What do the top hedge fund and mutual fund gurus like in the consumer non-durable goods sector? Consumer non-durable goods or soft goods or consumables are defined as goods that are immediately consumed in one use or ones that have a lifespan of less than three years, such as cosmetics, cleaning products, personal products, apparel, footwear and food. Typically, fuel is also included in the consumer non-durable goods sector, but is not included here in this analysis as that industry - due to its size in the economy - was analyzed in a separate article on oil and gas exploration stocks.
This article, the tenth in a series, identifies through research of the latest available institutional 13-F filings the gurus who are most invested in the consumer non-durable goods sector, and the specific consumer non-durable goods companies that they prefer to hold in their hedge fund portfolios. The first nine articles in the series identified gurus that are over-weight in the solar sector, utilities sector, China stocks, airline sector, optical networking sector, chemicals industry, oil and gas exploration industry, the automobile industry and the biotech industry, and the stocks within those sectors that they hold in their portfolios (for those familiar with the series, skip over to the fifth paragraph).
A guru is defined as someone who is regarded as having great knowledge, wisdom and authority in a certain area. When it comes to hedge funds, there are a number of ways to anoint leading managers as gurus including long-term performance, low portfolio volatility and an elite reputation in the investment community.
Many of us are familiar with leading investors and hedge fund managers such as Warren Buffett, George Soros, Carl Icahn and Julian Robertson. But the hedge fund community alone includes over 9,000 funds. Add in mutual funds, ETFs and other investment entities and the number is likely to be at least two to three times that number. While there is no official list of gurus, less than 1% or between 100 to 200 fund managers, are commonly believed by the larger investment community to have earned the distinction of being called gurus.
The study of the investing habits of gurus can be informative as these are very savvy, well-respected investors with high personal net worth deploying large sums of capital from their funds on a regular basis. They have a long-term track record of success, and while one can easily just ride their coattails, the savvy investor may want to use these lists as a starting point to conduct their own due diligence.
The total capitalization of the U.S. equity markets is somewhere in the $15 trillion range, and the total market capitalization of leading consumer non-durable goods stocks is approximately $1.74 trillion, or 11.6% of the overall market. The table lists four investment gurus whose funds have invested over one-and-a-half times that, or at least about 17.4% in the consumer non-durable goods sector, and the following is a list of their picks in that sector:
- U.S.-based cigarette manufacturers such as Philip Morris (NYSE:PM), a manufacturer of cigarettes sold in markets outside the U.S. under the Marlboro, LM, Parliament, Virginia Slims and other brands; and Altria Group Inc. (NYSE:MO), a manufacturer of cigarettes and other tobacco products sold in the U.S. under the Marlboro and Black and Mild names.
- U.S. based global manufacturers of alcoholic beverages such as Molson Coors Brewing (NYSE:TAP), a manufacturer of beers primarily sold under the Coors Light, Carling, Keystone, C2 , Pilsner and Molson brands.
- U.S. based global manufacturers of non-alcoholic beverages such Pepsico Inc. (NYSE:PEP), a manufacturer of a variety of salty, convenient, sweet grain-based snacks and carbonated and non-carbonated drinks; and Coca Cola Co (NYSE:KO), a global manufacturer of non-alcoholic beverage concentrates and syrups sold to bottler and fountain wholesalers.
- U.S. based global manufacturers of a diverse range of non-durable consumer goods such as Procter & Gamble (NYSE:PG), a global manufacturer of beauty care products, cleaning products, diapers, tissues, health care, toothpaste, snacks and beverages; and Kraft Foods (KFT), a global manufacturer of food products such as snacks, cheese, beverages and other grocery products.
- Hormel Foods Co. (NYSE:HRL), a processor of meat and food products such as pork, turkey and shelf-stable foods for the retail and food-service markets.
- Aptargroup Inc. (NYSE:ATR), a manufacturer of dispensing systems for personal care, cosmetics, fragrances, pharmaceutical, food and beverage products.
- Liz Claiborne Inc. (LIZ), a global supplier of apparel, accessories and fragrances under the Liz Claiborne, Juicy Couture, Lucky Brand, Mexx and other brands.
- Foreign companies such as British American Tobacco (NYSEMKT:BTI), a U.K. based manufacturer of tobacco products sold under more than 300 brands worldwide; Fomento Econ Mex Sab ADS (NYSE:FMX), a producer of Coca-Cola trademark beverages in Mexico and other Latin American countries and also operates convenience stores; and Coca Cola Femsa Sab ADS (NYSE:KOF), a Mexican bottler of Coca-Cola trademarked beverages in nine Latin American countries.
Fund and Guru
Type of Fund
Assets Under Management
Percent Portfolio in the Consumer non-Durable Goods Sector
Major Consumer non-Durable Goods company positions in Portfolio
Children's Investment Fund Management UK LLP (Chris Hohn)
Hedge Fund – Shareholder Activist
$ 6.9 billion including $2.4 billion in US equity investments
Tremblant Capital Group (Brett Barakett)
Hedge Fund - Long/Short
$ 1.9 billion
PG, LIZ, KFT
Tweedy Browne Co LLC
$ 2.9 billion
PM, KOF, KFT
Gardner Russo & Gardner (Thomas A. Russo)
Hedge Fund – Long/Short
$ 5.1 billion
PM, MO, BTI, PG, PEP, HRL, FMX, ATR
The Children's Investment Fund Management (TCI), a hedge fund founded by Chris Hohn in 2003, is based out of London and manages the Children’s Investment Master Fund. The firm has a Value investment style and is a shareholder activist, meaning that they take large stakes in targeted investments and then use their influence resulting from the ownership to effect change at these companies, with the objective that these changes will result in more value for the shareholders.
Tremblant Capital Group, a hedge fund formed in 2001 by Brett Barakett, invests in long/short strategies.
New York-based Tweedy Browne Co LLC has been in the investment business for over 90 years. Its approach is based on Benjamin Graham, and focuses on intrinsic value in making investments, generally calculated by summing the future income generated by an asset and discounting it to the present value. This differentiates it from the market value and book value of the security.
Lancaster, Pennsylvania,-based Thomas A. Russo is a famed value investor known for his expertise in the consumer goods sector. He manages $5.1 billion as of the latest filing for the March 2011 quarter filed this past weekend, and has 18.0% of his portfolio allocated to the non-durable consumer goods sector. His investment selection is value-based, and he looks for companies with strong cash-flow characteristics. As a side-note, over 11% of his portfolio is invested in fellow "value" investor Warren Buffet’s Berkshire Hathaway stock.
Credit: Historical fundamentals including operating metrics and stock ownership information were derived using I-Metrix by Edgar Online®, Zacks Investment Research, Thomson Reuters and Briefing.com. Fund data including assets under management and firm profiles are sourced mostly from Hedgetracker.com. The information and data is believed to be accurate, but no guarantees or representations are made.
Disclaimer: Material presented here is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities. Before buying or selling any stock you should do your own research and reach your own conclusion. Further, these are my opinions and I may be wrong. I may have positions in securities mentioned in this article. You should take this into consideration before acting on any advice given in this article. If this makes you uncomfortable, then do not listen to my thoughts and opinions. The content of this article does not take into consideration your individual investment objectives so consult with your own financial adviser before making an investment decision. Investing includes certain risks including loss of principal.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.