Tracking Tweedy Browne Portfolio - Q1 2016 Update

| About: Tweedy, Browne (TBGVX)

Summary

Tweedy Browne’s US long portfolio increased from $3.41B to $3.63B this quarter.

The largest five individual stock positions are Cisco Systems, Johnson & Johnson, Berkshire Hathaway, Wells Fargo, and Alphabet and they account for ~41% of the US long portfolio.

Cisco Systems and Bank of New York Mellon stakes were increased significantly during the quarter.

This article is part of a series that provides an ongoing analysis of the changes made to Tweedy Browne's US stock portfolio on a quarterly basis. It is based on Tweedy Browne's regulatory 13F Form filed on 05/12/2016. Please visit our Tracking Tweedy Browne Portfolio series to get an idea of their investment philosophy and our previous update for the fund's moves during Q4 2015.

This quarter, Tweedy Browne's US long portfolio increased 6.65% from $3.41B to $3.63B. The number of holdings increased from 49 to 50. The largest position is Cisco Systems at 10.73% of the US long portfolio. Largest five individual stock positions are Cisco Systems, Johnson & Johnson, Berkshire Hathaway, Wells Fargo, and Alphabet Inc. Combined they are at 41.15% of the portfolio. 36 of the 50 13F stakes are significantly large (over ~0.5% of the US long portfolio each) and they are the focus of this article.

Tweedy Browne (MUTF:TBGVX) (MUTF:TWEBX) (MUTF:TBHDX) (MUTF:TBCUX) has released a number of investment research papers over the years and that is a valuable resource for anyone looking to learn from their value investing philosophy. The best known work is "What Has Worked in Investing: Studies of Investment Approaches and Characteristics Associated With Exceptional Returns" that was first released in 1992. Also, Christopher Browne authored the book "The Little Book of Value Investing", a great introduction.

Note: Tweedy Browne's flagship Tweedy Browne Global Value Fund has a global orientation with non-US allocation at ~71% of the portfolio and cash at ~19%. The top five holdings are Safran SA (OTCPK:SAFRF), Roche Holding AG Dividend Right Cert. (OTCPK:RHHVF), Heineken Holding NV (OTCQX:HKHHF) (HINKY), Novartis AG (OTCPK:NVSEF) (NYSE:NVS), and GlaxoSmithKline PLC (OTCPK:GLAXF) (NYSE:GSK). Together, they are at ~15% of the portfolio.

New Stakes:

Avnet Inc. (NYSE:AVT): AVT is a small 0.82% of the US long portfolio stake established this quarter at prices between $37.78 and $44.73. The stock currently trades at $38.95.

Stake Increases:

Agco Corporation (NYSE:AGCO): AGCO was a minutely small stake as of Q3 2015. Last quarter saw a ~92% increase at prices between $43.83 and $51.44 and that was followed with another ~48% increase this quarter at prices between $44 and $53.28. The stock is currently at $52.43 and the position is now at 1.05% of the 13F portfolio.

Bank of New York Mellon (NYSE:BK): BK is a fairly large 5.19% stake first purchased in 2010 in the mid-20s price range. There was a ~11% selling last quarter at prices between $38 and $44. This quarter saw a ~41% stake increase at prices between $32.74 and $38.17. The stock currently trades at $39.74.

Cisco Systems (NASDAQ:CSCO): CSCO was a 2.2% of the US long portfolio position when first established in 2011. It is currently their largest 13F stake at 10.73% of the US long portfolio. The bulk of the current position was purchased in 2012 at prices between $15.50 and $21. This quarter saw a ~45% stake increase at prices between $22.51 and $28.47. The stock currently trades at $26.67. For investors attempting to follow Tweedy Browne, CSCO is a very good option to consider for further research.

International Business Machines (NYSE:IBM): IBM is a 1.71% of the 13F portfolio position established in Q3 2015 at prices between $141 and $173 and increased by ~6% last quarter at prices between $132 and $153. This quarter saw another 22% increase at prices between $118 and $152. The stock currently trades at $148.90. For investors attempting to follow Tweedy Browne, IBM is a good option to consider for further research.

Stake Decreases:

3M Company (NYSE:MMM) and Baxter International (NYSE:BAX): These are medium-sized (less than ~5% of the US long portfolio) long-term stakes in the portfolio. MMM was first purchased in 2008 while BAX stake was established in 2010. The positions have seen very minor reductions in recent quarters. The long-term nature of these stakes indicates a bullish bias toward these businesses.

Baxalta Inc. (BXLT): The 2.77% of the portfolio BXLT stake was established as a result of the spinoff of Baxalta from Baxter International that closed July 1st 2015. Baxter shareholders received one share of BXLT for each share of Baxter held. Last two quarters saw marginal reductions. The stock is now at $41.79.

Note: In January 2016, BXLT accepted an acquisition offer from Shire plc (NASDAQ:SHPG) whereby BXLT shareholders would receive $18 per share cash and 0.1482 shares of SHPG for each BXLT share held. At current prices, the deal is worth ~$43.75 per share.

Berkshire Hathaway (NYSE:BRK.A) (NYSE:BRK.B): Berkshire Hathaway is a very long-term stake that has been in the portfolio since before the financial crisis. It is currently their third-largest position at 8.37% of the US long portfolio. Back in 2009, it was a very small 0.60% of the portfolio position. The bulk of the current stake was purchased in 2010 and 2012 at prices between $65 and $90. The position was marginally reduced in the last eight quarters. The stock currently trades at $143.

