Chris Davis

Chris Davis

Last Update: 2014-08-13

Number of Stocks: 175
Number of New Stocks: 11

Total Value: $33,639 Mil
Q/Q Turnover: 6%

Countries: USA
Details: Top Buys | Top Sales | Top Holdings  Embed:

Chris Davis Watch

  • Chris Davis Comments on UnitedHealth Group

    UnitedHealth Group (UNH), the largest health care insurance company in the United States, is an example of a headline risk or contrarian holding in the Portfolio. The company focuses solely on its core health care business and has a diversified product line in most major segments including underwriting health insurance plans for large employers, administering plans on a non-risk basis, and offering Medicare Advantage as an alternative to traditional Medicare. In addition the company has successfully built an array of less regulated health care related noninsurance businesses, including the third largest pharmacy benefit management company, and also offers consulting and other services in the area of health care information technology. We view UnitedHealth Group as a well-managed and durable franchise with good growth potential that is overshadowed by current political debates.


    From Chris Davis' Davis New York Venture Fund First Quarter 2014 Update.

      


  • Chris Davis Comments on Paccar

    Paccar (PCAR) is an example of an out-of-the-spotlight holding in the Portfolio. Although not a household name, this more than 100-year-old company is the largest manufacturer of trucks in North America and also has a substantial and growing global presence. Paccar’s brands, including Kenworth and Peterbilt in the United States and DAF in Europe, have earned a reputation for high quality and longevity. Financially strong and resilient, the company regularly buys back shares and has paid a dividend every year since 1941. Management’s interests are aligned with shareholders’ as Paccar’s founding family owns nearly 30% of the company.


    From Chris Davis' Davis New York Venture Fund First Quarter 2014 Update.

      


  • Chris Davis Comments on American Express

    Another example of a global market leader in the Portfolio is American Express (AXP), which combines a strong, upscale charge card brand with ownership of the underlying payment network to create a unique business model. The company attracts some of the most desirable cardholders whose affluence leads to average spending about three times as great as ordinary bank cards. American Express reinforces this higher charge card spending with a market-leading cardholder rewards program, creating a virtuous circle of higher spending and higher rewards. The company earns much of its revenue from the transaction or interchange fees it charges merchants that accept its card. Because its payment network is wholly owned, American Express avoids sharing this important revenue source, generating significantly better economics than the payment networks of its competitors whose interchange fees are shared with banks. We believe American Express is well positioned to benefit over the long term as card-based transactions continue to increase at the expense of cash-based transactions.


    From Chris Davis' Davis New York Venture Fund First Quarter 2014 Update.

      


  • Chris Davis Comments on Google

    Google (GOOGL), an example of a market leader in the Portfolio, globally dominates the business of online search with a market share of more than 65%. We consider Google a new generation media company with a business model that is exceptionally well positioned to capitalize on the continuing transition from traditional print and television media to Internet-based content and advertising. With advertising representing about 95% of its revenue, Google is one of the largest advertising companies in the world. Financially strong, Google is a cash flow machine with no net debt and ample liquidity provided by its substantial cash balances.


    From Chris Davis' Davis New York Venture Fund First Quarter 2014 Update.

      


  • A Conversation with a Third Generation Value Investor - Chris Davis

    Value investing is all in the family for Chris Davis (Trades, Portfolio). From his grandfather to his father and now to him, Chris Davis (Trades, Portfolio) carries on a family tradition of value investing.


    In the interview below Davis explains how he approaches investing by focusing on long term business value and not pieces of paper.

      


  • Another Pick by Peter Lynch

    Oil prices have entered a faithful declining trend in April 2011. Until then, crude oil prices were closer to $130 per barrel of oil equivalent; today, the value has slipped below $110. As a consequence, operating margins in the oil and gas industry have been reduced. For some competitors, the new context meant renewed financial trouble. For others, however, it meant an opportunity to settle the business as competition eased somewhat. Most telling are the actions taken by Statoil (STO), a self-imposed slowdown to guarantee a sounder business model through debt reduction and improvement of reserve replacement ratio. Canadian Natural Resources (CNQ) appears to be taking similar steps, and gurus with long-term positions have not modified their opinion. Last, according to the Peter Lynch’s earnings line, this is a good moment for entering a position in the company.


