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Tracking Allan Mecham's Arlington Value Capital Portfolio - Q4 2019 Update

John Vincent profile picture
John Vincent


  • Arlington Value Capital’s 13F portfolio value decreased from $1.53B to $1.47B. The number of positions remained steady at 15.
  • Allan Mecham increased Alliance Data Systems while decreasing Berkshire Hathaway and AutoNation.
  • The top three positions are Berkshire Hathaway, Cimpress NV, and Spectrum Brands, and they add up to ~60% of the portfolio.

This article is part of a series that provides an ongoing analysis of the changes made to Allan Mecham's 13F stock portfolio on a quarterly basis. It is based on Mecham's regulatory 13F Form filed on 02/14/2020. Please visit our Tracking Allan Mecham's Arlington Value Capital Portfolio article for an idea on his investment philosophy and our last update for the fund's moves during Q3 2019.

This quarter, Mecham's 13F portfolio value decreased ~4% from $1.53B to $1.47B. The number of holdings remained steady at 15. The top three holdings are at ~60% while the top five are at ~80% of the 13F assets: Berkshire Hathaway (BRK.A) (BRK.B), Cimpress NV (CMPR), Spectrum Brands (SPB), Alliance Data Systems (ADS), and AutoNation (AN). To know more about value investing, check out Value Investing: A Value Investor's Journey Through The Unknown.

New Stakes

Covetrus Inc. (CVET): CVET is a small 1.15% of the portfolio stake established this quarter at prices between $8.75 and $15.

Note: Covetrus was spun off from Henry Schein (HSIC) in a spin-merger with Vets First Choice in February last year. Shares started trading at $36.50 and now go for $11.32.

Stake Disposals

Charter Communications (CHTR): The original 2.46% CHTR stake was purchased in Q3 2018 at prices between $275 and $333. Q4 2018 and Q1 2019 saw the position almost sold out at around the same price range. The remainder stake was disposed this quarter. The stock is now at ~$523.

Stake Increases

Alliance Data Systems: ADS is a large (top five) ~10% of the portfolio position. It was first purchased in Q3 2017 at prices between $210 and $265 with the bulk established in Q1 2018 at prices between $213 and $276. Q1 2019 saw an about turn: ~23% selling at prices between $150 and $182. That was followed with a similar increase next quarter at prices between $134 and $181. The zig-zag trading pattern

This article was written by

John Vincent profile picture
Focused on analyzing 13F reports & building tools to help DIY investors generate absolute returns through exploiting inefficiency, volatility, and momentum.

Analyst’s Disclosure: I am/we are long BAC, BRK.B. 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.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (19)

Mecham has indeed retired. He is offering to permit his LP's to cash out, receive in-kind distributions, or be acquired by another hedge fund manager. Based on my back of the envelope calculations, AV could potentially have lost $500 to $600 million of his investor's capital. Possibly as much as -40% in Q1. Sadly, this was avoidable (see my 2015 post where I questioned the AV track record).
18 Apr. 2020
You seem to indicate the losses are permanent? Do you believe the businesses he owned in the fund are worth 40% less?
value_vulture profile picture
pity. would be nice if another guru manager took a stake now
If investors "cash out", their losses would indeed be permanent. However, it's likely April was profitable so it's also possible a modest recovery occurred for those who held on. His letter to investors suggested a 6-9 month wind down so the ultimate outcome is unknown. What is also unclear is whether Mecham is managing in the interim or not. Would be interested to know, but as usual with AV, there is a shroud of secrecy. I can't even find a web page.
Does anyone have his letters from 2017-nowish??
awgreig profile picture
He just shut the doors after blowing up. Sent out a letter announcing dissolution
Exile of the Mainstream profile picture
@awgreig Joking right? If not link please.
Yeah, it's true. He's closing down the fund. Not sure about blowing up the fund, but the rumor is health issues. Partners are being turned over to Greenberg's fund.
14 Apr. 2020
have some sort of source? I'm not seeing anything.
Thank you john for your work ,
Just one thing on the summary it says brk was increased while ads was decreased, that's a typo as its the opposite
John Vincent profile picture
Hi Emissary,

Thank you for pointing this out. I have put in a correction request.

All the best,
ADS has been an unmitigated disaster.
Pickwick's Value Club profile picture
Sadly yes, seems to be punished 2x as the rest of the sector...bottom should be soon though, its trading as if its going out of business within 3 years...
06 Mar. 2020
It is an odd one. I would have to imagine the confluence of no stable management, activist dumping it, sale of epsilon, sale of underperforming receivables, and just general negativity in the sector is making this a once in a lifetime sort of situation. Basically, if it doesn't go bust (which it has a 99% chance of not doing) it will be a triple, at minimum. New CEO will hopefully instill some confidence in the investing public on the next call.
Pickwick's Value Club profile picture
Don't forget the 50bps rate cut not included in their guidance, let alone the urther 50 bps if they come! With retail clients being a decent (albeit shrinking) part of revenues, in hindsight, i can see this as a great short from $240! But these are 2008 prices now so at least a double by 2021/22
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