This article is the first in a series that provides an ongoing analysis of the changes made to David Winters' US stock portfolio on a quarterly basis. It is based on Winters' regulatory 13F Form filed on 08/14/2013. David Winters founded Wintergreen Advisors, LLC in May 2005 after being with Mutual Series since 1987. As a Max Heine protégé, he is a member of a venerable group that also includes Seth Klarman and Michael Price among others. Wintergreen Fund is a value-oriented global mutual fund with market-beating returns since inception in 2005 - opting for a far more regulated mutual fund rather than a hedge fund raised some eyebrows and Winters explained it by saying "Mutual Fund is a truly democratic way. You can invest your friends' money. It is nice to be able to do a nice job for people who need the money." His value oriented investment style holds a concentrated global portfolio of stocks and sparingly uses shorting and hedging. Security selection is based on three basic elements: a) quantitative analysis to unearth stocks that are deeply undervalued, b) ensuring that any investment is backed by a management team focused on creating value for all shareholders, and c) international scope that ensures global diversification of currencies and free cash flows.
The mutual fund (WGRNX) has a global orientation and the US allocation is at 36% of the overall portfolio. The largest two investments are a 9% allocation in Jardine Matheson Holdings (JMHLY) and a 7.6% allocation in Swatch Group (SWGAY). The former is a Singapore listed conglomerate focused on the growing Asian consumer and the latter is a Switzerland based manufacturer of watches, jewelry, and accessories.
This quarter, Winters' US long portfolio increased marginally from $906M to $918M. The number of holdings increased from 13 to 14. The top five holdings represent close to 60% of the US long assets making it a heavily concentrated portfolio. The largest holding is Berkshire Hathaway (BRK.B) at 15.30% of the US long portfolio.
Boeing Company (BA): BA was a very small 0.63% of the US long portfolio stake that was established last quarter at prices between $73.65 and $86.62. It was disposed of this quarter at prices between $84 and $104. The stock currently trades at $103. The minor stake disposal does not indicate a clear bias.
Union Pacific (UNP): UNP is 1.60% of the US long portfolio stake established this quarter at prices between $135 and $160. The stock currently trades near the high-end of that range at $157. The stake establishment indicates a bullish bias.
NV Energy (NVE): NVE is a very small 0.54% of the US long portfolio stake established this quarter at prices between $19.28 and $24. The stock currently trades at $23.71. The minor stake establishment does not indicate a clear bias.
Reynolds American (RAI): RAI is 11.20% of the US long portfolio stake that was increased by ~4% this quarter at prices between $44.20 and $50. The stock currently trades at around $49. RAI is a very long-term position that has been in the portfolio since their first 13F filing (Q4 2006). By EOY 2007, the position was aggressively built up to 12.6% of the US long portfolio stake. During the market turmoil, the position was substantially reduced and by EOY 2009, the stake was at ~7% of the US long portfolio. Since then, the position was rebuilt through consistent buys almost every quarter. The stake build-up over several years represents a clear bullish bias.
The rest of the positions were left untouched during the quarter:
Berkshire Hathaway : BRK.B is Wintergreen's largest US long portfolio position at 15.30%. The stake saw some buying last year but has been kept steady so far this year. Except for a minor stake reduction in 2009, the position has consistently been bought since 2006. Wintergreen is very bullish on BRK.B.
Franklin Resources (BEN): BEN is Wintergreen's second largest US long portfolio position at 11.49%. The stake was first purchased in 2008 and has seen consistent buying since then. Last quarter saw a 5% stake increase at prices between $41.90 and $50.24. The stock currently trades at $47.30. Wintergreen is bullish on BEN.
Philip Morris International (PM): PM is a large 10.93% position that was left untouched this quarter. A starter position was purchased in 2009 and it was aggressively built up over the next two years to a 12.65% position by EOY 2011. Since then, the position has been marginally increased although on a relative basis, the stake is smaller. Wintergreen continues to be bullish on PM.
MasterCard Inc. (MA): MA is 9.93% of the US long portfolio position that has been kept remarkably steady ever since the stake initiation in 2011. The large position size indicates a bullish bias. MA has doubled since the initial stake establishment and so Wintergreen is sitting on large long-term capital gains on this position.
Canadian Natural Resource Ltd. (CNQ): CNQ is a very long-term position that has been in the portfolio since 2006. The stake has been built up over several years from 5.8% to 9.32% of the US long portfolio. The share count has increased almost 10-times as a result of the stake build-up and the 2-for-1 stock split in 2010. But, as a percentage of the US long portfolio stake, the position has increased only by around 61% as the portfolio value has increased from ~$266M to ~$918M in the 2006-2013 time frame. The stock price has not budged much and Wintergreen is continuing to stay very bullish on the position. For investors attempting to follow Wintergreen, CNQ is a very good option to consider.
Coca-Cola Company (KO): KO is another very long-term position that has been built-up to an 8.86% position. The position saw some aggressive buying in Q4 2012 when 670,000 shares were purchased at prices between $35.97 and $38.58 to increase the stake by over 50%. The stock currently trades at around $39, just outside the price range of that purchase.
Altria Group (MO): MO was a huge 11.4% stake that was purchased in Q1 2012 at prices between $28 and $31. It has since been trimmed to a 7.92% position currently. Most of the trimming happened last quarter when the position was reduced by 26% at prices between $31.44 and $35.32. The stock currently trades at $34.60. The significant stake reduction last quarter indicates a bearish bias.
Consolidated-Tomoka Land Company (CTO): CTO is a very long-term stake. It was the largest US long portfolio position at over 24% in 2006. The position was increased by over 60% in 2007 as well. Since then, the stake has been kept relatively steady. Wintergreen owns over 1.5M shares currently which translates to an ownership of 27% of the business. As a percentage of the US long portfolio, the position currently stands at 6.41%. The stock currently trades at $36.90, much higher than Wintergreen's average purchase price. For investors attempting to follow Wintergreen, CTO is a very good option to consider.
Google Inc. (GOOG), McDonald's Corporation (MCD), & Norfolk Southern (NSC): GOOG is a small 3.58% of the US long portfolio position purchased in 2011. It has since been kept relatively steady. MCD and NSC are much smaller (~1.4% of the US long portfolio each) positions left untouched this quarter. They were first purchased in 2009 and 2011 respectively and the positions were kept relatively steady since. As the position sizes are still small, they do not indicate a clear bias.
The spreadsheet below highlights changes to Winters' US stock holdings in Q2 2013: