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 05/16/2016. Please visit our Tracking Ruane, Cunniff, & Goldfarb's Portfolio article for an idea on their investment philosophy and our previous update for the moves during Q4 2015.
This quarter, Ruane, Cunniff, & Goldfarb's US long portfolio decreased 26.67% from $19.48B to $12.87B. The number of holdings decreased from 144 to 134. 46 of those stakes are significantly large (more than ~0.1% of the portfolio each) and they are the focus of this article. The top three holdings are at 36.32% while the top five are at 48.66% of the US long assets: Berkshire Hathaway, TJX Companies, Fastenal Company, Valeant Pharmaceuticals, and O'Reilly Automotive.
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:
Dentsply Sirona Inc. (NASDAQ:XRAY): XRAY is a 2.32% of the US long portfolio position established this quarter as a result of the acquisition of Sirona Dental (NASDAQ:SIRO) by Dentsply. They had a 2.79M share stake in SIRO (~5% of the business) for which they received ~5M shares (1:1.8142 ratio) of Dentsply Sirona. There was a marginal reduction overall as well. The original SIRO position was from 2011 and they have large unrealized gains.
Chipotle Mexican Grill (NYSE:CMG), JD.com (NASDAQ:JD), and JP Morgan Chase (NYSE:JPM) WTS: These are very small (less than 0.5% of the portfolio each) stakes established this quarter. They had a minutely small position in JPM common last quarter and that was replaced by these warrants.Stake Disposals:
Precision Castparts (BATS:PCP): The large 6.26% PCP 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. Last quarter saw another one-third increase at prices between $230 and $232. In August 2015, Berkshire Hathaway (NYSE:BRK.A) (NYSE:BRK.B) agreed to buy PCP for $235 per share cash and the transaction closed in January thus eliminating the stake and realizing huge long-term gains.
Constellation Software (OTCPK:CNSWF), Hexcel Corp. (HXL, and Sirona Dental Systems : These small (less than ~2% of the portfolio each) stakes as of last quarter were eliminated this quarter.Stake Decreases:
Allergan plc (NYSE:AGN): AGN is a 2.14% of the US long portfolio stake established in Q3 2015 at prices between $252 and $340. Last two quarters have seen minor reductions. The stock is currently at $232.
Berkshire Hathaway : 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 again the largest position at 19.46% of the portfolio. The last significantly activity was in 2012 when there was a one-third increase at prices between $76 and $92. The stock is now at $143. Last two quarters have seen marginal reductions.
Fastenal Company (NASDAQ:FAST): FAST is a fairly large (top three) 7.01% 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. This quarter saw a ~22% selling at prices between $36.53 and $49.87. The previous 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 $46.08.
Note: They have a ~6.4% ownership stake in the business.
Alphabet Inc. (NASDAQ:GOOG) (NASDAQ:GOOGL) previously Google: GOOG is a fairly large 5.28% 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 had seen only very minor activity since. This quarter saw a ~18% reduction at prices between $678 and $765. The stock is now at $724. They are starting to harvest huge long-term gains.
Idexx Laboratories (NASDAQ:IDXX): IDXX is a medium-sized 4.67% 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. Last two quarters have seen marginal reductions. The stock currently trades at $89.74.
Note: Their ownership stake in the business is ~9%.
Mastercard Inc. (NYSE:MA): MA is a 3.81% 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 $96.38 per share. Q3 2915 saw a marginal increase while last two quarters have seen minor reductions.
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 3.89% 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. Q3 2015 saw a very minor increase while last two quarters have seen minor selling. The stock is currently at $196.
Note: They have a ~3.5% ownership stake in the business.
O'Reilly Automotive (NASDAQ:ORLY): ORLY is a large (top five) 6.15% 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 had remained remarkably steady over the years and the stake was at ~3.5M shares as of last quarter. This quarter saw a ~18% reduction at prices between $232 and $277. The stock has had a tremendous run (~13x return) over the holding period. It is now at $264. They are starting to harvest huge long-term gains.
Note: Their ownership stake in the business is ~3%.
TJX Companies (NYSE:TJX): TJX is a large (top three) 9.85% 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. This quarter also saw a ~7% trimming. The stock is now at $75.91.
Note: They have a ~2.4% ownership stake in the business.
Valeant Pharmaceuticals (NYSE:VRX): VRX was Ruane, Cunniff, & Goldfarb's largest stock position at 20.49% of the 13F portfolio as of last quarter. 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 30.31M shares. Last two quarters had seen minor increases while this quarter saw a ~14% trimming. The stock is currently at $26.94 compared to a peak of ~$260 reached in July 2015. The huge price drop has resulted in the stake dropping down to 6.19% of the portfolio.
Note 1: Their ownership stake in VRX is at ~9%.
Note 2: As Valeant tumbled in October 2015, two directors resigned, hinting at a lack of consensus over the unusually large VRX stake. In March this year, Sequoia's CEO Robert Goldfarb retired and the firm's Valeant analyst left.
58.com Inc. (NYSE:WUBA), American Express (NYSE:AXP), Brown & Brown Inc. (NYSE:BRO), Cabelas Inc. (NYSE:CAB), Canadian Natural Resources (NYSE:CNQ), Coca-Cola Co. (NYSE:KO), Costco Wholesale (NASDAQ:COST), Danaher Corp. (NYSE:DHR), Emcor Group Inc. (NYSE:EME), Goldman Sachs (NYSE:GS), IAC Interactive (IACI), International Business Machines (NYSE:IBM), Jacobs Engineering (NYSE:JEC), Monsanto Company (NYSE:MON), Omnicom Group (NYSE:OMC), Praxair (NYSE:PX), Tiffany & Co. (NYSE:TIF), Trimble Navigation (NASDAQ:TRMB), Visa Inc. (NYSE:V), Wal-Mart Stores (NYSE:WMT), Waters Corp. (NYSE:WAT), and West Pharmaceutical Svcs. (NYSE:WST): These are very small (less than ~1.5% of the portfolio each) stakes that were reduced further during the quarter.Stake Increases:
Perrigo Company plc (NYSE:PRGO): PRGO is a small 1.45% 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 $96.20. Last quarter saw marginal decrease while this quarter saw a very minor increase.
Note: Mylan NV (NASDAQ:MYL) made a hostile takeover bid for PRGO but the tender offer lapsed in November 2015.
Vipshop Holdings (NYSE:VIPS): VIPS is a minutely small 0.12% of the portfolio stake that was increased by ~11% this quarter.Kept Steady:
Primerica Inc. (NYSE:PRI): PRI is a very small 1 % 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 $54.97.
Note: Their ownership stake in the business is ~6%.
Athenahealth Inc. (NASDAQ:ATHN), Colfax Corp. (NYSE:CFX), Interactive Brokers Group (NASDAQ:IBKR), Makemytrip (NASDAQ:MMYT), Range Resources (NYSE:RRC), Third Point Reinsurance (NYSE:TPRE), and Yandex NV (NASDAQ:YNDX): These are very small (less than ~1.5% of the portfolio each) positions kept steady this quarter.
Note: They have a ~7% ownership stake in MMYT.
The spreadsheet below highlights changes to Ruane, Cunniff, & Goldfarb's US stock holdings in Q1 2016:
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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