    Old and New Assets

      


  • Chris Davis' Davis Funds 2013 Portfolio Managers Update

    The chart below summarizes results through December 31, 2013 for Davis New York Venture Fund. As the Fund’s managers, my colleagues and I at Davis Advisors have two objectives: to earn a satisfactory absolute investment return and to generate relative results in excess of the S&P 500® Index. In our view, the data in the chart below presents a mixed picture. Over virtually all periods, the Fund’s absolute returns have been satisfactory. In particular, a one year return of 35% and five year compounded annual return of 16% should be considered extraordinary.1 On a relative basis, we fell short of our goal in a number of these periods. Although both goals are important, if forced to choose between strong absolute returns in which we trailed the market or negative absolute returns in which we beat the market, we would far prefer the former. When people choose to invest rather than spend their hard earned money, their objective is generally to be able to afford something more in the future. For our shareholders, this might mean a child’s or grandchild’s education, a more comfortable retirement, a new house, or simply the peace of mind that comes from being prepared for life’s unexpected expenses. Thus, as stewards of shareholders’ savings, we always remember the wisdom of the old saying, “you can’t eat relative returns.” However, we aim to achieve both goals and unquestionably have ground to make up on a relative basis. The year 2013 was a good start but we have a ways to go.


    The performance presented represents past performance and is not a guarantee of future results. Total return assumes reinvestment of dividends and capital gain distributions. Investment return and principal value will vary so that, when redeemed, an investor’s shares may be worth more or less than their original cost. The total annual operating expense ratio for Class A shares as of the most recent prospectus was 0.88%. The total annual operating expense ratio may vary in future years. Returns and expenses for other classes of shares will vary. Current performance may be higher or lower than the performance quoted. For most recent month-end performance, click here or call 800-279-0279.

      


  • Davis Selected Advisers Chris Davis' Top Five Holdings at Year-End

    Over the past quarter Chris Davis of Davis Selected Advisers reported a total portfolio of 184 stocks valued at $40.93 billion. The guru purchased 14 new stocks over the quarter.



    The Davis Funds select their stocks based on the types of businesses that they would want to own. Their criterion includes companies with proven management and durable, financially strong business models as well as companies with sustainable competitive advantages.
      


  • Sector Watch: Gurus Active on REITs at 52-Week Low

    According to the GuruFocus Value Screen for finding 52-Week Lows, the real estate investment trusts or REITs sector shows 266 companies out of 475 are on a 52-week low. The sector low ratio is 0.56.


    Here’s a look at three REITs, all of them more than 30% off a 52-week high, and screened for billionaire stakeholders as of the third quarter of 2013.

      


  • Chris Davis’ Major Reductions

    Guru Chris Davis of Davis Selected Advisers is averaging a 12-month return of 32.92%. As of the third quarter of 2013, his portfolio lists 181 stocks, 17 of them new, a total value at $38.52 billion, with a quarter-over-quarter turnover of 3%. The portfolio is weighted with top three sectors: financial services at 39.2%, consumer defensive 12.1% and technology at 1 2%.

    In the third quarter, Chris Davis cut his Walt Disney Co. holding by a little more than half. Walt Disney Co. reported financial results for the fourth quarter of fiscal 2013, ended Sept. 28, 2013, with revenue of $11.56 billion, marking a 7% increase over the same quarter a year ago. Quarterly net income was up 12% at $1.39 billion. Earnings of $0.77 per diluted share reflect an increase of 13% over the same quarter a year ago at $0.68.  


  • Chris Davis' Top Five Positions

    Over the past quarter Chris Davis of Davis Selected Advisers reported a total portfolio of 181 stocks valued at $38.5 billion. The guru purchased 17 new stocks over the quarter.

    The Davis Funds select their stocks based on the types of businesses that they would want to own. Their criterion includes companies with proven management and durable, financially strong business models as well as companies with sustainable competitive advantages.  


  • Chris Davis Comments on Google

    Our third largest position is an extraordinary technology company dedicated to organizing the world’s information and making it both useful and accessible to anyone, anytime, anywhere. In just 15 years, this company’s remarkable collection of engineers have been so successful that the company’s once strange-sounding name, Google (GOOG), has become a verb synonymous with Internet search. As a business, the company currently receives payment for the value of its technology by selling advertisers the right to place ads above or alongside a user’s search results. Such advertisements currently represent 95% of Google’s revenue, making the company the largest and most profitable advertising company in history. Because search has the advantage of allowing advertisers to control and track the return on their advertising expenditures (for example, they only pay if the ad is clicked on), they finally have a response to the lament of department store owner John Wanamaker who famously complained, “Half the money I spend on advertising is wasted; the trouble is I don’t know which half.”

