Tracking Allan Mecham's Arlington Value Capital Portfolio - Q1 2020 Update
Summary
- Arlington Value Capital’s 13F portfolio value decreased from $1.47B to $688M. The number of positions increased from 15 to 16.
- Allan Mecham added Wayfair while decreasing most of his top positions.
- The top three stakes are Berkshire Hathaway, Cimpress plc, and AutoNation 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 05/15/2020. 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 Q4 2019.
This quarter, Mecham’s 13F portfolio value decreased ~53% from $1.47B to $688M. The number of holdings increased from 15 to 16. The top three holdings are at ~60% while the top five are at ~78% of the 13F assets: Berkshire Hathaway(BRK.A) (BRK.B), Cimpress plc(CMPR), AutoNation (AN), Spectrum Brands(SPB), and Monro Inc. (MNRO). To know more about value investing, check out Value Investing: A Value Investor's Journey Through The Unknown.
Note: It was reported in April that Allan Mecham will wind down the fund over the next six to nine months due to health issues.
New Stakes
Wayfair Inc. (W) and Molson Coors (TAP): These two are the new positions this quarter. The 1.80% W position was purchased at prices between $23.50 and $110 and the stock currently trades well above that range at ~$181. TAP is a minutely small 0.07% position.
Stake Disposals
Grubhub Inc. (GRUB): GRUB was a minutely small 0.01% of the portfolio position established in Q3 2019 and disposed this quarter.
Stake Increases
None.
Stake Decreases
Berkshire Hathaway: BRK.B is a long-term holding that has been in the portfolio for many years. It is currently the largest position at ~40% of the entire portfolio. The vast majority of the original stake was purchased during the five quarters through Q1 2016 at prices between $124 and $152. Recent activity follows: There was a ~55% stake increase in Q1 2019 at prices between $192 and $209. Next quarter had seen an ~8% stake increase and that was followed with a ~16% increase in Q3 2019 at prices between $196 and $215. The stock is currently at ~$191. The last two quarters have seen a ~38% reduction at prices between ~$160 and ~$230.
Cimpress plc: CMPR is Arlington Value Capital’s second-largest individual stock position at ~12% of the portfolio. It is a long-term stake that has been in the portfolio since the firm’s first 13F filing in Q4 2012. The bulk of the original stake was purchased in Q1 and Q2 2013 at prices between $32 and $49. The next significant buying was in Q3 2015 when there was a ~90% increase at prices between $64.50 and $84.50. The position has since wavered. Recent activity follows: There was a one-third increase in Q1 2019 at prices between $74 and $120. This quarter saw a ~20% selling at prices between $44 and $126. The stock currently trades at $85.42.
Note: Arlington Value Capital has a ~7.4% ownership stake in the business.
AutoNation Inc.: The large ~10% AutoNation stake was first purchased in Q4 2016 at prices between $40 and $50 and increased by ~60% in the following quarter at prices between $42 and $53. The position has wavered. Recent activity follows: Q4 2018 saw a ~70% stake increase at prices between $33 and $43 while in H2 2019 there was a ~20% selling at prices between $41 and $53. This quarter also saw a ~14% selling at prices between ~$22.50 and ~$49. The stock is now at $42.28.
Spectrum Brands: SPB is a large (top five) 9.25% of the portfolio stake established in Q4 2018 at prices between $41.50 and $75. There was a ~13% trimming last quarter at prices between $46.50 and $64. That was followed with a one-third reduction this quarter at prices between ~$24 and ~$64. The stock currently trades at $47.42.
Monro Inc.: MNRO is a large ~9% portfolio stake established in Q2 2017 at prices between $41 and $55 and increased by ~55% in the following quarter at prices between $40 and $56. The stock currently trades at $55.78. The last two years had seen only minor adjustments. This quarter saw an ~8% trimming.
Note: Arlington Value Capital has a ~4.5% ownership stake in Monro Inc.
Interactive Brokers (IBKR): IBKR is a 6.27% stake purchased in Q4 2014 at prices between $24 and $29. The following quarter saw a roughly one-third increase at prices between $28 and $34. There was a ~20% selling in Q4 2018 at prices between $47 and $58. That was followed with another ~12% trimming in H2 2019 at prices between $44.50 and $55. This quarter also saw a ~15% selling at prices between $35 and $57. The stock currently trades at $43.92.
Jefferies Financial Group (JEF) previously Leucadia: JEF was a very small ~1% position in 2013. In H2 2014, that original position was increased by a whopping 15x at prices between $22 and $24.50. Q4 2015 also saw a ~60% increase at prices between $16 and $21. Since then, the position has wavered. This quarter saw a ~23% reduction at prices between $12.25 and $23.72. The stock currently trades at $15.53 and the stake is at ~6% of the portfolio.
Alliance Data Systems (ADS): ADS is a 3.45% 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 continued in Q3 2019: similar reduction at prices between $122 and $159. There was a ~15% stake increase last quarter at prices between $100 and $128 while this quarter saw a ~45% selling at prices between $22.50 and $114. The stock currently trades at $55.17.
Covetrus Inc. (CVET): CVET is a small 1.17% of the portfolio stake established last quarter at prices between $8.75 and $15. There was a ~23% selling this quarter at prices between ~$5.50 and ~$15. Shares started trading at $36.50 and now goes for $17.91.
Note: Covetrus was spun-off from Henry Schein (HSIC) in a spin-merger with Vets First Choice in February last year.
GCI Liberty (GLIBA): The very small ~1% GLIBA stake was established in Q3 2018 at prices between $44.90 and $51. The position had seen only minor adjustments since. This quarter saw a ~37% reduction at prices between ~$42 and ~$79. The stock currently goes for $71.70.
Bank of America (BAC): BAC position was established in Q1 2016 at prices between $12 and $15 and increased by ~28% in Q3 2016 at prices between $12.74 and $16.19. At the time, it was a large ~6% portfolio stake. Q4 2016 saw an about-turn: ~55% selling at prices between $15.50 and $23 and that was followed with another ~20% reduction the following quarter at prices between $22 and $25.50. Q4 2017 also saw a ~55% selling at prices between $25.50 and $30. There was another similar reduction in Q3 2018 at prices between $27.75 and $31.80. This quarter saw the stake almost sold out at prices between ~$18 and ~$35. The stock currently trades at ~$26.
Spirit Airlines (SAVE): SAVE is now a minutely small 0.08% portfolio position. It was established in Q3 2017 at prices between $32 and $54. There was a 24% selling next quarter at prices between $33.50 and $45.50. Q4 2018 also saw a ~50% reduction at prices between $44 and $65. There was a marginal increase in Q1 2019 and minor trimming over the next three quarters. This quarter saw the stake almost sold out at prices between ~$9 and ~$45. The stock currently trades at ~$18.
Kept Steady
Deswell Industries (DSWL): The minutely small DSWL position was kept steady this quarter.
The spreadsheet below highlights changes to Mecham’s 13F stock holdings in Q1 2020:
This article was written by
Analyst’s Disclosure: I am/we are long BAC, BRK.B, TAP. 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.
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John.