Here's What This 27,589% Gainer Has Been Buying (and Selling)
Every quarter, many money managers have to disclose what they've bought and sold. Their latest moves can shine a bright light on smart stock picks.
Today let's look at the Ruane, Cunniff, & Goldfarb company, founded by the late William Ruane, a student of value investing giant Benjamin Graham, along with Warren Buffett. Ruane founded the Sequoia (SEQUX) mutual fund in 1970, and its performance will show you why you might want to pay attention to the fund company's investments: Since inception and through the end of March 2012, the fund gained a cumulative 27,589%, vs. 6,510% for the S&P 500. Annualized, that's 14.4% vs. 10.6%. Over the past decade, which has been a challenging one for the stock market, Sequoia averaged 6.6% annually, vs. 4.1% for the S&P 500.
Ruane, Cunniff, & Goldfarb's overall portfolio (which may contain holdings other than those of the flagship Sequoia fund) totaled $12.9 billion in value as of March 31, 2012. The company's top three holdings, representing about 35% of its total asset value, were Valeant Pharmaceuticals, TJX, and Berkshire Hathaway.
So what does Ruane, Cunniff, & Goldfarb's latest quarterly 13F filing tell us? Here are a few interesting details:
New holdings include 3M (NYS: MMM) . Recently yielding 2.8%, the company has been raising its payout annually for more than 50 consecutive years. With about a third of its revenue generated in Asia, it's poised to benefit from emerging and developing economies that are growing faster than our own. It also has a long history of innovation, serves some critical and growing industries such as health care, and has hefty profit margins.
Among holdings in which Ruane, Cunniff, & Goldfarb increased its stake was Bank of America (NYS: BAC) . By selling off non-core assets, the company has been collecting moola and bolstering its balance sheet. Its troubled mortgage operations have been holding it back, but those won't last forever. (For those who care about rational compensation plans and corporate governance, though, this company isn't a poster child.)
Ruane, Cunniff, & Goldfarb reduced its stake in lots of companies, including Applied Materials (NAS: AMAT) . The semiconductor fabrication equipment supplier stands to gain from an uptick in demand for consumer products, but it's also been pressured by a slowdown in the solar energy sector due to overcapacity. Bulls are also pleased by recent share buybacks that actually seem to be happening when the stock is at attractive levels.
Finally, Ruane, Cunniff, & Goldfarb unloaded several companies, such as Walgreen (NYS: WAG) and Netflix (NAS: NFLX) . Walgreen has been suffering ever since it cut ties with Express Scripts, losing lots of customers and billions in revenue. Some speculate that it might do well to buy Rite Aid, but that remains mere speculation, along with speculation that Walgreen and Express Scripts might reconcile. My colleague Shubh Datta advises just steering clear of the whole pharmacy benefits management arena until the dust settles.
Netflix's recent troubles are no secret, and have driven the stock down to levels that some find quite compelling, despite worries about competition threatening its future. A new worry is support from the FCC for usage-based broadband pricing, which would interfere with Netflix's all-you-can-eat streaming model.
We should never blindly copy any investor's moves, no matter how talented the investor. But it can be useful to keep an eye on what smart folks are doing. 13F forms can be great places to find intriguing candidates for our portfolios.
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At the time this article was published Longtime Fool contributorSelena Maranjian, whom you canfollow on Twitter, owns shares of Berkshire Hathaway, 3M and Netflix, but she holds no other position in any company mentioned.Click hereto see her holdings and a short bio. The Motley Fool owns shares of Bank of America, Netflix, and Berkshire Hathaway.Motley Fool newsletter serviceshave recommended buying shares of 3M, Berkshire Hathaway, Netflix, and Express Scripts, as well as creating a diagonal call position in 3M. The Motley Fool has adisclosure policy.We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. Try any of our Foolish newsletter servicesfree for 30 days.