    In its core Internet search business, Google is the unquestioned global leader, with a 67% share of all Internet searches in the United States (compared to Bing’s 16% and Yahoo’s 12%), a stunning 93% share in Western Europe and a 74% share globally. While an estimated 80% of all searches still come from desktop PCs and tablets, Google is also the leader in mobile searches, which already account for 20% of searches and are growing rapidly. Google’s costs are largely fixed and consist of people and data centers. Each additional time a user clicks on an ad, the incremental revenue represents almost 100% profit. Google’s current operating margins in the low 30% range understate the company’s true profitability as they include enormous investments in innovative products such as Android, Google+, Google Wallet, and Google TV, which help widen its competitive moat, as well as “blue sky” products such as Google Glass and the Google car.  


  • Chris Davis Comments on American Express

    Our next largest investment is American Express (AXP). In terms of business, American Express has a unique business model that combines one of the strongest brands in financial services with ownership of the underlying payment network. The company’s strong brand, which stands for high-quality service, success and prestige, attracts affluent credit and charge cardholders who spent an average of $15,700 per primary card in 2012, or about four times the level of Visa and MasterCard credit cardholders. American Express reinforces this higher spending with best-in-class customer service and its leading cardholder rewards program, creating a virtuous circle of strong customer satisfaction, higher share of wallet per customer and lower customer turnover.

    In reviewing the company’s competitive advantages, we should start with the obvious observation that using charge cards and credit cards is vastly superior to using cash and checks in terms of convenience, safety and record keeping and thus cards should continue to gain market share from cash and checks for years to come. As noted above, American Express is not the only option within the card industry. However, in comparison to Visa and MasterCard, the company has a number of key competitive advantages. Chief among these are the American Express brand and the higher spending patterns of its wealthy consumer, corporate and small business cardholders. Because American Express customers spend more, merchants are willing to pay the company a higher fee. Furthermore, because American Express is primarily a charge card, rather than a credit card, it is far less reliant on consumer lending for revenue and profits than typical card issuers. For example, the company generates almost four times as much revenue through transaction or interchange fees from merchants ($18 billion) as it does from lending to cardholders ($4.6 billion of net interest income before $2 billion in charge-offs). Cardholder rewards are a key enticement for customers, and with $6.3 billion allocated to rewards in 2012 American Express has the largest program in the industry.  


  • Chris Davis Comments on Bank of New York Mellon

    Our largest position is Bank of New York Mellon (BK). Starting with the business, despite having the word “bank” in its name, Bank of New York Mellon is not a bank in the traditional sense but instead primarily provides a range of processing, custody and investment management services to corporations, governments and financial institutions. While absolutely essential, these services are not easily understood by the layman. To use an analogy, if the financial markets are like a thriving city, then Bank of New York Mellon would be the local electric utility, a necessary but unglamorous element of the city’s infrastructure. The two largest segments (comprising approximately 55% of total company earnings) are asset custody (where it holds $26 trillion in assets on behalf of customers) and issuer services (where it acts as trustee for approximately $11 trillion of debt securities and more than 1,300 depository receipt programs). To put these numbers in perspective, the market capitalization of the entire S&P 500® Index is about $15 trillion and the total government debt outstanding (federal, state and local) in the United States is about $20 trillion. Each of these businesses is an oligopoly in which Bank of New York has a leading position with durable competitive advantages derived from economies of scale, the costs of switching and customer loyalty.

    In addition to the base fee income earned in its investment services business, the bank generates ancillary revenue from foreign exchange trading, securities lending and the interest rate spread on approximately $220 billion of low cost deposits on which the bank currently pays an average interest rate of less than 0.1%. The “moat” around the investment services businesses is evidenced by the high returns on tangible equity that Bank of New York earns—currently in the mid-20’s and historically in the mid-30’s.  


