Tracking Al Gore's Generation Investment Management Portfolio - Q3 2018 Update

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Includes: ADI, ADP, ALLE, AMZN, APTV, AYI, BAP, BDX, CERN, CL, CMG, COO, CRM, DE, GOOG, HSIC, IR, JD, JLL, MA, MCHP, MELI, MSFT, NKE, SCHW, SPY, ST, TMO, TSM, TXN, V, WAT, XRAY
by: John Vincent
Summary

Generation Investment Management’s 13F portfolio value increased ~11% from $11.33B to $12.53B this quarter.

They increased Analog Devices, Deere, and Dentsply Sirona during the quarter.

The top three positions are Henry Schein, Cooper Companies, and Dentsply Sirona, and they add up to ~23% of the entire portfolio.

This article is part of a series that provides an ongoing analysis of the changes made to Generation Investment Management’s 13F portfolio on a quarterly basis. It is based on Al Gore’s regulatory 13F Form filed on 11/14/2018. Please visit our Tracking Al Gore’s Generation Investment Management Portfolio series to get an idea of their investment philosophy and our previous update for the fund’s moves in Q2 2018.

This quarter, Al Gore’s 13F portfolio value increased ~11% from $11.33B to $12.53B. The number of positions decreased from 33 to 31. The largest five stakes are Henry Schein, Cooper Companies, Dentsply Sirona, Analog Devices, and Thermo Fisher Scientific, and they together account for just over one-third of the total portfolio value. Generation Investment Management’s whitepapers and Al Gore’s books are good precursors for anyone interested in investing based on sustainability analysis.

New Stakes:

None.

Stake Disposals:

JD.com (JD): The original JD purchase in 2014 was in the low-$20s. H1 2017 had seen a ~40% selling at prices between $25.50 and $43. There was an about turn in Q3 2017: ~73% increase at prices between $38 and $48 and that was followed with a ~52% increase next quarter at prices between $36.50 and $43. The pattern reversed last quarter: ~55% reduction at prices between $35 and $44 and the disposal this quarter was at prices between $24.50 and $39.50. The stock is currently at $19.27.

Visa Inc. (V): Visa was a small 1.64% portfolio stake disposed this quarter. The position was established in Q3 2017 at prices between $94 and $106 and the elimination was at prices between $131 and $151. The stock is now at $133.

Stake Increases:

Cooper Companies (COO): The bulk of the large (top three) 7.28% position in COO was purchased in Q4 2016 at prices between $159 and $183. The original stake was doubled in Q1 2018 at prices between $218 and $251 and that was followed with a ~37% increase last quarter at prices between $218 and $237. The stock is now at $270. This quarter saw a marginal increase.

Dentsply Sirona (XRAY): XRAY is a large (top three) 6.50% portfolio stake built in 2014 at prices between $44 and $56. The position has wavered. Recent activity follow: Q1 2018 saw an ~18% stake increase and that was followed with a ~65% increase last quarter at prices between $42 and $51. This quarter saw another ~25% increase at prices between $37.50 and $48.50. The stock currently trades just below the low end of those ranges at $36.51. For investors attempting to follow Generation IM, XRAY is a good option to consider for further research.

Analog Devices (ADI) and MercadoLibre (MELI): These new positions established last quarter were increased this quarter. ADI is now a large (top five) 6.38% position. It was purchased at prices between $87 and $102 and doubled this quarter at prices between $91 and $100. The stock currently trades at $88.64. The 3.29% MELI stake was established at prices between $285 and $356 and it now goes for ~$310. There was a minor ~3% increase this quarter.

Note: MELI had a previous round-trip: it was a very small 0.51% stake established in Q4 2017 at prices between $222 and $329 and disposed next quarter at prices between $315 and $414.

Thermo Fisher Scientific (TMO): TMO is a large (top five) 5.88% portfolio position first purchased in Q3 2016 and more than doubled the following quarter at prices between $141 and $159. Q2 2017 saw another ~20% increase at prices between $152 and $176. The stock currently goes for ~$235. Last five quarters have seen only minor activity.

Microsoft Corporation (MSFT): MSFT is a large 5.58% portfolio position. The stake was first purchased in 2014 and more than doubled the following year at prices between $36 and $56. The position saw a ~50% selling in Q2 2017 at prices between $65 and $72.50 and that was followed with a ~25% reduction in Q4 2017 at prices between $74 and $87. The stock is now at $103. Last three quarters have seen minor increases.

Automatic Data Processing (ADP): ADP is a large 5.17% portfolio stake purchased in Q4 2017 at prices between $109 and $119 and increased by ~160% next quarter at prices between $108 and $124. The stock currently trades well above those ranges at ~$141. Last two quarters have seen another ~16% increase at prices between $114 and $151.

Deere & Co. (DE): DE is a 5.07% portfolio stake. The position is from 2015 at prices between $75 and $97. There was a two-thirds reduction over the first three quarters of 2017 at prices between $103 and $132. Q1 2018 saw another ~41% selling at prices between $148 and $172. The position was rebuilt over the last two quarters at prices between $135 and $159. The stock is now at ~$143.

