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 05/15/2019. 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 Q4 2018.
This quarter, Gardner Russo & Gardner's 13F stock portfolio value increased ~7% from $12.05B to $12.87B. The top three holdings are at one-third of the portfolio while the top five are at ~48% of the assets: Mastercard (NYSE:MA), Berkshire Hathaway (NYSE:BRK.A) (NYSE:BRK.B), Nestle (OTCPK:NSRGY) (OTCPK:NSRGF), Heineken Holding (OTCQX:HKHHF), and Pernod Ricard (OTCPK:PDRDF) (OTCPK:PDRDY). 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).
Mastercard Inc.: MA is currently the largest 13F stake at 13.60% of the portfolio. It was first established in 2008 with the bulk of the current stake purchased in 2010 in the low-20s price range. 2011 to 2013 also saw significant buying at higher prices. Since then, it had been kept almost steady. The stock is now at ~$266. There was a ~19% selling over the last five quarters at prices between $155 and $235.
Note: In the WealthTrack interview in July 2017, Russo picked Mastercard as the one investment to own for everyone. The stock was trading at ~$127 at the time. It invests way beyond others to be at the top of innovation, and it also has a product edge: focus on digital delivery of cash to beneficiaries, especially digitizing government payments.
Berkshire Hathaway: BRK.B had been consistently maintained as the top position in the portfolio since its first 13F filing in Q1 1999. At the time, the sizing was at 5.78% compared to the current allocation of 10.25%. 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 ~$206. There was a ~4% trimming last quarter and another ~6% selling this quarter.
Nestle SA: NSRGY is the third-largest 13F stake at ~10% of the portfolio. It was a ~3% portfolio stake (~460K shares) in Q1 1999. The position size increased to ~4M shares by 2007 but was sold out the following year. The majority of the current ~14M 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 $103. There was a ~14% reduction over the last seven quarters.
Pernod Ricard: PDRDF is a large (top five) 7.34% of the 13F portfolio position. The stake was established in Q1 2011 in the low-90s price range. The two years through Q1 2017 saw a ~17% combined increase at prices between $101 and $126. The interim period had also seen purchases almost every quarter. The stock is now at ~$180. Last two years have seen a combined ~17% reduction at prices between $120 and $172.
Heineken Holding NV: 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 built back up to a 10.20M share stake in the 2011-2013 timeframe at prices between $37 and $66. The current position is at 9.69M shares and it is a large stake at 7.54% of the portfolio. The stock is now at $104. Last two quarters have seen a ~10% trimming.
Unilever NV (UN) (UL) (OTCPK:UNLNF): UN is a fairly large ~6% of the portfolio stake first purchased in 2000. The bulk of the current 13.35M shares stake was acquired during the five-year period from 2010 to 2014 at prices in the high-20s to the low-40s. The stock is now at $61.29. There was a ~13% trimming over the last four quarters.
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 with 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 $79.90. It is currently a large position at ~6% of the 13F portfolio. There was a ~6% trimming over the last two quarters.
Note: In an August 2017 podcast for MOI Global titled "Investing and Mental Models in a Changing World", Russo said Cartier & other brands are all pressured by Alibaba (NYSE:BABA), Amazon (NASDAQ:AMZN), etc. He also hinted at possible anti-trust issues with the Echo product (Amazon owns private-label brands that Echo recommends which they also own).
Philip Morris International (PM): PM is a large position at 6.61% of the 13F portfolio. It was acquired as a result of the spinoff of Philip Morris International from Philip Morris (now Altria) in 2008. Last major activity was in 2013 when close to 2M shares were acquired in the high-80s price range. The stock currently trades at $78.17. Last three quarters have seen a ~8% trimming.
Note: "Capacity to suffer" is a key attribute that Russo looks for - the $2.5B Philip Morris International spent so far on IQOS (delivers nicotine without harmful effects) is an example.
Wells Fargo (WFC): WFC is a fairly large ~5% 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 12.65M shares position was purchased in the 2011 to 2013 time frame at prices in the low-20s to the low-40s. The stock is currently at $45.63. The three quarters thru Q2 2017 had seen a combined ~20% reduction at prices between $44 and $60. There was a ~9% increase in Q3 2018 at prices between $52 and $59. Last two quarters have seen a ~5% trimming.