  • Chris Davis Fall 2013 Update - Comments on Bank of New York, Amex, Google

    The chart below summarizes results through June 30, 2013 for Davis New York Venture Fund. As managers of and investors in Davis New York Venture Fund, my partner Ken Charles Feinberg, our colleagues and I have two objectives: to earn a satisfactory absolute investment return and to generate relative results in excess of the S&P 500® Index. As can be seen in the chart, our performance report card might be said to resemble a barbell. Over the very long term and the very short term, results on both an absolute and relative basis are satisfactory. In the middle, however, both are below our standards and expectations. In particular, we call attention to our five year results where an anemic absolute return of 4.5% per year trailed the Index by roughly 2.5% per year.1 While we view this return as unquestionably disappointing, it is some consolation that during a five year stretch that included the collapse of residential real estate, the financial crisis and the Great Recession, the cumulative return of Davis New York Venture Fund has still been roughly 25%. Bearing in mind how many companies, funds and firms were wiped out in those years, we are glad to have made money for our clients. As a final note, it is striking that while investor sentiment continues to be overwhelmingly negative, returns for our Fund and the market have compounded at a rate in the mid-teens for the last four years. Clearly, there is much truth in the old saying that the market climbs a wall of worry. Make no mistake, however, we have ground to make up.

      


  • Davis Funds Buys UnitedHealth, Liberty Global, Air Products & Chemicals, SINA

    Value shop Davis Funds just their second quarter portfolio. The firm has been run by Davis family for three generations. Its flagship fund Davis New York Venture Fund, run by Chris Davis and Ken Feinberg, averaged 6% a year in the last 10 years. The managers said in a recent interview that they are still seeing a lot of opportunities.

    Chris Davis buys UnitedHealth Group, Liberty Global, Laboratory Corporation of America, Air Products & Chemicals, Digital Realty Trust, Inc., Boston Properties Inc, Wesco Aircraft Holdings Inc, SINA Corporation, AvalonBay etc, according to the most recent filings of his investment company, Davis Selected Advisers. As of 06/30/2013, Davis Selected Advisers owns 193 stocks with a total value of $39.4 billion. These are the details of the buys and sells.  


  • Chris Davis' New York Venture Fund Top 5 New Stock Buys

    Chris Davis’ Davis New York Venture Fund has beaten the market since inception, which it attributes to buying durable, well-managed companies at a discount to intrinsic value and holding for the long term. But it is currently in a spot of underperformance. Year to date, the fund trails the S&P500 10.07% to 18.9%.

    The underperformance has precedent though, and in each similar period in the past, the fund came back strong when the gap between price and value in its holdings closed. “The gap between ‘price and value’ in our portfolio today is as large as we have ever seen,” David wrote in a June letter.  


  • Recent Insights from Chris Davis and Ken Feinberg, Portfolio Managers of Davis New York Venture Fund

    Our Commitment to Shareholders

    • Many clients have been invested with Davis for more than two decades. We are very grateful for this loyalty and we will continue to treat these relationships with great care.  


  • Davis New York Venture Fund Q1 2013 Investor Letter

    Q: Please provide your perspective on the market.

    A: The first quarter of 2013 marked the four year anniversary of the powerful stock market rally that followed the financial crisis of 2008–2009. During this time, most market indexes have fully recovered from their 2009 lows and some are near or above their previous all-time highs. The absolute level of stock prices is not what matters when assessing the risk/reward of equities, however. What ultimately counts is the relationship of price to value with the latter determined by long-term earnings power. On that basis stocks continue to represent good value in our view as business fundamentals have in many instances improved even more than share prices. Equities look all the more favorable when compared with U.S. Treasury securities and other asset classes.1 In short, much of our optimism about the stock market in general—and about our Portfolio in particular—is grounded by the reality today that many opportunities exist to purchase worldclass franchises at reasonable prices that can be held for the long term. This fact should bode well for skilled, fundamentals-based investors with a long-term perspective in our opinion.  


  • Chris Davis' Davis New York Venture Fund 2013 Annual Commentary

    The chart below summarizes results through December 31, 2012 for the Davis New York Venture Fund compared with the S&P 500® Index against which my co-manager Ken Charles Feinberg, our colleagues and I judge ourselves. Relative results over all recent periods have fallen short of our goal of matching or exceeding this Index after fees and expenses. Furthermore, although we outpaced the market for the five years from 2002–2007, results in the most recent five years have dragged down our 10 year performance so that we now trail the market by about 0.5% per year.1

      


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