Arlington Value Adds Rent-A-Center, TripAdvisor, Liberty Global; Sells Moody's And Armstrong

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Includes: LBTYK, RCII, TRIP
by: Safety In Value

Summary

High-performing hedge fund has a concentrated portfolio.

TripAdvisor and Liberty Global are trading near their lows in a highly valued market.

Rent-A-Center activists have just taken three board seats and will push for a sale.

Arlington Value is a hedge fund based in Utah, run by Allan Mecham. He has become somewhat famous in value investing circles, I would suggest probably because of his similarities to Warren Buffett. He lives and works in a smaller center outside of the pull of Wall Street, and takes concentrated positions. He also has a record of excellent returns, although they are not generally publicly reported, which makes verification of them rather difficult. Nonetheless, I believe his new ideas are worthy of consideration by investors, which is why I have included him in my ongoing updates on the holdings of value investors. You can find an index to the series, with previous articles on Mecham and other value investors here.

In this article, I will focus primarily on new positions, as well as on positions he has reduced. A table showing all of his current holdings appears below.

Company Symbol Value ($000s) Q1 2017 Number of Shares (000s) Change in size from Previous Quarter
ARMSTRONG WORLD INDUSTRIES AWI 1,794 38,971 -76%
AUTONATION INC AN 23,085 545,885 58%
BANK OF AMERICA CORP BAC 28,716 1,217,333 -19%
BERKSHIRE HATHAWAY INC CL A BRK.A 10,743 43 0%
BERKSHIRE HATHAWAY INC CL B BRK.B 153,023 918,068 -17%
CIMPRESS N V CMPR 152,391 1,768,093 20%
COPART INC CPRT 7,670 123,855 5%
DESWELL INDUSTRIES INC DSWL 196 100,981 0%
HEICO CORP NEW - CL A HEI.A 2,364 31,532 2%
INTERACTIVE BROKERS GRO-CL A IBKR 64,487 1,855,181 0%
LEUCADIA NATIONAL CORP LUK 92,660 3,563,868 -12%
LIBERTY GLOBAL INC-SERIES C LBTYK 277 7,926 New
MOODYS CORP MCO 5,598 49,968 -66%
MSC INDUSTRIAL DIRECT CO-A MSM 46,336 450,919 -28%
NOW INC/DE DNOW 48,208 2,842,472 -2%
RAVEN INDUSTRIES INC RAVN 707 24,339 7%
RENT-A-CENTER INC RCII 13,036 1,469,758 New
SENSATA TECHNOLOGIES HOLDING ST 8,796 201,422 69%
TRIPADVISOR INC TRIP 11,057 256,195 New
VALMONT INDUSTRIES VMI 3,539 22,760 6%
WELLS FARGO & COMPANY WFC 26,072 468,429 -30%

Source: SEC Filings, authors analysis

Rent-A-Center

The company sells goods on a rent-to-own basis to primarily low income customers. This is essentially a subprime lender for electronics, furniture and appliances. The company is highly leveraged, which is a potential risk to the thesis here as discussed further here. On the other hand, activists have been pressuring the board to sell the company, and they had a very big win recently. The activists recently won 3 board seats, including the seat formerly held by the current CEO. That will give them significant authority to push for the sale of the company.

TripAdvisor

TRIP runs the biggest online travel review site, which has the natural ability to generate leads for booking travel. The company has recently launched a instant booking travel engine, which is a bit risky because it has them competing with their customers. There is a strong qualitative basis for the company having a competitive moat in travel reviews, as naturally people want to check reviews at the biggest review site. The company is trading only slightly above its 52 week low, and about half its 52 week high. So the current issues have the market offering shares at half off, but the question is how the company will do going forward. Author Intelligent Speculator suggested here the company will have a bright long term future, and it appears Arlington agrees.

Liberty Global

Arlington has dabbled in John Malone's Liberty complex of companies before, and had a small position built in Liberty Global at the end of the quarter. I would suspect he has continued buying, as otherwise this would be a rather small position for the fund. Liberty Global is also trading close to its 52 week lows, and continued political uncertainty in Europe (where it owns cable networks) has been keeping the price down.

The new holdings of a respected value investor are always worth further investigation. I have been following Arlington Value and other noted value investors and reporting on their holdings for some time. If you want to catch up on past reports, you can see the index I keep here, and to be notified of future reports, hit the big orange follow button.

Disclosure: I am/we are long BRK.B IBKR.

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.