Tracking Allan Mecham's Arlington Value Capital Portfolio - Q4 2015 Update

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Includes: BRK.A, BRK.B, CHEF, CMPR, CPRT, DNOW, DSWL, HEI, IBKR, LMCA, LMCK, LTRPA, LTRPB, LUK, MSM, OUTR, QVCA, QVCB, SNE, TRIP
by: John Vincent

Summary

Arlington Value Capital’s 13F portfolio increased from ~$745M to $796M. The number of positions decreased from 15 to 14.

Allan Mecham increased Leucadia National and Berkshire Hathaway while reducing Sony Corp.

The top-three positions are Cimpress NV, Berkshire Hathaway, and Now Inc. and they add up to almost ~55% of the portfolio.

This article is part of a series that provides an ongoing analysis of the changes made to Allan Mecham's US stock portfolio on a quarterly basis. It is based on Mecham's regulatory 13F Form filed on 02/16/2016. Please visit our Tracking Allan Mecham's Arlington Value Capital Portfolio article for an idea on his investment philosophy and the fund's moves during Q3 2015.

This quarter, Mecham's US long portfolio increased 6.80% from ~$745M to $796M. The number of holdings decreased from 15 to 14: A very small stake in Liberty Media was dropped during the quarter. The top three holdings are at 54.85% while the top five are at 75.11% of the US long assets: Cimpress NV, Berkshire Hathaway, Now Inc., Leucadia National, and Interactive Brokers.

To know more about value investing, check out Value Investing: A Value Investor's Journey Through The Unknown.

Stake Disposals:

Liberty Media (NASDAQ:LMCA) (NASDAQ:LMCK): Liberty Media was a very small 1.16% of the portfolio stake established last quarter and eliminated this quarter. The entry was at prices between $34 and $38 while the exit was at prices between $34 and $40. The stock is currently at $33.30.

New Stakes:

None.

Stake Decreases:

The Chef's Warehouse (NASDAQ:CHEF): CHEF is a small 1.40% of the portfolio stake purchased in Q2 2014 and doubled the following quarter at prices between $16.32 and $20.74. The stock currently trades at $17.84. Last four quarters had seen a combined one-third reduction at prices between $15.75 and $23.39. This quarter saw another ~41% reduction at prices between $13.63 and $19.44.

Interactive Brokers (NASDAQ:IBKR): IBKR is a top-five 10.03% stake purchased in Q4 2014 at prices between $23.79 and $29.37. The following quarter also saw a roughly one-third increase at prices between $28 and $34. Last two quarters saw minor increases while this quarter saw a ~5% trimming. The stock currently trades at $33.65.

MSC Industrial Direct (NYSE:MSM): MSM is a large 8.42% of the portfolio stake established in Q1 2015 and almost doubled the following quarter at prices between $69 and $81. Last quarter saw another ~35% increase at prices between $61 and $72. The stock currently trades at $68.41. This quarter saw a marginal reduction.

Sony Corporation (NYSE:SNE): The 4.12% of the portfolio SNE stake was purchased in Q2 2014 at prices between $16.10 and $19.03. The following quarter saw a ~40% increase at prices between $16.66 and $19.82. In Q2 2015, the pattern reversed: ~30% sold at prices between $28.39 and $32.74. This quarter saw another ~40% reduction at prices between $24.30 and $28.97. The stock currently trades at $21.51.

Stake Increases:

Berkshire Hathaway (NYSE:BRK.A) (NYSE:BRK.B): BRK.B is a long-term holding that has been in the portfolio for many years. The current position is the second-largest at 18.65% of the portfolio. Q2 2015 saw a ~140% increase at prices between $136 and $148 and that was followed with another ~120% increase last quarter at prices between $128 and $145. There was another ~21% increase this quarter at prices between $130 and $138. The stock is currently at $130.80.

Note: Mecham disclosed that Arlington had a very successful previous round-trip with Berkshire Hathaway: ~170% realized gains during 41 months of ownership that ended in 2014 - Berkshire Hathaway stock returned around half that during the period and Mecham's performance was boosted as the position was leveraged.

Cimpress NV (NASDAQ:CMPR): CMPR is Arlington Value Capital's largest individual stock position at 24.10% of the portfolio. It is a long-term stake that has been in the portfolio since the firm's first 13F filing in Q4 2012. The bulk of the current stake was purchased in Q1 & Q2 2013 at prices between $32 and $49. Q4 2014 saw a ~20% reduction at prices between $54 and $76. Last quarter saw a huge ~87% increase at prices between $64.53 and $84.51. The stock currently trades at $85.14. This quarter saw another ~6% increase.

Leucadia National (NYSE:LUK): LUK was a very small ~1% position in 2013. During the last two quarters of 2014, the original position was increased by a whopping 15x at prices between $21.80 and $24.41. There was incremental buying over the last three quarters. This quarter saw a ~58% increase at prices between $16.08 and $21.11. The stock currently trades well below those ranges at $14.76. For investors attempting to follow Mecham, LUK is a good option to consider for further research.

Liberty Tripadvisor (NASDAQ:LTRPA) (NASDAQ:LTRPB) and Tripadvisor Inc. (NASDAQ:TRIP): These two very small (less than ~1% of the portfolio each) stakes were established last quarter. Liberty Tripadvisor stake saw a ~10% increase this quarter. The TRIP stake was doubled to a fairly significant 3.47% portfolio position. The buying happened at prices between $63 and $93 and the stock is now just below the low end of that range at $60.70.

Note: Liberty Tripadvisor is a spinoff of Liberty Interactive's (NASDAQ:QVCA) (QVCB) Tripadvisor stake. It started trading in August 2014.

Now Inc. (NYSE:DNOW): DNOW is a large (top three) 12.10% of the US long portfolio position established in Q3 2014. The bulk of the buying happened the following two quarters at prices between $20.50 and $30. Last quarter saw a ~52% increase at prices between $14.80 and $19.91 and that was followed with another ~10% increase this quarter. The stock currently trades at $14.40. For investors attempting to follow Mecham, DNOW is a good option to consider for further research.

Outerwall Inc. (NASDAQ:OUTR): OUTR is a fairly large position at 6.62% of the US long portfolio. It was established in Q2 2014 and increased by ~120% the following quarter at prices between $53.66 and $72.22. There was another ~20% increase this quarter at prices between $37 and $66. The stock currently trades well below those ranges at $31.66.

Copart Inc. (NASDAQ:CPRT) and Heico Corp. (NYSE:HEI): These two very small stakes (less than ~0.5% of the portfolio each) were increased this quarter.

Kept Steady:

Deswell Industries (NASDAQ:DSWL): DSWL is a minutely small 0.02% of the US long portfolio stake kept steady this quarter.

The spreadsheet below highlights changes to Mecham'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.

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