Tracking Gardner Russo & Gardner Portfolio - Q3 2016 Update

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Includes: AHBIF, BF.A, BF.B, BRK.A, BRK.B, BTAFF, BTI, BUD, CFRHF, CFRUY, CMCSA, DEO, DGEAF, FMX, HINKF, HKHHF, JCDXF, JCDXY, MA, MKL, MLM, MO, NSRGF, NSRGY, PDRDF, PDRDY, PM, SNI, SWGAY, SWMAY, UL, UN, UNLNF, V, WFC, XOM
by: John Vincent

Summary

Gardner Russo & Gardner's 13F portfolio increased from $11.94B to $12.02B.

Russo increased JC Decaux and Wells Fargo during the quarter.

The top three 13F stakes are Berkshire Hathaway, Nestle, and Philip Morris International, and they add up to ~31% of the portfolio.

This article is part of a series that provides an ongoing analysis of the changes made to Gardner Russo & Gardner's 13F stock portfolio on a quarterly basis. It is based on Russo's regulatory 13F Form filed on 11/14/2016. Please visit our Tracking Gardner Russo & Gardner Portfolio series to get an idea of their investment philosophy and the last update for their moves during Q2 2016.

This quarter, Gardner Russo & Gardner's 13F stock portfolio increased marginally from $11.94B to $12.02B. The top three holdings are at 30.84% of the portfolio while the top five holdings are at 46.41% of the assets: Berkshire Hathaway (BRK.A BRK.B), Nestle (OTCPK:NSRGY, OTCPK:NSRGF), Philip Morris International (NYSE:PM), MasterCard (NYSE:MA), and Anheuser Busch Inbev (BUD, OTCPK:AHBIF). Recent 13F reports have shown around 100 positions, with around 20 stakes that are significantly large. The focus of this article is on the larger positions.

Note: Russo's portfolio on its own should not be viewed as an overall asset allocation plan, as his clients look at his firm to allocate a portion of their assets to his focus area (global equities with consumer orientation).

Stake Decreases:

Altria Group (NYSE:MO): MO is a ~3% of the portfolio stake. It is a very long-term position. It was a fairly large 4.59% position (1.75M shares - Philip Morris at the time) in Russo's first 13F filing in Q1 1999. The original position grew over the years: it doubled by 2005, and again doubled by 2008. Since then, only very minor adjustments have been made. The current stake is at ~5.9M shares. The stock is now at $65.18. Q4 2015 saw a ~6% reduction at prices between $54 and $62, while the last three quarters have seen marginal further reductions.

British American Tobacco (BTI, OTCPK:BTAFF): A large ~3.75M share position in BTAFF was acquired in 2011 in the high-$30s price range. There were minor purchases in the following years, and the current stake is at 5.06M shares (2.70% of the portfolio). The stock is now at $55.40. The last two quarters have seen marginal reductions.

Note: A minutely small stake in BTAFF was in the portfolio in their first 13F filing in Q1 1999. That position was eliminated in the 2008-2009 time frame.

Brown-Forman (BF.A, BF.B): BF.B is a 2.45% of the 13F portfolio position that has been in the portfolio since their first 13F filing in Q1 1999. The last significant activity was in 2012, when around 1M shares were purchased in the $26-35 price range. There have only been very minor changes since. The position was at ~5.8M shares at EOY 2012, and the current stake is at ~6M shares. The stock is now at ~$46.93. The last five quarters have seen very minor reductions.

Note: The stock prices and share counts quoted above are adjusted for the 2-for-1 stock split in August.

Comcast Corp. (NASDAQ:CMCSA): CMCSA is another very long-term position that has been in the 13F portfolio since their first filing in Q1 1999. The last major activity was between 2008 and 2011, when the original position was reduced by half (from ~10M shares to ~5M shares) at around $20. The current position is at 3.78M shares (2.09% of the portfolio), and the stock is at $70.14. The last four quarters have seen minor trimming.

Heineken Holding NV (OTCQX:HINKF, OTCQX:HKHHF): HKHHF was a fairly large ~5% portfolio stake (~2.5M shares) in their first 13F filing in Q1 1999. That original position was sold out in 2008. It was rebuilt back up to a 10.2M share stake in the 2011-2013 time frame at prices between $37 and $66. The current position is at 10.90M shares, and it is a top-five stake at 7.26% of the portfolio. The stock is now at $70.16. The last three quarters have seen marginal reductions.

Martin Marietta Materials (NYSE:MLM): MLM is a 3.08% of the 13F portfolio stake that has stayed relatively steady since 2004. At the time, Russo had a ~2M share position, and the current stake is at 2.07M shares. Most every quarter has seen minor adjustments, and the stock price increased around four times over that period. It currently trades at $219.

Pernod Ricard (OTCPK:PDRDY, OTCPK:PDRDF): PDRDF is a fairly large 6.21% of the 13F portfolio position. The stake has seen consistent buying every year since the position was established in Q1 2011 in the low $90s price range. 2015 saw a ~9% increase at prices between $100 and $128. The stock is now at $104. Q1 2016 saw a ~3% increase, while last quarter saw another ~6% increase. There was marginal trimming this quarter.

Philip Morris International: PM is a large (top-three) position at 8.34% of the 13F portfolio. It was acquired as a result of the spin-off of Philip Morris International from Philip Morris (now Altria) in 2008. The last major activity was in 2013, when close to 2M shares were acquired in the high $80s price range. The stock currently trades at $90.60.

