This article is part of a series that provides an ongoing analysis of the changes made to Ruane, Cunniff & Goldfarb's US stock portfolio on a quarterly basis. It is based on their regulatory 13F Form filed on 02/16/2016. Please visit our Tracking Ruane, Cunniff, & Goldfarb's Portfolio article for an idea on their investment philosophy and the moves during Q3 2015.
This quarter, Ruane, Cunniff, & Goldfarb's US long portfolio decreased 7.08% from $20.97B to $19.48B. The number of holdings decreased from 151 to 144. 31 of those stakes are significantly large (more than ~0.5% of the portfolio each) and they are the focus of this article. The top three holdings are at almost 41.61% while the top five are at 53.36% of the US long assets: Valeant Pharmaceuticals, Berkshire Hathaway, TJX Companies, Precision Castparts, and Fastenal Company.
The firm is best known as the investment advisor of the Sequoia Fund (MUTF:SEQUX) which has a venerable 46-year track record. Bill Ruane was a Benjamin Graham pupil. To learn about Benjamin Graham's teachings, check out the classics The Intelligent Investor and Security Analysis.New Stakes:
Allergan plc (NYSE:AGN): AGN is a 1.93% of the US long portfolio stake established last quarter at prices between $252 and $340. This quarter saw a marginal reduction. The stock is currently at $287.
Berkshire Hathaway (NYSE:BRK.A) (NYSE:BRK.B): BRK.B was the largest position in the portfolio for many years through 2010. The even larger Valeant Pharmaceuticals stake was established that year. Currently, BRK.B is the second-largest position at 14.07% of the portfolio. Last three quarters saw minor increases while this quarter saw a marginal reduction. The last significantly large increase happened in 2012 when the position was increased by roughly one-third at prices between $76 and $92. The stock is now at $131.
Fastenal Company (NASDAQ:FAST): FAST is a fairly large (top five) 5.49% of the portfolio stake. The original position is from 2001 & 2002 at a cost-basis just under $10 per share. The stock saw three 2-for-1 stock-splits during the holding period and the current position is at ~24M shares. The last significant activity was in 2014 when the position was increased by ~20% at a cost-basis in the mid-40s. The stock is currently at $44.54.
Note: They have a ~8.19% ownership stake in the business.
Alphabet Inc. (NASDAQ:GOOG) (NASDAQ:GOOGL) previously Google: GOOG is a fairly large 4.82% of the portfolio position first purchased in 2008. That original stake was almost sold out the following year. In 2010, a much larger position was built in the mid-200s price-range. The stake has seen only very minor activity since. Last two quarters have seen marginal reductions. The stock is now at $696.
Idexx Laboratories (NASDAQ:IDXX): IDXX is a medium-sized 3.33% of the portfolio stake. The original position is from 2003 when ~1.6M shares (~6.4M shares after accounting for the two 2-for-1 stock splits since) were acquired at a cost-basis of around $11. The position size has wavered over the years and the current stake is at ~8M shares. This quarter saw a marginal reduction. The stock currently trades at $71.70.
Note: Their ownership stake in the business is 8.82%.
Mastercard Inc. (NYSE:MA): MA is a 2.95% of the portfolio stake established soon after its IPO in 2006 at a split-adjusted cost-basis of $4.50 per share. The original position was huge at ~2.4M shares (24M shares after accounting for the 10-for-1 stock-split in 2014). It was sold down by ~72% over the next two years. Since then, the stake was kept relatively steady as the stock marched higher to the current price of ~$86.27 per share. Last quarter saw a marginal increase while this quarter saw a very minor reduction.
Note: During Investor Day 2015, management admitted not holding on to the originally huge position in Mastercard as an investment mistake.
Mohawk Industries (NYSE:MHK): MHK is a very long-term 2.94% of the portfolio position first purchased in 2001. The position became a significantly large stake in Q3 2002 when close to 10M shares were purchased at a cost-basis of around $50. The position size was reduced by around two-thirds in the 2012-13 timeframe at progressively higher prices. Since then, the sizing has remained relatively steady. Last quarter saw a very minor increase while this quarter saw marginal selling. The stock is currently at $167.
Note: They have a ~3.7% ownership stake in the business.
O'Reilly Automotive (NASDAQ:ORLY): ORLY is a large 5.11% of the portfolio stake first purchased in 2004 when around ~1.9M shares (~3.8M shares after accounting for the 2-for-1 stock split in 2005) at around $20 per share. The position size has remained remarkably steady over the years and the current stake is at ~3.5M shares. The stock has had a tremendous run (~13x return) over the holding period. It is now at $259.
