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What do the top hedge fund and mutual fund gurus like in the consumer services sector? This article, the 39th in a series, identifies through research of the latest available institutional 13-F filings the gurus that are most invested in the consumer services sector, and the specific stocks within that group that they prefer to hold in their portfolios. Please note that the group includes education, funeral, hospitality and a diverse range of leisure consumer services companies.
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 recently, 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 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. Please check my article page for previous articles in this series.
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 services sector companies is $295 billion, or just under 2.0% of the overall market. The table lists the top six investment gurus whose funds have invested over 5.0% in the group. The following are their leading picks in that group:
  • U.S. based casino operator MGM Resorts International (NYSE:MGM) owns and operates casino resorts in the U.S., and offers gaming, hotel, dining entertainment, retail and other resort amenities at its casinos. It has 20 casinos that have 34,966 slot machines, 1,985 table games in 2.1 million square feet of casino space and a total of 50,765 rooms.
  • Cruise line operators: Royal Caribbean Cruises (NYSE:RCL) operates in the cruise vacation industry in North America and Internationally, and owns five cruise brands: Royal Caribbean, Celebrity Cruises, Azamara Club Cruises, Pullmantur Cruises and CDF Croisieres de France; and Carnival Corporation (NYSE:CCL), which operates cruise vacations with a total of 98 ships under 10 brands servicing North America, Asia, Australia and Europe.
  • Priceline.com Inc. (NASDAQ:PCLN) provides airline ticket, hotel room, car rental, vacation package and cruise services through Priceline.com.
  • Live Nation Entertainment (NYSE:LYV) operates 142 venues offering live entertainment events such as music concerts and theatrical performances.
  • Block H & R Inc. (NYSE:HRB) provides tax, national accounting and business consulting services in the U.S., Canada and Australia.
  • Western Union Co. (NYSE:WU) provides money transfer and payment transactions via 41,000 agent locations in more than 200 countries and territories.
  • U.S.-based international education service providers: Apollo Group Inc. CLA (NASDAQ:APOL) provides secondary education to over 470,000 students through 472 facilities in North and South America via campuses and also online; ITT Educational Services (NYSE:ESI) provides post-secondary education programs to 84,000 students via 130 technical institutes and four learning sites in 38 states; and Career Education Corp. (NASDAQ:CECO) provides post-secondary education for 116,800 students via 90 campuses in the U.S., France, Italy and the U.K.
  • Chinese education services companies: New Oriental Education and Technology ADS (NYSE:EDU), a Chinese provider of language training and test preparation courses to 1.8 million students via 367 schools and centers; and TAL Education Group ADS (NYSE:XRS), a Chinese provider of K-12 after-school tutoring services to 382,505 students via 109 learning and 87 service centers.
  • Chinese hospitality industry companies: Home Inns and Hotels Management ADS (NASDAQ:HMIN) is a Chinese hotel manager operating over 616 hotels with over 70,000 rooms, and 69 hotels under development; and Seven Days Group Holdings ADR (NYSE:SVN), a Chinese hotel manager operating 337 hotels with over 32,000 total rooms, and 64 hotels with over 6,000 total rooms under conversion.
Table
Fund and Guru
Type of Fund
Assets Under Management
Percent Equity Portfolio invested in Consumer Services Companies
Major Consumer Services Sector company positions in Portfolio
Joho Capital LLC (Robert Karr)
Hedge Fund - Long/Short
$ 600 million
33.5%
EDU, HMIN, SVN, XRS
Blum Capital Partners (Richard Blum)
Hedge Fund - Deep Value
$ 1.7 billion
29.6%
CECO, ESI
Shumway Capital Partners LLC (Chris Shumway)
Hedge Fund - Long/short Equity
$ 6.9 billion
12.0%
PCLN, MGM, RCL
Tiger Global Management LLC (Chase Coleman)
Hedge Fund - Technology Focused
$ 3.7 billion
8.6%
PCLN, LYV
Ariel Investments, LLC (John Rogers)
Mutual Fund – Value Investing
$ 5.8 billion
5.8%
IGT, RCL, CCL
Gotham Asset Management, LLC (Joel Greenblatt)
Asset Management - including Hedge Fund
$ 306 million
5.7%
CECO, APOL, HRB, WU, ESI
Joho Capital, with $600 million in assets under management (AUM), was founded by Robert Karr in 1996. Mr. Karr is one of the Tiger Cubs, so called because they learned to pick stocks at Julian Robertson's legendary hedge fund Tiger Management LLC. The fund is generally concentrated in new technologies, with over 40% of the current allocation in Chinese equities.
Greenwich, Connecticut,-based Shumway Capital Partners was founded by CEO Chris Shumway in 2002. Like many other gurus profiled in this series, he is also a Tiger Cub, so called because he learned to pick stocks at Julian Robertson's legendary hedge fund Tiger Management LLC. The firm pursues a long/short equity strategy and uses fundamentals to drive investment decision making.
New York-based Hedge Fund Tiger Global Management is managed by Chase Coleman, a former analyst and partner at legendary Julian Roberson's Tiger Management. It invests in the public and private equity markets across the world, with a focus on technology stocks and also employing fundamental analysis to make its investment decisions.
Chicago-based Ariel Investments, LLC, founded by guru John Rogers, is America’s largest minority-run mutual fund firm. Rogers follows a value investing strategy, and was one of the hot stock pickers of the 1980s. His firm and its mutual funds have often been among the industry performance leaders and have on average outperformed the market.
Gotham Asset Management, founded by guru Joel Greenblatt, is mostly a traditional asset management firm that offers a suite of domestic, global and international value investing strategies with a focus on the institutional segment of the market. However, in addition to long-only fee-based products, it also offers long/short funds including a basic fee plus a performance allocation incentive fee.
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 Consumer Services Sector Picks by Fund Gurus Concentrated in the Sector