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What do the top hedge fund and mutual fund Gurus like in the retail sector? This article, the twenty-fifth in a series, identifies through a research of the latest available institutional 13-F filings the Gurus that are most invested in the retail sector, and the specific stocks within that sector that they prefer to hold in their portfolios. Also, please note that this article will be among the last in this series, as the latest March 2011 quarter 13-F Institutional filings are now beginning to come out. About 40% were out as of this weekend, and most should be filed by the end of this week. As such, once 13-F filings are complete for all Guru funds, in the next series starting the end of this week to the beginning of next week, I will bring to you the ‘Top New and Added Picks’ of Guru Funds by industry/sector detailing this time not the top holdings, but more importantly what ‘New’ positions they took and what existing positions they added to in the latest March 2011 quarter.
The first twenty 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, the Biotech Industry, the Consumer Non-Durable Goods Sector, the Gold and Silver Mining Industry, and the Regional Banking Industry, the Insurance Industry, the Computer Hardware and Peripherals Industry, the Big Pharmaceuticals and Generic Pharmaceuticals segments, the Money Center and Foreign Bank Sector, the Semiconductor Equipment Industry, the Broadcasting and Publishing Industry, the Computer Software Industry, and the Foreign Telecommunications Services Industry, and the and the stocks within those industries/sectors that they hold in their portfolios (For those familiar with the series, skip over to the sixth 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 Buffet, 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 one percent 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 US Equity markets is somewhere in the $15 trillion range, and the total market capitalization of retail companies is $1.28 trillion or 8.5% of the overall market. The Table lists the top five investment Gurus whose funds have invested at least 15.0% in the Retail Sector.
As you will see, noticeably absent from the list are the three largest companies in the sector including Wal-mart Stores (NYSE:WMT) that operates 8,838 Wal-mart and Sam’s Club stores worldwide and commands a valuation of almost $200 billion or more than 15% of the market capitalization for the Retail sector. Also absent are Amazon.com Inc. (NASDAQ:AMZN), a provider of online retail services, and Home Depot Inc. (NYSE:HD), an operator of 2,248 Home Depot Stores offering building materials, home improvement and lawn and garden products. The absence of these leaders in the portfolios of Top Fund Gurus who are over-concentrated in the Retail Sector is significant as it would be natural to expect them to be a part of these Guru portfolios.
The following is a list of the top Retail Company picks of Guru Funds over-concentrated in that Sector:
Online e-Commerce companies such as eBay Inc. (NASDAQ:EBAY), a provider of online marketplaces and electronic payment services via ebay.com, paypal.com and other websites; and Overstock.com Inc. (NASDAQ:OSTK), offering a variety of close-out and discount brand name and non-brand name consumer items via overstock.com.
Drug Stores such as CVS Caremark Corp. (NYSE:CVS), an operator of 7,182 pharmacy drug stores in 41 states and D.C.; and Walgreen Company (NYSE:WAG), an operator of 8,136 drug stores including mail service and home care facilities in 50 states, D.C., Puerto Rico and Guam.
Discount chains such as Target Corporation (NYSE:TGT), an operator of 1,750 Target and SuperTarget Stores across the U.S. offering everyday items, food and fashionable merchandise; Dollar Tree Inc. (NASDAQ:DLTR), an operator of 4,101 discount variety stores in 48 states and Canada, offering merchandise at the fixed price of $1.00; BJS Wholesale Club Inc. (NYSE:BJ), an operator of 189 warehouse clubs in 15 states.
Department stores such as Macy’s Inc. (NYSE:M), an operator of 854 department stores in 45 states, U.S., Puerto Rico and Guam; Penny JC Co. Inc. (NYSE:JCP), an operator of 1,107 department stores in 49 states and Puerto Rico offering apparel, jewelry and furniture; and Sears Holdings Corp. (NASDAQ:SHLD), an operator of 4,038 Sears and Kmart stores in North America offering appliances, tools, apparel and other home products.
Apparel retail stores such as American Eagle Outfitters (NYSE:AEO), an operator of 1,086 American Eagle Outfitters and Aerie clothing stores in the U.S. and Canada; TJX Cos Inc. (NYSE:TJX), an operator of 2,882 off-price apparel and home goods stores; Ross Stores Inc. (NASDAQ:ROST), an operator of 1,057 Ross Dress for Less and 52 DD’s discount retail stores in 27 states and Guam; Aeropostale Inc. (NYSE:ARO), an operator of 1,012 Aeropostale apparel stores in the U.S., Canada, and UAE.