Note: Their ownership stake in the business is 3.6%.
Perrigo Company plc (NYSE:PRGO): PRGO is a small 1.19% of the portfolio position first purchased in Q3 2010 at prices between $56 and $66. The position was kept almost steady since. Q2 2015 saw a ~14% reduction at prices between $163 and $204. The stock currently trades at $125. This quarter saw a marginal decrease.
Note: Mylan NV (NASDAQ:MYL) made a hostile takeover bid for PRGO but the tender offer lapsed in November 2015.
TJX Companies (NYSE:TJX): TJX is a large (top three) 7.05% of the portfolio position. It is a very long-term stake and the holding period is at just over 15 years. The stock has seen a ~15x return over that timeframe. The position size has wavered over the years. 2015 saw significant selling: one-third reduction at prices between $64 and $73. The stock is now at $72.68.
Note: They have a ~2.6% ownership stake in the business.
58.com Inc. (NYSE:WUBA), American Express (NYSE:AXP), Cabelas Inc. (NYSE:CAB), Constellation Software (OTCPK:CNSWF), Costco Wholesale (NASDAQ:COST), Danaher Corp. (NYSE:DHR), Goldman Sachs (NYSE:GS), International Business Machines (NYSE:IBM), Jacobs Engineering (NYSE:JEC), Monsanto Company (NYSE:MON), Omnicom Group (NYSE:OMC), Praxair (NYSE:PX), Sirona Dental Systems (NASDAQ:SIRO), Tiffany & Co. (NYSE:TIF), Visa Inc. (NYSE:V), Wal-Mart Stores (NYSE:WMT), and Waters Corp. (NYSE:WAT): These are very small (less than ~1.5% of the portfolio each) stakes that were reduced further during the quarter.
Note: They have a 4.98% ownership stake in SIRO.Stake Increases:
Precision Castparts (BATS:PCP): PCP. The stake was acquired during the market lows in Q2 2009 at a cost-basis in the low-70s. The original position was kept almost steady until Q1 2015 when it was increased by ~15% at prices between $200 and $241. This quarter saw another one-third increase at prices between $230 and $232.
Note: In August 2015, Berkshire Hathaway agreed to buy PCP for $235 per share cash and the transaction closed last month.
Valeant Pharmaceuticals (NYSE:VRX): VRX is Ruane, Cunniff, & Goldfarb's largest stock position at 20.49% of the 13F portfolio. The original position was acquired in Q2 & Q3 2010 at a cost-basis in the low-20s. Around 34M shares were acquired over those two quarters. Although minor adjustments were made every quarter, the current stake is very close to that original position at 35.38M shares. Last two quarters have seen minor increases. The stock is currently at $79.28.
Note 1: Their ownership stake in VRX is at 10.37%.
Note 2: As Valeant tumbled in October 2015, two directors resigned, hinting at a lack of consensus over the unusually large VRX stake.
Range Resources (NYSE:RRC): RRC is a very small 0.83% position that saw a minor increase this quarter.Kept Steady:
Primerica Inc. (NYSE:PRI): PRI is a very small 0.78% of the portfolio stake first purchased in Q2 2010. The position was kept relatively steady since. Q2 2015 saw a ~20% reduction at prices between $44 and $51. The stock currently trades at $41.88.
Note: Their ownership stake in the business is 5.97%.
As a percentage of the portfolio, the remaining positions are all below 0.5% of the portfolio each and so have limited portfolio performance impact. Below is a list of stakes that are between 0.1% and 0.5% of the portfolio each: Athenahealth Inc. (NASDAQ:ATHN), Brown & Brown Inc. (NYSE:BRO), Coca-Cola Co. (NYSE:KO), Emcor Group Inc. (NYSE:EME), Hexcel Corp. (NYSE:HXL), IAC Interactive (IACI), Interactive Brokers Group (NASDAQ:IBKR), Makemytrip (NASDAQ:MMYT), Third Point Reinsurance (NYSE:TPRE), Trimble Navigation (NASDAQ:TRMB), West Pharmaceutical Svcs. (NYSE:WST), and Yandex NV (NASDAQ:YNDX).
Note: They have a 6.67% ownership stake in MMYT.
The spreadsheet below highlights changes to Ruane, Cunniff, & Goldfarb's US stock holdings in Q4 2015:
Disclosure: I am/we are long IBM.
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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