Hedge Fund Manager Michael Price's 7 Largest Holdings

Includes: C, COP, GLF, ITT, JCP, SYA, WCBO
by: The Keating Letter

Michael Price is the president of MFP Investments, a firm he founded in 1998. He started his career working under renowned value investor, Max Heine, in 1973. In 1988 he took over Heine’s Mutual Series before selling the firm and starting his hedge fund. MFP Investors has about $800 million under management. Of this, about $650 million is allocated into equities. Price is known as one of the most astute value investors. Although he is on Forbes’ billionaire list, he’s not as well known as some other value managers. It’s well worth your time to follow him and analyze his holdings.

Unlike Bruce Berkowitz, Chase Coleman, and Bill Ackman, all of whom I’ve previously written about, Price does not employ a focused portfolio. He currently holds a bit more than 100 stocks. The top seven stocks make up about 30% of his portfolio. All of these figures are as of the end of the first quarter.

Below are Michael Price’s seven largest holdings:

ITT (NYSE:ITT): This conglomerate makes up 5.5% of Price’s portfolio. He bought into the company in the first quarter. Shares now trade slightly higher than Price’s purchase price because of a run up in the past week. Price most likely is interested in ITT because of its recently announced plans to split itself into three. Defense and water divisions will be spun off and the new ITT will be made up of industrial products. This arrangement should unlock value in the company. I’ve seen sum of the parts analysis putting value at $60 to $100 per share. Shares now trade under $60.

Citigroup (NYSE:C): Price’s Citigroup position makes up 4.8% of his portfolio. He first bought into the stock in the first quarter in 2010 and upped his stake in the Q1 2011. This is also one of Bruce Berkowitz’s and Bill Ackman’s favorite holdings. If you can wrap your head around the business, or at least get yourself comfortable with not knowing what’s in it, shares are attractively priced. They currently are about 20% below the 52 week high and sport a P/B ratio at 0.7. Of course that book value is always subject to a downward revision.

West Coast Bancorp (NASDAQ:WCBO): Price owns 8.8% of this bank and it makes up 4.4% of his portfolio. He’s owned shares since Q1 2010. After a horrendous few years during the crisis, this $330 million market cap bank has turned a profit over the last three quarters. It operates out of Oregon and Washington with 65 branches and $2.5 billion in assets. After a rough patch, it now has a very high capital ratio and declining nonperforming assets. For a more detailed picture, you can view their most recent investor presentation (pdf).

ConocoPhillips (NYSE:COP): Price has owned ConocoPhillips for a long time, since 2006. He’s traded around the position a bit for years and currently owns 346,500 shares. The position makes up 4.1% of his portfolio. Even with a market cap more than $100 billion, there’s been some recent chatter about the company being a takeover candidate. I tend to doubt that, but I don’t doubt how cheap shares are currently trading at. The P/E is around 9 and the dividend yield is 3.4%. And, the big man himself, Warren Buffett, owns 2% of the company.

Gulfmark Offshore (NYSE:GLF): Staying in the oil space, but moving to a much smaller target, Gulfmark Offshore makes up 3.6% of Price’s portfolio. This company is a $1.2 billion market cap oil equipment and services provider. They provide marine transportation to the oil and gas industry, primarily in the North Sea, Southeast Asia, and the Americas. Price has owned shares since the 3rd quarter of 2008 and dramatically increased his ownership level in the first quarter of 2010 when shares dipped below $30. They now trade just under $45.

Symetra Financial (NYSE:SYA): This stock makes up 3.6% of Price’s portfolio. He has owned it since the second quarter of 2010. Symetra is a life insurer with a P/B ratio of 0.7 and a market cap of $1.6 billion that went public in the beginning of 2010. Price probably got interested in the name because it was originally backed by Berkshire Hathaway (NYSE:BRK.A), which owned 21% of the shares post-IPO. It appears that Berkshire Hathaway continues to own all of its original shares.

J.C. Penney (NYSE:JCP): This Bill Ackman favorite jumped in early June because of the announcement that Apple (NASDAQ:AAPL) and Target (NYSE:TGT) vet Ron Johnson was coming on board as the new CEO. The stock makes up 3.4% of Price’s portfolio. He bought into the name in late 2010 and early 2011 at similar prices to what shares are currently trading at. More recently, the retailer disappointed with June same-store sales. Of course, one month is just a blip. Johnson’s worth won’t fully show itself for years. However, with a well-designed compensation package and the help of a lot of extremely smart capital allocators, I expect great things for J.C. Penney over the next three to five years. It appears Price does as well.

Disclosure: I am long BRK.B.

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