This article is part of a series that provides an ongoing analysis of the changes made to Lou Simpson's US stock portfolio on a quarterly basis. It is based on Simpson's regulatory 13F Form filed on 02/14/2017. Please visit our Tracking Lou Simpson's SQL Advisors Portfolio series to get an idea of his investment philosophy and our previous update for the fund's moves during Q3 2016.
This quarter, Simpson's US long portfolio value decreased 5.54% from $2.51B to $2.37B. The number of holdings increased from 12 to 15. The top five positions represent around 55% of the US long assets: Berkshire Hathaway (NYSE:BRK.A) (NYSE:BRK.B), Brookfield Asset Management (NYSE:BAM), Charles Schwab (NYSE:SCHW), Liberty Global (NASDAQ:LBTYK), and Ametek (NYSE:AME).
Since inception in 2011, SQ Advisors have held a very concentrated portfolio of 10 to 15 positions. Lou Simpson classifies his investing philosophy as being more in the "scuttlebutt" mold. To know more about that investing style, check out the book Common Stocks and Uncommon Profits and Other Writings.
Apple Inc. (NASDAQ:AAPL), Tyler Technologies (NYSE:TYL), and Hexcel Corporation (NYSE:HXL): These are the three new positions this quarter. AAPL is a fairly large 5.63% portfolio stake established at prices between $106 and $118 and the stock is now well above that range at $135. The 4.21% TYL position was purchased at prices between $141 and $171 and it currently goes for $156. HXL is a 3.49% portfolio stake established this quarter at prices between $42 and $55 and the stock is now at $52.79.
Berkshire Hathaway: BRK is Simpson's largest position at 12.83% of the portfolio. The original stake was increased by roughly 40% in Q1 2012 at prices between $76 and $82. The position was further increased in the next several quarters. Recent activity follow: Q1 2014 saw a ~26% increase at prices between $109 and $125. The six quarters through Q4 2015 had also seen a combined ~25% increase. There was an about turn in 2016: one-third overall reduction at prices between $126 and $166. BRK.B is now at $167.
Brookfield Asset Management: BAM is the second-largest position at 11.48% of the US long portfolio. The original position is from Q2 2012 at prices between $17.50 and $21.50. Q1 2015 saw a ~50% increase at prices between $32.50 and $36.50 and the following quarter saw a further ~60% increase at prices between $34 and $38. Q3 2015 also saw another ~25% increase at prices between $29.50 and $36. There was an about turn in 2016: ~40% overall reduction at prices between $27.50 and $36. The stock currently trades at $36.80.
Note: BAM stock split 3-for-2 on May 11, 2015. Also, Brookfield Business Partners was spun off in July 2016. The prices quoted above are adjusted for those transactions.
Charles Schwab: SCHW's stake was increased by ~50% during the period from Q4 2011 to Q4 2013 at prices between $11 and $26. Q1 2014 saw an about turn as the stake was reduced by 20% at prices between $23.50 and $28.50. The following five quarters saw a combined ~80% increase at prices between $25 and $33.50. There was a ~38% selling this quarter at prices between $31 and $40.50. The stock currently trades at $41.26. The position is now Simpson's third largest stake at 11.35% of the US long portfolio.
Ametek Inc.: AME is a top five stake at 10.39% of the US long portfolio. The position was established in Q2 2015 at prices between $52 and $55 and increased by ~350% the following quarter at prices between $51 and $57.50. Last three quarters had seen marginal reductions. This quarter saw a ~30% selling at prices between $44 and $51. The stock currently trades at $53.58.
Allison Transmission Holdings (NYSE:ALSN): ALSN is a fairly large ~7% portfolio stake purchased in Q2 2016 at prices between $26 and $29 and increased by ~30% last quarter at prices between $26.50 and $30.50. There was a ~17% trimming this quarter at prices between $27 and $35. The stock is currently at $38.02.
Wabco Holdings (NYSE:WBC): WBC is a fairly large ~5% of the portfolio position established in Q1 2016 at prices between $85 and $107. The stock currently trades at $117. Last two quarters had seen a combined ~9% trimming at prices between $87 and $114. This quarter saw another ~13% selling at prices between $96 and $114.
Liberty Global LiLAC (NASDAQ:LILAK): LILAK is a small 0.88% stake that came about as a result of the spinoff of Liberty LiLAC Group (Latin American assets of the parent company) from Liberty Global in July 2015. Last quarter saw a whopping ~480% stake increase at prices between $27 and $37. There was an about turn this quarter: ~20% reduction at prices between $19.33 and $28.74. The stock is now at $21.85.
Wells Fargo (NYSE:WFC): WFC was a large ~10% position as of last quarter. The stake was almost sold out this quarter at prices between $43.75 and $57.50. The last significantly large purchase was in Q1 2014 when a ~13% increase happened at prices between $44 and $50. The stock currently trades at $57.98.
Liberty Global: LBTYK is a top five 10.62% of the US long portfolio stake established in Q3 2014 at prices between $40 and $43. Q3 2015 saw a ~60% increase at prices between $41 and $51. The stock currently trades well below those ranges at $34.28. Last two quarters had seen minor trimming while this quarter saw a marginal increase. For investors attempting to follow SQ Advisors, Liberty Global is a good option to consider for further research.
Axalta Coating Systems (NYSE:AXTA), Sensata Technologies (NYSE:ST), and Cable One Inc. (NYSE:CABO): These three were the new positions last quarter. All three stakes were increased this quarter. AXTA is a fairly large 6.25% stake established at prices between $26 and $29 and increased by ~3% this quarter. The stock is currently at $29.66. ST is a ~4.5% portfolio position purchased at prices between $34.50 and $40 and increased by ~20% this quarter at prices between $35.50 and $41.
The stock currently trades just above those ranges at $42.01. CABO was a very small 0.78% stake established last quarter. This quarter saw a huge ~550% increase to a ~6% portfolio stake at prices between $570 and $624. The stock currently trades above that range at $636.
The spreadsheet below highlights changes to Simpson's US stock holdings in Q4 2016:
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.