Comcast Corporation (NASDAQ:CMCSA): CMCSA is a very long-term stake that has been in the portfolio since before the financial crisis. The stake was reduced by ~11% last quarter at prices between $56 and $63. The stock is now at ~$62. This quarter also saw a marginal further reduction.

ConocoPhillips (NYSE:COP): COP was a minutely small position in 2007. The majority of the current ~2.7M share stake (3% of portfolio) was purchased in 2009 at prices between $37 and $55. The stock currently trades at $43.72. This quarter saw a marginal reduction.

Note: The figures quoted above understate the actual performance of this position as there was a spin-off related price-drop. On May 1, 2012 COP had spun off Phillips 66 whereby COP shareholders received one share of Phillips 66 for every 2 shares of COP.

Devon Energy (NYSE:DVN): DVN is a fairly large 2.86% of the US long portfolio position. It has seen marginal reductions in the last eight quarters. The bulk of the current stake was purchased in 2012 when around 2.2M shares were acquired at prices between $51 and $75. The stock currently trades well below the low end of that range at $32.71. Last quarter saw a ~6% reduction at prices between $28.67 and $47.76 while this quarter saw a marginal further reduction.

Emerson Electric (NYSE:EMR): EMR is a long-term 2.77% stake. The position was first purchased in 2008 and doubled the following year at a cost-basis in the low-30s. Around 40% of that original position was sold in 2010 in the low-50s price-range. It had since been kept relatively steady. Last major activity was in Q2 2015 when the stake saw a ~13% reduction at prices between $55.43 and $61.78. The stock currently trades at $52.91.

Alphabet Inc. (NASDAQ:GOOG) (NASDAQ:GOOGL) previously Google: GOOG is a large (top-five) 5.80% position first purchased in 2012 at much lower prices compared to the current trading price of $713. Last three quarters have seen marginal reductions. Tweedy Browne is sitting on huge long-term gains on this position.

Halliburton Company (NYSE:HAL): HAL is a large 5.03% of the portfolio stake. It was established in 2012 at prices between $27.80 and $38.50. There have only been very minor adjustments since. The stock currently trades at ~$40.

Johnson & Johnson (NYSE:JNJ): JNJ is the second-largest position in the US long portfolio at 10.08%. It is a long-term stake that has been in the portfolio since before the financial crisis. The position was built up from 400K shares to just over 4.3M shares between 2009 and 2012 at prices between $48 and $72. Since then, the stake saw minor selling and that pattern continued this quarter: ~8.4% reduction. The share count is now at 3.38M shares. The stock currently trades at $114. Tweedy Browne is starting to harvest large long-term gains from this position.

MRC Global (NYSE:MRC): The 2.07% MRC stake was purchased in Q3 2015 at prices between $10.91 and $15.72 and increased by ~16% last quarter at prices between $10.91 and $15.36. The stock is now at ~$14. This quarter saw a marginal further reduction.

Note: Tweedy Browne controls ~5.6% of MRC.

Verizon Communications (NYSE:VZ): VZ is a 2.41% of the US long portfolio position established in Q3 2014 at prices between $48.40 and $52. In Q4 2014, the stake was increased by ~38% at prices between $45.42 and $51.50 and that was followed by a ~31% increase in Q2 2015 at prices between $46.61 and $50.55. Last three quarters saw minor reductions. The stock currently trades at $51.48.

Wells Fargo (NYSE:WFC): WFC is the fourth-largest position at 6.17% of the US long portfolio. The initial stake was established in 2010 with the bulk of the current position purchased in 2011 at prices between $25 and $34. The stock currently trades at $49.23. Last quarter saw a ~7% reduction at prices between $51 and $56 and this quarter saw a marginal further reduction.

American Express (NYSE:AXP), American National Insurance (NASDAQ:ANAT), Diageo plc (NYSE:DEO), MasterCard Inc. (NYSE:MA), National Western Life (NASDAQ:NWLI), Novartis AG , Philip Morris (NYSE:PM), Phillips 66 (NYSE:PSX), UniFirst Corporation (NYSE:UNF), Unilever (NYSE:UN) (NYSE:UL), Union Pacific (NYSE:UNP), & Wal-Mart Stores (NYSE:WMT): These are small positions (less than 2% of the US long portfolio) that were reduced marginally this quarter. As the activities were very minor, they do not indicate a clear change in bias.

Kept Steady:

Coca Cola FEMSA (NYSE:KOF), General Electric (NYSE:GE), Illinois Tool Works (NYSE:ITW), Lockheed Martin (NYSE:LMT), and US Bancorp (NYSE:USB): These are very small (less than ~1% of the US long portfolio each) stakes kept steady this quarter.

Other minutely small (less than 0.5% of the US long portfolio each) positions in the 13F portfolio include GlaxoSmithKline, HSBC Holdings (NYSE:HSBC), Royal Dutch Shell (NYSE:RDS.A) (NYSE:RDS.B), Total S A ADR (NYSE:TOT), Connecticut Water Service (NASDAQ:CTWS), Leucadia National (NYSE:LUK), National Oilwell Varco (NYSE:NOV), NOW Inc. (NYSE:DNOW), Shenandoah Tel. (NASDAQ:SHEN), and CKX Lands Inc. (NYSEMKT:CKX).

The spreadsheet below highlights changes to Tweedy Browne's US stock holdings in Q1 2016:

Click to enlarge

Disclosure: I am/we are long CSCO, 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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