Ruane Cunniff

Ruane Cunniff

Last Update: 05-15-2015

Number of Stocks: 155
Number of New Stocks: 6

Total Value: $21,121 Mil
Q/Q Turnover: 1%

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

Ruane Cunniff Watch

  • Correction Is An Opportunity To Buy Range Resources

    Gurus have been activity on Range Resources (NYSE:RRC) in 2015 and Ruane Cunniff (Trades, Portfolio) of Ruane, Cunniff & Goldfarb Inc currently holds 4,005,407 shares of the company. Further, Wallace Weitz (Trades, Portfolio) of Weitz Investment Management Inc holds 2,136,130 shares of the company. While investors can track Gurus action in the real time stock picks section, I will discuss in this article why Range Resources is an interesting stock to consider at this point of time.


    It is important to note here that Range Resources peaked out at $64.75 on May 1, 2015. The stock has subsequently declined by 28% as lower natural gas prices have depressed sentiments. However, the company has sound fundamentals, strong hedged positions and good hedges to ensure strong cash flows. This article will elaborate on these factors, which might also provide some insight on why Gurus find the stock interesting in the energy sector.

      


  • Ruane Cunniff Adds New Positions to Portfolio In Q1FY15

    Ruane Cunniff (Trades, Portfolio) added six new positions to his portfolio during 1QFY15, which leaves him with a total of 155 stocks that are valued around $21.12 billion, and have a quarter over quarter turnover of 1%. Over half of his portfolio consists of stocks in the healthcare sector.


    Cunniff purchased 250,000 shares of LKQ Corp (NASDAQ:LKQ) at an average price of $25.90 a share.

      


  • Fossil: Catching a Break, or Catching a Knife?

    It’s a fine company with a once-impressive string of earnings reports; earnings that not only grew, but grew consistently. And, its watches look good, too!


    Fossil Group, Inc. (NASDAQ:FOSL) has fallen on harder times lately, most recently in February 2015 when it warned earnings for this year and next year would fail to match the level of those in 2014. To make the future even more interesting, Apple (NASDAQ:AAPL) has finally brought out its Watch, which some say could be a category killer (although they’ve been vague on which category).

      


  • Ruane, Cunniff & Goldfarb Inc Comments on Valeant

    A topic many shareholders and clients wanted to discuss with us in 2014 was Valeant (VRX). It is the largest holding in Sequoia by far. One could argue Valeant wasted much of the year on a quixotic effort to buy Allergan (AGN), maker of Botox. Allergan had no interest in being acquired and fought a vicious and savvy public relations campaign to portray Valeant as unworthy of marriage to such a prized catch. In the end, Allergan found a suitor more to its liking in Actavis (ACT), and Actavis agreed to pay a substantially higher price than Valeant had offered.


    In our opinion, much of what Allergan said was wrong but Valeant seemed unprepared for what it should have known would be an aggressive counterattack. The defenses available to the targets of hostile takeovers are considerable and Valeant has now lost three hostile bids for public companies since 2011. Meanwhile, Allergan’s stock price nearly doubled over the past year without so much as a thank you note sent to Valeant CEO J. Michael Pearson.

      


  • Ruane, Cunniff & Goldfarb Inc Comments on CIE FINANCIERE RICHEMONT SA

    In case it’s not clear, we are disappointed with our track record in Europe. Unfortunately, we’re slow learners. We bought two new positions in Europe during the year, one of which already has been sold at a loss. The other, Richemont (XSWX:CFR), ranks among the great luxury houses globally: we believe Cartier is the strongest jewelry brand in the world and is flanked by a stellar portfolio of Swiss watch brands. As the emerging world grows wealthier, we believe the newly affluent will seek ways to project status and enjoy their wealth, benefiting Richemont and our long-time holding Tiffany (TIF). The chairman of Richemont is also an owner whose family built the company over decades. We’re hopeful that will make a difference.

    From Ruane Cunniff (Trades, Portfolio)’s Sequoia Fund Q4 2014 Shareholder Letter.  


