ~2.4M shares purchased in Q1 2011 at prices between $28.50 and $53.25 and the current position stands at ~6.7M shares. The stock currently trades at around $104. Greenberg is very bullish on VRX and his average cost-basis is very low.
VistaPrint N V (VPRT): VPRT is Greenberg's second largest position at 13.15% of the US long portfolio. The position was increased marginally this quarter at prices between $33.50 and $48.50. The stock currently trades at $56. The original stake consisted of ~2M shares purchased in Q4 2011 at prices between $27 and $36. The position currently stands at 5.75M shares. The large position size indicates a clear bullish bias.
Express Scripts Holding (ESRX): ESRX is a ~12% of the US long portfolio stake that was first purchased in Q4 2012 at prices between $50 and $65. The position was more than doubled last quarter at prices between $53.30 and $59. The stake was marginally increased this quarter as well. The stock currently trades just outside those ranges at $65.43. Greenberg is very bullish on ESRX.
Halliburton (HAL): HAL is a 8.49% of the US long portfolio stake that was increased by roughly two times this quarter at prices between $37 and $45.50. The original stake was established last quarter at prices between $34.50 and $43.50. The stock currently trades at $46.82. The aggressive stake build-up indicates a clear bullish bias.
Primerica Inc. (PRI): PRI is a 5.78% of the US long portfolio position first established in Q3 2011. The original stake consisted of ~1.3M shares and has since been built-up over the ensuing quarters to a ~3.3M share position. This quarter, the pattern continued, as the position was increased by ~10% at prices between $31.50 and $37.50. The stock currently trades outside that range at around $40. Greenberg is sitting on large gains from this position.
Comcast Corporation (CMCSA): CMCSA is a 5.69% of the US long portfolio stake that is a remnant of a huge $1.4B activist stake built in the 2005-2006 timeframe (under Chieftain Capital Management). The activism revolved around calls to replace Comcast CEO Brian Roberts over management missteps and failure to increase shareholder value. That plan did not succeed but they were instrumental in the company initiating a 25c annual dividend in early 2008. The position was marginally increased this quarter. The activity, although very minor, is going against a consistent pattern of periodic trimming that started in 2008. The stock currently trades at around $44, more than double his average cost-basis.
Charles Schwab Corporation (SCHW): SCHW was a 4.67% of the US long portfolio stake established in Q3 2012 at prices between $12.50 and $14.50. It has since been built up to a 9.20% stake by incremental purchases over the following quarters. This quarter, the position was increased by ~7% at prices between $16.20 and $21.20. The stock currently trades at $22.
Oracle Corporation (ORCL): ORCL was a small 2.14% position established in Q4 2011 at prices between $22.50 and $33.75. The stake has since been built-up over the following quarters to a large 9.18% position. This quarter, the position was increased by ~25% at prices between $30 and $35.10. The stock currently trades at $33.57. The aggressive stake build-up indicates a clear bullish bias.
The spreadsheet below highlights changes to Greenberg's US stock holdings in Q2 2013: