Tracking Lou Simpson's SQ Advisors Portfolio - Q4 2015 Update

|
Includes: AME, BAM, BRK.A, BRK.B, CCK, LBTYK, LILAK, PCP, SCHW, UPS, USB, VRX, WFC
by: John Vincent

Summary

Lou Simpson's US long portfolio increased from $2.98B to $3.01B this quarter.

Simpson increased his position in Valeant Pharmaceuticals while dropping Precision Castparts during the quarter.

SQ Advisors has just eleven positions. The top three holdings are Ametek Inc., Brookfield Asset Management, and Charles Schwab, and they together account for ~42% of the entire portfolio.

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 02/05/2016. 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 Q3 2015.

This quarter, Simpson's US long portfolio increased marginally from $2.98B to $3.01B. The number of holdings decreased from 12 to 11. The top five positions represent two-thirds of the US long assets: Ametek Inc., Brookfield Asset Management, Charles Schwab, Berkshire Hathaway, and Wells Fargo.

Since inception in 2011, SQ Advisors have held a very concentrated portfolio of 10 to 15 positions. Lou Simpson classifies his investing philosophy as being more in the "scuttlebutt" mold. To know more about that investing style, check out Common Stocks and Uncommon Profits and Other Writings.

Stake Disposals:

Precision Castparts (NYSE:PCP): PCP was a large 8.92% of the US long portfolio stake established in Q1 2015 at prices between $200 and $240. The position was reduced by over 90% last quarter and that was followed with the elimination this quarter.

Note: On 08/10/2015, Berkshire Hathaway agreed to buy PCP for $235 per share in cash. Ever since that announcement, the stock traded in a tight range above $230. The transaction closed last month.

New Stakes:

None.

Stake Decreases:

Brookfield Asset Management (NYSE:BAM): BAM is the second largest position at 14.04% of the US long portfolio. It was first purchased in Q2 2012 at prices between $18 and $22. The position has since been increased by ~450% through consistent buying. Q1 2015 saw a ~52% increase at prices between $32.85 and $36.80, and the following quarter saw a further ~57% increase at prices between $34.20 and $38.66. Last quarter also saw another ~26% increase at prices between $29.91 and $36.18. The stock currently trades well below his recent purchase price ranges at $28.82. This quarter saw very minor selling. For investors attempting to follow Simpson, BAM is a good option to consider for further research.

Note: BAM's stock split 3-for-2 on May 11, 2015. The prices quoted for BAM is adjusted for that split.

Crown Holdings (NYSE:CCK): CCK position size had increased by around 150% from Q4 2011 to Q4 2014 at prices between $33 and $52. Last year saw a ~20% reduction overall at prices between $44.31 and $55.94. The stock currently trades at $45.81 and the position stands at 5.29% of the US long portfolio. This quarter saw a very minor decrease.

Liberty Global (NASDAQ:LILAK): LILAK is a minutely small 0.35% stake that came about as a result of the spinoff of Liberty LiLAC Group (Latin American assets of the parent company) from Liberty Global. The shares are structured currently as a tracking stock with plans for an eventual spinoff.

United Parcel Service (NYSE:UPS): UPS is a 4.82% of the US long portfolio position. It was established in Q2 2013 at prices between $82.30 and $89 and was increased by ~53% in Q3 2013 at prices between $85 and $92. The following three quarters saw a combined 19% increase at prices between $85 and $105. Q4 2014 saw an about-turn as the position was reduced by ~38% at prices between $94.67 and $112. Last four quarters have also seen a combined ~7% further reduction. The stock currently trades at $95.36.

Stake Increases:

Valeant Pharmaceuticals (NYSE:VRX): VRX position has increased by around 130% since Q4 2011. The stake is fairly large at 9.09% of the US long portfolio. Last quarter saw a ~13% increase at prices between $158 and $263 and that was followed with a ~38% increase this quarter at prices between $70 and $182. The stock currently trades at $96.61.

Ametek Inc. (NYSE:AME): AME is currently the largest position at 14.61% of the US long portfolio. The stake was established in Q2 2015 at prices between $51.71 and $55.38 and increased by ~350% last quarter at prices between $50.83 and $57.50. The stock currently trades below his purchase price ranges at $45.33. This quarter saw a marginal increase. For investors attempting to follow SQ Advisors, AME is a good option to consider for further research.

Berkshire Hathaway (NYSE:BRK.A) (NYSE:BRK.B): BRK is Simpson's fourth largest position at 12.27% 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. Q1 2014 saw a ~26% increase at prices between $109 and $125. Last six quarters have also seen a combined ~25% increase. Lou Simpson continues to be very bullish on Berkshire Hathaway's stock. It currently trades at $127, well above Simpson's cost basis.

Liberty Global (NASDAQ:LBTYK): LBTYK is a fairly large 11.24% of the US long portfolio stake established in Q3 2014 at prices between $39.71 and $43.35. Last quarter saw a ~62% increase at prices between $40.79 and $51.10. The stock currently trades well below the low end of those ranges at $33.02. For investors attempting to follow SQ Advisors, Liberty Global is a good option to consider for further research. This quarter also saw a ~4% further increase.

Charles Schwab (NYSE:SCHW): SCHW stake was increased by ~53% during the period from Q4 2011 to Q4 2013 at prices between $11 and $26. Q1 2014 saw an about-turn as the stake was reduced by 20% at prices between $23.65 and $28.53. The following three quarters saw a combined 11% increase at prices between $24.85 and $30.78. Q1 2015 saw a further ~22% increase at prices between $25.96 and $31.05 and that was followed with a ~48% increase in the following quarter at prices between $29.77 and $33.53. The stock currently trades at $24.36. The position is now Simpson's third largest stake at 13.71% of the US long portfolio. Last two quarters have seen very minor further increases.

U.S. Bancorp (NYSE:USB): U.S. 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. Q4 2013 saw a stake doubling at prices between $35.70 and $40.60. Since then, the position was increased by ~40% at prices between $38.78 and $45.12. Last quarter saw an about-turn as two-thirds the stake was sold at prices between $39.76 and $46.02. The stock currently trades at $40.09 and the position is at 2.94% of the US long portfolio. This quarter saw a ~7% increase.

Wells Fargo (NYSE:WFC): WFC is a top five position at 11.63% of the US long portfolio. It has seen consistent buying since Q4 2011. The last significantly large purchase was in Q1 2014 when a ~13% increase happened at prices between $44.43 and $49.74. The stock currently trades within that range at $47.85.

Kept Steady:

None.

The spreadsheet below highlights changes to Simpson's US stock holdings in Q4 2015:

Click to enlarge

Disclosure: I/we 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.