  • Ruane, Cunniff & Goldfarb Inc Comments on IMI PLC

    Yet another British company in our portfolio, IMI (LSE:IMI), chose to force a successful CEO into early retirement and replace him with a newcomer because the board of directors wished to change strategy and pursue more acquisitions. Never mind that the existing management had been enormously successful. IMI shares declined 14% during the year in sterling (adjusting for a return of capital during the year). In fairness, we believe the new CEO is quite capable.

    From Ruane Cunniff (Trades, Portfolio)’s Sequoia Fund Q4 2014 Shareholder Letter.  


  • Ruane, Cunniff & Goldfarb Inc Comments on Rolls-Royce

    If Pirelli was a disappointment, the performance of our UK holdings in 2014 was a horror show. Rolls-Royce (LSE:RR.), our largest UK position, seems willing to destroy shareholder value in the name of diversification. Rolls-Royce has a world class business making engines for wide body jets. These engines are often sold at breakeven prices, or even a loss, but come with long-term Total Care service contracts that are quite profitable. Rolls shares a duopoly with General Electric in wide body engines and the barriers to entry for any newcomer would be formidable. Not only is the business intensely regulated, but a new player selling jet engines without an installed base of profitable service contracts likely would lose billions of dollars to capture market share from GE and Rolls. Not surprisingly, Rolls earns more than a 20% return on invested capital in civil aviation and its installed base of service contracts and strong backlog suggest Rolls should grow profitably for years to come.


    And yet Rolls’ board of directors decided that it wanted to diversify deeper into the marine engine and power generation businesses, competitive sectors that are being encroached by low cost Asian players. To pursue this strategy, the board appears to have pushed out a sitting CEO who had crafted the successful Total Care service contract selling model, and replaced him with John Rishton, a board member who, in our meetings with him, has shown minimal awareness of the returns on capital his acquisitions have generated.

      


  • Ruane, Cunniff & Goldfarb Inc Comments on Pirelli

    On the Continent, our largest holding was Pirelli (MIL:PC), the Italian maker of performance tires. Pirelli was down about 11% in dollars in March when we sold it, but had been a solid performer previously. We didn’t sell because of short-term price gyrations but because of concerns over corporate governance. The family that controls Pirelli had decided to sell a significant ownership stake to Rosneft, the Russian oil company that is aligned with President Vladimir Putin. We opted to exit immediately.

    From Ruane Cunniff (Trades, Portfolio)’s Sequoia Fund Q4 2014 Shareholder Letter.  


  • Ruane, Cunniff & Goldfarb’s Sequoia Fund Q4 2014 Shareholder Letter

    Dear Shareholder:


    Sequoia Fund’s results for the quarter and year ended December 31, 2014 appear below with comparable results for the S&P 500 Index:

      


  • Rolls Royce and the Sequoia letter

    At Bronte we have a large position in Rolls Royce (LSE:RR.) - the UK based manufacturer of jet engines.

    Rolls is a relatively simple story - Rolls is part of a duopoly in engines for wide-bodied aircraft (aircraft with two aisles like the Dreamliner, A350, A380, 777 and forthcoming 777X).

    Jet engines cost a fortune to develop and are sold at a loss - but with huge out-year maintenance streams.

    The maintenance is potentially very profitable. If you sell a lot of copies of the jet engine maintenance margins can get very fat.

    This duopoly is almost impossible to break. Not only would a company need to spend billions of dollars before they developed a competitive engine they would then need to sell the engine at a loss for many years until the maintenance streams come on.

    Moreover it is risky.

    If you attach your engine to an unsuccessful plane (like say the A340) production will be a few hundred copies - and you will eat all those development costs for smaller maintenance streams and you will not get scale on maintenance. Making unsuccessful engines or attaching engines to unsuccessful planes is a good way to lose a lot of money.

    Contra: if you attach your engine to a hit plane like the 777 - especially if it is the only engine choice for that plane - you will make thousands of copies of the engine and develop scale in maintenance. And that is profitable in the billions - and maybe even tens of billions of dollars range.

    Rolls has had a few less than successful planes in recent years - let by the A340 but probably including the A380. (The super-jumbo is wondrously fuel inefficient.)

    --

    The bull story revolves around the A350. On paper this new plane is the most fuel efficient long-haul plane in the world - and if that is true it should - over time - receive thousands of orders. (The current order book is slightly over 800.)

