This article is part of a series that provides an ongoing analysis of the changes made to Lou Simpson's US stock portfolio on a quarterly basis. It is based on Simpson's regulatory 13F Form filed on 05/15/2014. Please visit our Tracking Lou Simpson's SQL Advisors Portfolio series to get an idea of his investment philosophy and our previous update highlighting the fund's moves during Q4 2013.
This quarter, Simpson's US long portfolio increased just over 9% from $2.10B to $2.30B. The number of holdings in the portfolio remained steady at 13. The top five holdings represent around 54% of the US long assets: Wells Fargo, Berkshire Hathaway, Oracle Corporation, United Parcel Service, and Valeant Pharmaceuticals. All the thirteen positions were adjusted during the quarter although many of them were minor.Stake Disposals:
Directv (DTV): DTV position had been steadily increased by more than double since Q4 2011. Last quarter saw an about-turn as the position size was reduced by over 43% at prices between $58 and $69. This quarter saw minor additional trimming. The stake now accounts for 5.47% of the US long portfolio. The substantial stake reduction last quarter indicates a bearish bias. The stock spiked around ten points since the end of the quarter (currently trades at $86.18) on reports that AT&T (NYSE:T) is in talks to acquire the business.
Moody's Corp (NYSE:MCO): MCO is a 5.21% of the US long portfolio stake. The position was first established in Q4 2012 at prices between $44 and $51.50. In Q1 2013, the stake was roughly doubled at prices between $43.30 and $55.50. The stock currently trades well above those ranges at around $81.37. The position was slightly increased last quarter but this quarter saw an about turn: a ~25% stake reduction at prices between $72.65 and $83.58. Lou Simpson is starting to harvest long-term gains from the position.
TE Connectivity (NYSE:TEL): TEL has been in the portfolio since Q4 2011 when it was already a 10.36% stake. The share count had since been increased by over ~45% over several quarters. Last quarter, the position was reduced by ~40% at prices between $49.91 and $55.11 and this quarter saw a marginal stake reduction. The stock currently trades at around $57.15. The activity indicates a bearish bias.
Valeant Pharmaceuticals (NYSE:VRX): VRX position has been increased by ~43% since Q4 2011. The stake currently stands at 9.26% of the US long portfolio. The last four quarters saw small stake reductions. Lou Simpson has large gains on this position and is continuing to hold on.
Charles Schwab (NYSE:SCHW): SCHW stake had been increased by around 53% since Q4 2011 to a large 9.30% of the US long portfolio position as of last quarter. This quarter, the stake was reduced by 20% at prices between $23.65 and $28.53. The stock currently trades at $25. The position currently stands at 7.22% of the US long portfolio. The significant stake reduction of a large long-term position indicates a bearish bias.Stake Increases:
United Parcel Service (NYSE:UPS): UPS was a brand new 7.85% of the US long portfolio stake established in Q2 2013 at prices between $82.30 and $89. It was increased by ~53% in Q3 2013 at prices between $85 and $92. Last two quarters saw a combined 15% stake increase at prices between $85 and $105. The stock currently trades at around $101. The large stake build-up over the last four quarters indicates a clear bullish bias.
Wells Fargo (NYSE:WFC): WFC is a 11.71% of the US long portfolio stake that was consistently built-up since Q4 2011. In Q3 2013, the position was increased by ~20% at prices between $41 and $45. Last quarter saw a 10.5% stake increase at prices between $40 and $45.50 and this quarter saw an additional 12.5% stake increase at prices between $44.43 and $49.74. The stock currently trades near the top end of those ranges $49.08. The aggressive buying indicates a clear bullish bias.
Oracle Corporation (NYSE:ORCL): ORCL is a large 10.71% position which was first purchased in Q1 2012 at prices between $26.50 and $30.20. In Q2 2013, the position was increased marginally at prices between $29.90 and $35.10. The bulk of the position was purchased in Q4 2012 and Q1 2013 at prices between $29.50 and $36.30. In Q3 2013, the stake was increased by ~5% at prices between $30 and $34. Last two quarters saw a combined 20% stake increase at prices between $32 and $41. The stock currently trades at around $41.69. The activity indicates a bullish bias.
US Bancorp (NYSE:USB): US Bancorp was a minute 0.03% of the US long portfolio position as of Q2 2013. The stake was increased substantially to a 3.68% position in Q3 2013 at prices between $36 and $38. Last quarter saw a stake doubling at prices between $35.70 and $40.60 and this quarter saw an additional 15% stake increase at prices between $38.78 and $43.42. The stock currently trades at around $40.89. The position now stands at 8.37% of the US long portfolio. The strong buying over multiple quarters indicates a clear bullish bias.
Brookfield Asset Management (NYSE:BAM): BAM is a 6.39% of the US long portfolio position first purchased in Q2 2012 at prices between $30 and $33. The stake was increased by ~10% in Q2 2013 at prices between $34.30 and $39.10. It was further increased by another ~5% in Q3 2013 at prices between $34.23 and $38. Last two quarters saw an additional 20% stake increase at prices between $37 and $41. The stock currently trade well outside those ranges at $44.23.
Crown Holdings (NYSE:CCK): CCK position size has more than doubled since Q4 2011. Last quarter saw a ~12% stake increase at prices between $40 and $44.50 and this quarter saw an additional ~16% stake increase at prices between $40 and $45. The stock currently trades at $48.51 and the position stands at 6.92% of the US long portfolio.
Berkshire Hathaway (NYSE:BRK.A) (NYSE:BRK.B): BRK is a top-three position at 11.52% of the portfolio. The original stake was increased by roughly 40% in Q1 2012 at prices between $76 and $82. The position was further increased in the next several quarters. This quarter saw a ~26% stake increase at prices between $109 and $125. Lou Simpson continues to be very bullish on Berkshire Hathaway stock. The stock currently trades at around $127, well above Simpson's cost-basis.Kept Steady:
The spreadsheet below highlights changes to Simpson's US stock holdings in Q1 2014:
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.