Carmax Inc. (NYSE:KMX), an operator of 100 used car dealerships in 26 states.
O Reilly Automotive Inc. (NASDAQ:ORLY), an operator of 3,570 automotive parts stores in 38 states.
Whole Foods Market Inc. (WFMI), an operator of 299 organic supermarkets in 38 states, Canada, and the U.K. featuring organically grown foods.
Sysco Corp. (NYSE:SYY), a distributor of food and related products to the food-service industry via 180 distribution centers in the U.S. and Canada.
Bed Bath and Beyond Inc. (NASDAQ:BBBY), an operator of 1,100 bed bath and beyond and other stores;
Green Mountain Coffee Roasters (NASDAQ:GMCR), a distributor of coffees and teas, single cup brewers and single cup portion packs to supermarkets, food stores and others.
Table
Fund and Guru
Type of Fund
Assets Under Management
Percent Equity Portfolio invested in Equities of Companies in Semiconductor the Retail Sector
Major Retail company positions in Portfolio
Pershing Square Capital Management, L.P. (Bill Ackman)
Hedge Fund - Deep Value and Shareholder Activist
$ 5.8 billion
29.2%
JCP, TGT
Akre Capital Management, LLC (Chuck Akre)
Mutual Fund - Growth at a Reasonable Price
$ 477 million
25.2%
ROST, DLTR, ORLY, KMX, TJX
Hussman Econometrics Advisors, Inc. (John Hussman)
Mutual Fund
$ 6.3 billion
17.0%
ARO, BBBY, BJ, TJX, WAG, AEO, WFM,TGT, SYY, EBAY
Chou Associates Management Inc. (Francis Chou)
Mutual Fund
$ 510 million
16.0%
OSTK, SHLD
Tremblant Capital Group (Brett Barakett)
Hedge Fund
$ 1.9 billion
15.0%
GMCR, CVS, JCP, M, AEO
New York-based Pershing Square, founded by Guru Bill Ackman in 2003, is a $5.8 billion hedge fund. He has a deep value orientation and is a shareholder activist, meaning that the fund can take large stakes in target investments and then can use its influence resulting from the ownership to effect change at these companies, with the objective of eventually selling them for a tidy profit. He currently holds a concentrated portfolio of 12 positions.
Chuck Akre, Managing Member and CEO of Akre Capital Management LLC, has been named to Barron's "Top 100 Mutual Fund Managers" list from 2003-2006, one of only two small cap growth managers to make the list four consecutive years. He has been in the securities business since 1968, first as Director and CEO of Asset Management Division and Director of Research at Johnston, Lemon & Co. until 1989, and later as the sole sub-advisor to the $ 1 billion FBR Focus Fund from which he resigned in 2009. While he was managing the FBR Focus Fund, the fund performed in the top 1% of small/mid-cap growth funds in 2002, 2004, and 2006, as well as the 2nd percentile in 2001 and the 6th percentile in 2008. As of the latest filing, Akre Capital Management had $477 million holdings in equities and was relatively concentrated with less than 35 positions in the portfolio. His focus seems to be in the small- and mid-capitalization portion of the equities markets, and his investment style seems to be selecting equities based on a Growth at a Reasonable Price (GARP) approach.
Dr. Hussman founder of Hussman Econometrics Advisors, manages the Hussman Funds which are diversified, no-load mutual funds for investors seeking long-term investment returns, with added emphasis on capital protection in unfavorable market conditions. Prior to managing the Hussman Funds, he was a former professor at the University of Michigan. He is widely known for his criticism of the U.S. Treasury and the Federal Reserve and for predicting the 2008-2009 U.S. Recession, and as of late 2009, he is calling for another financial crisis due to bad policy choices made by the US government.
Francis Chou is the fund manager for the Chou America Mutual Fund. The investment process followed in selecting equity investments for the Funds is a value-oriented approach to investing. This involves a detailed analysis of the strengths of individual companies, with much less emphasis on short-term market factors. Far greater importance is placed upon an assessment of a company's balance sheet, cash flow characteristics, profitability, industry position, special strengths, future growth potential and management ability.
Tremblant Capital Group, a hedge fund formed in 2001 by Brett Barakett, invests in long/short strategies.
Credit: Historical fundamentals including operating metrics and stock ownership information were derived using I-Metrix® by Edgar Online®, Zacks Investment Research, DailyGraphs®, 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 contents of this article do 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.
Source: Top Retail Picks by Fund Gurus Concentrated in the Sector