    On paper Boeing's forthcoming 777X is a match for the A350 in fuel per seat kilometer - but that plane is still a paper plane. It has not flown yet.

    Rolls Royce is the monopoly engine supplier to the A350. GE the monopoly on the 777X.

    At Bronte we spent considerable time trying to work out whether the A350 was as fuel efficient as it was claimed to be. (Other planes, notably the A380, have not met spec.)

    If the A350 meets spec and does not fail on safety then Airbus will sell many more than the current forward order book and Rolls will have a super-successful engine on its hands. Revenue will more than double over time. Operating margins will probably also double. Rolls Royce stock will be a big winner.

    A test flight came through Sydney and we tried to get the fuel loading statistics from the airport. (No we are not kidding. Alas the plane was refueled by Virgin Australia and not Qantas. I could not get through.) We had other methods to try and assess the numbers too.

    That question really comes down to carrying capacity. The A350-900 is claimed to be able to handle 314 passengers fully loaded. No plane has yet been fitted out with more than 300 seats but some are being delivered later this year with 306 seats.

    If the plane is overweight (because it does not meet specifications) then it won't be able to carry that much load. In that case the airlines would need to spread the seats out. Passengers love this (more leg room) but airlines hate it. Fuel efficiency is compromised.

    Alas the plane that came through Sydney was fitted out with about 260 seats - it was really spacious. This could have been because the plane was overweight - or it could have been because they wanted the plane to appear spacious as Airbus was merely drumming up orders. We could not tell.

    --

    We finally have a definitive answer. We have discussed the matter with pilots who have seen the training manual. That includes take-off weight specs and fuel specifications.

    The plane is as good as its specifications.

    And Rolls Royce should be a great stock.

    This is old-fashioned in-the-weeds stock research.

    --

    There is a bad bit to Rolls Royce though. It has a business in very big diesel engines - sometimes used on ships but even more pertinently used in the stabilizer motors of large oil platforms. All of this business looks pretty bad at the moment - the cycle looks bad - and the barriers to entry look far lower than the core jet engine business.

    Moreover there is no A350 on the horizon - no world-beating product that should make lots and lots of money.

    It is this business - and the seeming willingness of management to commit more capital to this business - that is the bear case for Rolls.

    It is also really the reason why Rolls Royce stock is a bargain.

    And I have never really heard a decent explanation of why Rolls has continued to commit capital here.

    But now I am hearing the whispers of activism. The latest Sequoia letter is pleading for activism. To quote:


    Rolls-Royce, our largest UK position, seems willing to destroy shareholder value in the name of diversification. Rolls-Royce has a world class business making engines for wide body jets. These engines are often sold at breakeven prices, or even a loss, but come with long-term Total Care service contracts that are quite profitable. Rolls shares a duopoly with General Electric Company (NYSE:GE) in wide body engines and the barriers to entry for any newcomer would be formidable. Not only is the business intensely regulated, but a new player selling jet engines without an installed base of profitable service contracts likely would lose billions of dollars to capture market share from GE and Rolls. Not surprisingly, Rolls earns more than a 20% return on invested capital in civil aviation and its installed base of service contracts and strong backlog suggest Rolls should grow profitably for years to come.
      


  • Ruane Cunniff Sells Portions of Five of its Top 10 Stakes

    In contrast to its activity in the third quarter, when nearly half of its transactions involved buying stocks in companies that were new to its portfolio, the majority of Ruane Cunniff (Trades, Portfolio)’s fourth-quarter activity involved selling – including portions of five of its 10 largest existing stakes.


    Ruane Cunniff (Trades, Portfolio) sold 3,659,055 shares of its second-largest stake, in TJX Companies (NYSE:TJX), a Massachusetts-based apparel and home goods company, for an average price of $63.7 a share. The transaction had a -1.15% impact on Ruane Cunniff (Trades, Portfolio)’s portfolio.

      


  • Guru Stocks at 52-Week Lows: RDS.A, CVX, VZ, T, IBM

    Royal Dutch Shell PLC (NYSE:RDS.A) reached the 52-week low of $65.56


    The prices of Royal Dutch Shell PLC (NYSE:RDS.A) shares have declined to close to the 52-week low of $65.56, which is 21.9% off the 52-week high of $83.42. Royal Dutch Shell PLC is owned by 22 Gurus we are tracking. Among them, eight have added to their positions during the past quarter. 8 reduced their positions.