Scripps Networks Interactive (NYSE:SNI): SNI is a very small 0.62% of the 13F portfolio position that has been in the portfolio since its IPO in July 2008. The IPO was the result of the spin-off of E.W. Scripps Company's (NYSE:SSP) cable TV division as Scripps Networks Interactive. Russo had a ~3.2M share position in E.W. Scripps, and they received an equivalent number of SNI shares. The SSP position was almost sold out the following year. SNI also saw reductions: 2010 saw a ~1M share reduction in the high $40s price range, and the following four years also saw selling at higher prices. The stock is now at $70.06. The last several quarters have seen marginal reductions, and the position is now at ~1.18M shares.

Stake Increases:

Anheuser Busch Inbev SA: BUD is a large (top-five) 7.29% of the 13F portfolio position. The majority of the current position was purchased in 2010 and 2011 at prices between $45 and $64. The following two years also saw significant buying at higher prices. Since then, the position has been kept relatively steady. Q4 2015 saw a ~25% increase at prices between $106 and $130. The stock is now at $105. The last three quarters have seen marginal increases.

Note: Anheuser Busch was a small ~1% of the portfolio position during their first 13F filing in Q1 1999. That stake was eliminated in 2008.

Berkshire Hathaway: BRK.B has been consistently maintained as the largest stake in the portfolio since their first 13F filing in Q1 1999. At the time, the sizing was at 5.78%, compared to the current allocation of 12.08%. The last major activity was in 2012, when around 400K shares were acquired in the low $80s price range. The following year also saw an increase at higher prices. The stock is now at $158. The last quarter saw a very minor reduction, while there was a marginal increase this quarter.

Compagnie Financiere Richemont (OTCPK:CFRHF, OTCPK:CFRUY): A large ~6.5M share stake was established in 2011 in the low $50s price range and was increased to 10.36M shares through incremental purchases in the following years. Q3 2015 saw a ~6% increase at prices between $73 and $86, and that was followed by a ~17% increase the following quarter at prices between $71 and $87. Q1 2016 saw a further ~17% stake increase at prices between $62 and $72. The stock is now at $63.85. The stake is fairly large at 6.06% of the 13F portfolio. The activity indicates a clear bullish bias. There was a ~2% increase this quarter.

Note: CFRHF has seen a previous round-trip in the portfolio: A fairly large 6.33% portfolio stake was purchased in 2001, and the position saw consistent buying till 2007. It was eliminated the following year.

Diageo plc (DEO, OTCPK:DGEAF): DEO is another 2.70% of the portfolio very long-term stake that was sold down in 2008, but built back up starting Q1 2011. Over 6M shares were acquired that quarter in the high $70s price range. The following two years also saw significant buying. The current stake is at ~9.8M shares. The stock is now at $102. The last five quarters have seen only marginal activity.

JC Decaux SA (OTCPK:JCDXF, OTC:JCDXY): JCDXF is a small 1.69% of the portfolio stake that has seen consistent buying since the stake establishment in 2011. 2015 saw a ~240% increase at prices between $34 and $44. Q1 2016 also saw a ~12% stake increase at prices between $34.50 and $43.50. The stock is currently near the low end of those ranges at $26.10. Last quarter saw an ~8% further increase, while this quarter saw another ~4% increase.

MasterCard Inc.: MA is a large 8.28% of the portfolio position first purchased in 2008. The vast majority of the current stake was purchased in 2010 in the low $20s price range. 2011 to 2013 also saw significant buying at higher prices. Since then, it has been kept almost steady. The stock is now at $104. The last three quarters have seen marginal increases.

Nestle SA: NSRGY is the second-largest 13F stake at 10.42% of the portfolio. It was a ~3% portfolio stake in Q1 1999. The position size increased to ~4M shares by 2007, but was sold out the following year. The majority of the current 15.8M shares stake was purchased in 2011 in the mid-$50s price range. The following two years also saw a combined ~45% increase at higher prices. The stock is currently at $67.61.

The Swatch Group (OTCPK:SWGAY): SWGAY was a minutely small stake as of Q3 2015. The following quarter saw a ~600% increase to a significant 2.22% of the portfolio position at prices between $16.50 and $21. That was followed by a ~17% increase in Q1 2016 at prices between $15.50 and $18.50. Last quarter saw another ~12% increase at prices between $13.50 and $18. The stock currently trades at $14.53. The significant buying indicates a clear bullish bias. There was a very minor ~1% further increase this quarter.

Unilever NV (UN, UL, OTCPK:UNLNF): UN is a fairly large 5.51% of the portfolio stake first purchased in 2000. The bulk of the current ~14.32M shares stake was acquired during the 5-year period from 2010 to 2014 at prices in the high $20s to the low $40s. The stock is now at $39.39.

Wells Fargo (NYSE:WFC): WFC is a large 5.82% of the 13F portfolio position. It was already a ~2.5% stake in their first 13F report in Q1 1999. The majority of the current ~15.81M shares position was purchased in the 2011-2013 time frame at prices in the low $20s to the low $40s. The stock is currently at $51.86. There was a ~4% increase this quarter at prices between $44 and $51.

As a percentage of the portfolio, the remaining positions are all below 0.5% of the portfolio each, and so have a limited impact on portfolio performance. Below is a list of stakes that are between 0.1% and 0.5% of the portfolio each: Exxon Mobil (NYSE:XOM), Fomento Economico Mexicano SAB ADR (NYSE:FMX), Markel Corp. (NYSE:MKL), Swedish Match ADR (OTCPK:SWMAY), and Visa Inc. (NYSE:V).

Note: Some of the securities in this report are OTC stocks with very low liquidity in the US markets. As such, it is best to use limit orders and/or use orders in their native markets.

The spreadsheet below highlights changes to Gardner Russo & Gardner's 13F stock holdings in Q3 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.

Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.