Martin Marietta Materials (MLM): MLM is a 2.90% of the 13F portfolio stake. It had stayed steady at ~2M shares since 2004 but Q4 2016 saw a significant change: ~12% selling at prices between $169 and $234. The stock price increased around five-times over that 12-year period. It currently trades at ~$231. There was a ~15% stake increase in Q3 2017 at prices between $196 and $228. Last four quarters have seen minor trimming.
Diageo plc (DEO) (OTCPK:DGEAF): DEO is a 2.42% of the portfolio very long-term stake that was sold down in 2008 but built back up from Q1 2011. Over 6M shares were acquired that quarter in the high-70s price-range. The following two years also saw significant buying. Since then, the activity has been minor. The current stake is at ~6.6M shares. The stock is now at ~$173. There was a ~31% reduction over the last six quarters at prices between $132 and $164.
Brown Forman (BF.A) (BF.B): BF.B is a 2.44% of the 13F portfolio position that has been in the portfolio since its first 13F filing in Q1 1999. The last significant activity was in 2012 when around 1M shares were purchased in the $26 to $35 price range. There was a ~23% increase in Q1 2018 at prices between $50.50 and $56.50. The stock is now at $56.50. Last four quarters have seen a combined ~25% selling.
Note: The stock prices and the share counts quoted above are adjusted for the 2-for-1 stock split in August 2016.
Altria Group (MO): MO is a 2.28% of the portfolio stake. 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 position size 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 ~5.11M shares. The stock is now at $51.38. There was a ~9% reduction over the last four quarters.
Comcast Corp. (CMCSA): CMCSA is another very long-term position that has been in the 13F portfolio since its first filing in Q1 1999. The last major activity was between 2008 and 2011 when the original position was reduced by half (from ~20M shares to ~10M shares) at ~$10. The current position is at ~6.3M shares (~1.95% of the portfolio) and the stock is at $41.48. There was a ~11% trimming in the last three quarters.
Note: The prices & share counts quoted above are adjusted for the 2-for-1 stock-split in February 2018.
JC Decaux SA (OTCPK:JCDXF) (OTC:JCDXY): JCDXF is a small 1.63% of the portfolio stake that was built during the period from 2011 thru 2018. 2015 saw a ~240% increase at prices between $34 and $44 while the following year saw another ~40% increase at prices between $25 and $44.50. The stock is currently at $29.43. Q1 to Q3 2017 also saw a ~12% stake increase at prices between $29.50 and $36.50. There was a ~10% trimming over the last two quarters.
Visa Inc. (V): The very small 0.63% V stake saw a ~10% increase in Q2 2018 at prices between $118 and $136 and the stock is currently at ~$170. There was a ~11% trimming this quarter at prices between $128 and $157.
Anheuser-Busch InBev SA (BUD) (OTCPK:AHBIF): BUD is a 5.29% 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. There was a ~25% increase in Q4 2015 as well at prices between $106 and $130. The eleven quarters thru Q3 2018 had also seen another ~25% increase at prices between ~$100 and ~$130. The stock is now well below their recent purchase price ranges at $85.32. For investors attempting to follow Russo, BUD is a good option to consider for further research. Last two quarters have only seen minor adjustments.
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.
The Swatch Group (OTCPK:SWGAY): SWGAY was a minutely small stake as of Q3 2015. The following quarter saw a ~600% increase at prices between $16.50 and $21. 2016 also saw a ~40% stake increase at prices between $12.75 and $17.90. There was another ~7% increase in Q3 2017 at prices between $18 and $21 and that was followed with a similar increase in the following quarter at around the same price range. The stock currently trades at $13.37 and the stake is at 2.59% of the portfolio. Last five quarters have seen only minor adjustments.
Alphabet Inc. (NASDAQ:GOOG) (NASDAQ:GOOGL): GOOG is a small 0.87% position that saw a ~60% stake increase last quarter at prices between $976 and $1203. The stock is now at $1066. This quarter saw a marginal increase.
As a percentage of the portfolio, the remaining positions are all below 0.5% of the portfolio each and so have limited portfolio performance impact. Below are stakes that are between ~0.1% and ~0.5% of the portfolio each: American Express (AXP), Exxon Mobil (XOM), Fomento Economico Mexicano ADR (FMX), and Swedish Match AB (OTCPK:SWMAF).
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 Q1 2019:
Disclosure: I am/we are long PM. 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.