Tracking David Winters' Wintergreen Advisers Portfolio - Q1 2016 Update

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Includes: BHI, BTI, CFRUY, CNQ, CTO, GD, GOOG, GOOGL, KO, MO, NSC, NSRGY, RAI, SUHJY, SWGAY, UNP, WGRNX
by: John Vincent

Summary

David Winters’ 13F portfolio decreased from $384M to $279M this quarter.

Wintergreen Fund's largest three positions are Reynolds American, Consolidated-Tomoka Land, and British American Tobacco plc.

A large stake in Canadian Natural Resources was eliminated while also reducing several other large positions.

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

This quarter, Winters' 13F portfolio decreased 27.52% from $384M to $279M. The number of holdings decreased from 9 to 8. The top five holdings represent ~90% of the assets, making it a heavily concentrated portfolio.

The mutual fund (MUTF:WGRNX) has a global orientation: ~37% US, ~20.4% cash & short-term investments, and the rest outside US. Switzerland, Canada, and United Kingdom together account for ~36% of the overall portfolio. AUM is $636M. Performance wise, the fund is down ~0.13% YTD compared to ~0.35% down for the MSCI World Index. The three largest investments are Reynolds American, Consolidated-Tomoka Land, and British American Tobacco plc (NYSEMKT:BTI) and they together account for ~30% of the overall portfolio. Compagnie Financiere Richemont SA (OTCPK:CFRUY), Nestle SA (OTCPK:NSRGY), Swatch Group AG (OTCPK:SWGAY), and Sun Hung Kai Properties (OTCPK:SUHJY) are the other non-US positions in the top-ten.

Note: Wintergreen Fund's tobacco allocation is large at ~28%. In the 13F portfolio, the allocation is even larger at ~52%.

New Stakes:

General Dynamics (NYSE:GD): GD is a very small 0.27% of the US long portfolio stake established this quarter at prices between $124 and $138. The stock currently trades at $144.

Stake Disposals:

Canadian Natural Resource Ltd. (NYSE:CNQ): CNQ was a very long-term position that was in the portfolio since 2006. The stake was built up over several years to 3.2M shares by Q2 2015. The last three quarters had seen a combined ~28% stake reduction at prices between $19 and $27 and the elimination this quarter was at prices between $15.76 and $28.06. The stock currently trades at $28.57.

Norfolk Southern (NYSE:NSC): NSC was a 1.51% of the US long portfolio position purchased in 2011. In Q4 2013, the position was almost eliminated at prices between $76.27 and $92.87. The minutely small 0.42% of the portfolio remainder stake was sold this quarter at prices between $66.60 and $84.75. The stock currently trades at $85.98.

Stake Increases:

None.

Stake Decreases:

Altria Group (NYSE:MO): MO was first purchased in Q1 2012 at prices between $28 and $31. In Q1 2013, the original position was reduced by 26% at prices between $31.44 and $35.32. The last five quarters had seen a combined ~55% stake reduction at prices between $45 and $62. This quarter saw another ~31% selling at prices between $57 and $63. The stock currently trades at $64.57 and the remaining stake is at 16.38% (third-largest) of the 13F portfolio. Winters is harvesting long-term gains from this position.

Baker Hughes (NYSE:BHI): BHI was a minutely small 0.33% of the 13F portfolio stake established in Q3 2015 at prices between $45.76 and $61.70. Last quarter saw a substantial increase to a 1.33% portfolio stake at prices between $43.36 and $57.33. The pattern reversed this quarter: ~17% stake reduction at prices between $38.88 and $47.44. The stock currently trades at $44.63.

Coca Cola Company (NYSE:KO): KO is a very long-term 5.30% of the portfolio position. The original stake was increased by 50% in Q4 2012 when 670,000 shares were purchased at prices between $35.97 and $38.58. Q4 2013 saw an additional 18% stake increase at prices between $37 and $41.31. Q1 2015 saw an about-turn as the position was reduced by ~69% at prices between $39.91 and $43.78. Last quarter saw a ~46% further reduction at prices between $39.80 and $43.84 and that was followed with a ~15% selling this quarter at prices between $41.39 and $46.58. The stock currently trades at $45.35.

Note: Wintergreen Funds is choosing to move on after an unsuccessful activism attempt: In the KO annual meeting last year, Wintergreen voted against the company's directors and later disclosed that they did not believe Coca Cola's management and directors served the interests of shareholders. They also voted against the "say on pay" measure.

Alphabet Inc. (NASDAQ:GOOG) (NASDAQ:GOOGL) previously Google: GOOG is a 10.80% of the portfolio position purchased in 2011 at much lower prices. It had since been kept relatively steady. Last quarter saw a ~26% reduction at prices between $608 and $777 and that was followed with a ~21% reduction this quarter at prices between $678 and $765. Winters is harvesting huge long-term gains from this position. The stock is now at $711.

Reynolds American (NYSE:RAI): RAI is Wintergreen's largest 13F stake at 35.79% of the portfolio. It is a very long-term position that has been in the portfolio since their first 13F filing in Q4 2006. By EOY 2007, the position was aggressively built up to a 12.6% of the portfolio stake. During the market turmoil that followed, the position was substantially reduced and by EOY 2009 the stake was at ~7% of the 13F portfolio. Since then, the position was rebuilt through consistent buying almost every quarter. Last five quarters have seen selling: ~47% overall stake reduction at prices between $32 and $52. The stock currently trades at $50.89.

Union Pacific (NYSE:UNP): UNP is a 4.47% of the US long portfolio stake established in Q2 2013 at prices between $67.50 and $80. Q3 2014 saw a ~47% stake increase at prices between $97 and $110. There was a ~28% reduction last quarter at prices between $75.03 and $97.05 and that was followed with another ~26% selling this quarter at prices between $68.79 and $84.42. The stock currently trades at $82.02.

Kept Steady:

Consolidated-Tomoka Land Company (NYSEMKT:CTO): CTO is a very long-term stake. It was the largest position at over 24% in 2006. The stake was increased by over 60% in 2007 as well. Since then, the position has been kept relatively steady. Wintergreen owns over 1.54M shares which translates to an ownership of 26% of the business. As a percentage of the 13F portfolio, the position stands at 25.55% (second-largest). The stock currently trades at $49.37. It returned ~55% in 2014, was flat for 2015, but has dropped ~5% YTD.

Note: Wintergreen has been very critical of CTO management recently. A proxy fight may be brewing as they have indicated that they plan to vote against certain key proposals. Earlier this year, they sent a couple of letters to the directors stating disclosure failings. Among other things, the fund stated CTO's share repurchase program did not reduce shares outstanding as it only helped to offset some of the options granted to management (CEO was granted options for ~5% of shares outstanding). Wintergreen's stance is for management to either sell the business or liquidate the real-estate assets.

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

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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