      


  • Walt Disney's Most Recent Stock Information

    Like most other little girls growing up, I always dreamed about becoming a Disney princess when I was younger. My mother dressed me as Tinkerbell when I was a toddler, and I wore the costume every single day, through November, until my father made me take it off because of the stares from strangers in grocery stores and on the streets. No one could understand why this little girl was wearing a tattered lime green costume around Thanksgiving.


    Walt Disney Co (NYSE:DIS) has not lost its impact on society. Younger girls nowadays sing along to the "Frozen" soundtrack and beg their mothers to dress them like Princess Elsa. Disney is much more than movies and toys. The company makes sure no one forgets the movies, new or old, by creating rides at the theme parks and even putting some of the characters on cruiselines and at the resorts. Who wouldn't want to be on a ship with Mickey Mouse and Minnie Mouse?

      


  • What DDM Model Tells Us About The Travelers Companies?

    In a previous article, we analyze the principal drivers of the Travelers Companies, Inc. (NYSE:TRV), a $34.59 billion market cap company that is a leading commercial and personal lines property-casualty insurer that recently expanded its presence in Canada by acquiring Toronto-based Dominion of Canada. In this article, let´s try to calculate the intrinsic value of the stock and make a recommendation.


    Dividends

      


  • Reasons to Invest in Boeing

    In this article, let's take a look at The Boeing Company (NYSE:BA), a $91.63 billion market cap company that is the largest aircraft manufacturer in the world and one of the largest aerospace and defense giant conducting business through three operating segments: Boeing Defense, Space and Security (38%) is the world's fourth-largest military contractor, and Boeing Capital Corp. (1%) primarily finances Boeing aircraft for airlines.


    A potential industry

      


  • United Technologies Is an Opportunity Investment

    In this article, let's take a look at United Technologies Corp. (NYSE:UTX), a $96.95 billion market cap company, a multi-industry holding company that conducts business through five segments: Otis; UTC Climate, Controls & Security; Pratt & Whitney; UTC Aerospace Systems and Sikorsky.


    Defense sector

      


  • Zoetis Will Benefit from Industry Trends

    In this article, let's take a look at Zoetis Inc. (NYSE:ZTS), a $18.88 billion market cap company, which is a global leader in the animal health products industry and emerged as a separate entity following its spin-off from Pfizer (NYSE:PFE) in June 2013.


    Number one

      


  • Weekly CEO Buys Highlight: OPK, QTET, MIC, FAST, OCRX

    According to GuruFocus Insider Data, these are the largest CEO buys during the past week. The overall trend of CEOs is illustrated in the chart below:


    Opko Health Inc (NYSE:OPK): CEO & Chairman, 10% Owner Phillip Md Et Al Frost Bought 106,000 Shares

      


  • It’s Retail and It’s Boring, but it’s TJX Companies

    “Price is what you pay, value is what you get”.


    “It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price”.

      


  • Charles De Vaulx Reports His Top Five of the First Quarter

    Charles De Vaulx of the IVA Funds reported his first quarter holdings this past week. In October the IVA Funds will celebrate their sixth year in the business. The fund maintains a dual investment approach which is split into short- and long-term investments. IVA reports that their short-term (12 to 18 months) investments are in order to preserve capital while their longer term (5 to 10 years) they try to perform better that their equity benchmark. The fund also reported that over the past five years, they achieved both of these goals with their investments.


    Over the past quarter Charles De Vaulx in his IVA Worldwide Fund bought no new stocks bringing the total number of stocks to 98 valued at $5.09 billion. The following five companies are De Vaulx’s largest holdings as of the close of the first quarter.

      


Add Notes, Comments

If you want to ask a question, or report a bug, please create a support ticket.

User Comments

No comment yet



Get WordPress Plugins for easy affiliate links on Stock Tickers and Guru Names | Earn affiliate commissions by embedding GuruFocus Charts
GuruFocus Affiliate Program: Earn up to $400 per referral. ( Learn More)
FEEDBACK