Chieftain Capital was originally founded in 1984 by John Shapiro and Glenn Greenberg. The firm has focused on value investing since its formation with positive results. In January 2010, due to personal differences and personality conflicts, Chieftain Capital was split into two separate firms, Chieftain Capital Management and Brave Warrior Advisors. The new Chieftain Capital Management was formed by Shapiro and two chief partners, Tom Stern and Joshua Slocum, while Greenberg is now leading Brave Warrior Advisors.
Chieftain Capital has a great reputation as a value investor. Here are the top value stock picks in Chieftain’s portfolio as of September 30, 2011:
Company Name | Ticker | Value | Activity |
TEMPUR PEDIC INTERNATIONAL | 254091 | 5% | |
TIME WARNER CABLE INC | 229311 | 17% | |
LOCKHEED MARTIN CORP | 203222 | 5% | |
CROWN HOLDINGS INC | 196080 | 3% | |
LABORATORY CORP AMERICA | 153930 | 52% | |
U S BANCORP DEL | 135869 | 6% | |
AON CORP | 133975 | 6% | |
ABBOTT LABORATORIES | 98607 | -22% | |
WESTERN UNION CO | 62538 | New | |
COACH INC | 39809 | New | |
RYANAIR HOLDINGS PLC | 2575 | -96% | |
CROSSTEX ENERGY LP | 1972 | 0% |
Chieftain Capital Management has a very concentrated portfolio, which we like a lot. At the end of September, it had approximately $1.5 billion worth of the portfolio invested in only 12 positions. The number was not too different from that at the end of June, when Chieftain invested about $1.6 billion in only 10 positions.
During the third quarter, Chieftain did not sell out any positions while it opened two new positions, Western Union Co (WU) and Coach Inc (COH). According to its latest 13F, the fund initiated a new $63 million position in WU and $40 million in COH over the third quarter. WU returned 9.16% and COH was up 19.87% so far since the end of September, both beating the 5.80% for SPY in the same period. Billionaire investor Jim Simons doubled his stake in WU during the third quarter. Ron Gutfleish’s Elm Ridge Capital also initiated a brand new position in WU during the third quarter.
The top three positions in Chieftain Capital Management’s portfolio at the end of the third quarter were Tempur Pedic International Inc (TPX), Time Warner Cable Inc (TWC) and Lockheed Martin Corp (LMT). Chieftain invested over $200 million in each of the three stocks. Since the end of September, TPX returned 1.22%, TWC lost 7.63%, and LMT was up 7.38% so far, generating a return of 0.09% on a weighted average basis. It also invested over $100 million each in Crown Holdings Inc (CCK), Laboratory Corp America Holdings (LH), US Bancorp (USB) and Aon Corp (AON). However, except AON, which was up 6.76% since the end of the third quarter, the other three stocks all underperformed the market. CCK gained 1.73%, LH returned 4.82%, and USB was up 5.01%.
It seems that Chieftain Capital Management’s portfolio is slightly underperforming the market so far in the fourth quarter. But some of its positions are still doing quite well. For example, its two new positions generated a double-digit weighted average return since the end of the third quarter. We really like the concentrated portfolio of Chieftain and we believe that investors can beat the market in the long term by imitating the best investments of Chieftain Capital Management.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