Jones Lang LaSalle Inc. (JLL): JLL is a 4.90% long-term position first purchased in 2008. By 2013, that original position was doubled to a fairly large ~5% stake through consistent buying every year. The next two years saw selling: ~75% overall reduction at prices between $103 and $178. The pattern reversed in 2016: ~500% increase at prices between $91 and $141. That was followed with a ~30% increase in Q2 2017 at prices between $103 and $125. The stock currently trades at ~$140. Last four quarters have seen only minor adjustments.

Note: Generation IM has a ~9% ownership stake in Jones Lang LaSalle.

Charles Schwab (SCHW): SCHW is a 4.54% portfolio position. The stake is from Q4 2016 at prices between $31 and $40.50. Q2 2017 saw a two-thirds increase at prices between $37.50 and $43 and that was followed with a ~40% increase in the following quarter at around the same price range. The stock is now at $44.08. Last three quarters have seen a combined ~16% increase.

Note: SCHW has seen a previous round-trip. A large ~7.2M share stake purchased in 2013 in the high-teens price-range was disposed the following year at much higher prices.

Cerner Corporation (CERN): CERN is a ~4% of the portfolio position. The stake was established in 2015 and doubled in Q1 2016 at prices between $52 and $60. Q4 2016 also saw another ~50% stake increase at prices between $47 and $62. There was a ~37% selling in Q4 2017 at prices between $64.50 and $73.50 and that was followed with a one-third reduction next quarter at prices between $56.50 and $73. The stock currently trades at $56.91. Last two quarters have seen marginal buying.

Sensata Technologies (ST): The bulk of the 3.59% ST position was purchased in Q2 2016 at prices between $33.50 and $39. Q2 2017 saw a two-thirds increase at prices between $39 and $43.50 and that was followed with ~12% increases each in the next two quarters. The stock currently goes for $46.43. Last three quarters have also seen minor increases.

Note: Generation IM has a ~5% ownership stake in Sensata Technologies NV.

Ingersoll-Rand plc (IR): IR is a 3.49% portfolio position first purchased in 2015 at prices between $51 and $71. The stake saw a ~30% reduction in 2016 at prices between $50.50 and $78.50 and that was followed with another ~50% selling during Q1 to Q3 2017 at prices between $75 and $93. The stock is now at ~$102. There was a ~17% increase last quarter at prices between $80 and $93. This quarter saw marginal buying.

Allegion plc (ALLE): The ALLE stake saw a ~350% increase last quarter at prices between $75 and $87 and that was followed with a ~20% increase this quarter at prices between $77 and $91. The stock is currently at $89.11 and the stake is at 3.29%.

Credicorp Ltd. (BAP): BAP is a 2.76% of the portfolio position established in Q2 2017 at prices between $152 and $183 and increased by ~22% in the following quarter at prices between $179 and $213. It is now at ~$218. Last four quarters have seen a combined ~44% increase at prices between $192 and $236.

Alphabet Inc. (GOOG) (NASDAQ:GOOGL): The ~2% GOOG stake saw a two-thirds increase this quarter at prices between $1,102 and $1,268. The stock currently trades at $1,024.

Colgate-Palmolive (CL), Microchip Technology (MCHP), Texas Instruments (TXN), and Waters Corp. (WAT): These are very small (less than ~1% of the portfolio each) positions increased this quarter.

Stake Decreases:

Henry Schein (HSIC): HSIC became the largest position in Q4 2017 as it saw a ~550% increase at prices between $66.50 and $84.50. There was another ~22% increase next quarter at prices between $63 and $79.50. The stock is now at $83.94 and the stake is at 9.20% of the portfolio. For investors attempting to follow Generation IM, HSIC is a good option to consider for further research. There was a ~5% increase last quarter while this quarter saw a ~4% trimming.

Note: HSIC stock split 2-for-1 last September. Generation IM has a ~9% ownership stake in Henry Schein.

Acuity Brands (AYI): AYI is a 4.63% of the portfolio stake purchased in Q1 2017 at prices between $199 and $240 and increased by ~85% the following quarter at prices between $163 and $204. The stock is currently below those ranges at ~$123. There was a ~12% increase in Q4 2017 at prices between $156 and $178. Last three quarters have seen only minor adjustments. For investors attempting to follow Generation IM, AYI is a good option to consider for further research.

Note: Generation IM controls ~9% of AYI.

Aptiv plc (APTV) previously Delphi Automotive: APTV is a ~2% position. It was first purchased in Q4 2016 at prices between $46 and $55. The following quarter saw a ~28% selling at prices between $50 and $65 while Q2 2017 saw a ~60% increase at prices between $57 and $72. The stock currently trades at ~$73. Q1 2018 saw a ~12% stake increase while this quarter saw a ~25% selling at prices between $84 and $99.

Note: The prices quoted above are adjusted for the Delphi Technologies spinoff last November.

Amazon.com (AMZN), Becton Dickinson (BDX), Chipotle Mexican Grill (CMG), Mastercard Inc. (MA), Nike Inc. (NKE), Salesforce.com (CRM), SPDR S&P 500 Trust (SPY), and Taiwan Semiconductor (TSM): These small (less than ~1.5% of the portfolio each) positions saw reductions this quarter.

Kept Steady:

None.

Below is a spreadsheet that highlights the changes to Al Gore's Generation Investment Management 13F stock portfolio as of Q3 2018:

Al Gore - Generation IM - Q3 2018 13F Report

Disclosure: I am/we are long JD. 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.