Recently, mutual fund rating company Morningstar put some nice words for Sequoia Fund, managed by Ruane, Cunniff & Goldfarb.
Benz: So, let's talk about a couple of your fund ideas. One is kind of a tried-and-true quality-oriented pick, let's talk about that one.
Dorsey: Well, Sequoia Fund. I mean this is a fund that's sort of well known to those inside the industry, because it's ... the firm Ruane, Cunniff... where Warren Buffett told folks who had invested in his partnership that dissolved in the late '60s, he said, well, I think these guys are pretty respectable, you should put your money over there if you still want someone to run it, and that sort of morphed into the Sequoia Fund over time, which was closed for a long, long time. There was actually a secondary market in the shares, if I'm not mistaken. And I think about three years ago, it reopened. And so, this is a fund that's in the top decile of performance over one, three, five, 10, 15 years; charges you are whopping 100 basis points; and is one of the most shareholder-friendly cultures I have ever found, and in the vein of "Keep It Simple Stupid," I mean, what more do you want.
The fund’s website put out a chart shows that if you invested $10,000 in 1970, you would have $1,922,290. That is 14.07% per year. During the same period, S&P also returned 10.09%. Are you regretting you did not live through the same 40 investing years? The truth is, few funds can claim that long history. The ones who do, they may not have as impressive track record.
The Sequoia Fund is certainly a good place to invest you money. But if you are the venturous type of investor who aspires to be his/her stock picker but would like to have a peek what stocks The Sequoia Fund has invested in, GuruFocus has exactly the kind of information for you.
Here are the fund’s top holdings as of June 30, 2010:
No. 1: Berkshire Hathaway Inc. (BRK.A, Financial), Weightings: 14.75% - 9,980 Shares
Berkshire Hathaway … no introduction is necessary. Interesting thing is that the fund has sold down the position in the past two quarters, from 18,616 shares to 9,980 shares, despite as the Morningstar commentator said, the fund has put 20% of the fund’s asset in this one stock 20 years ago.
No. 2: IDEXX Laboratories Inc. (IDXX, Financial), Weightings: 9% - 12,000,089 Shares
IDEXX Laboratories, Inc. is company in providing diagnostic, detection, and information products to the animal health industry as well as quality assurance products and services to the food and water industries. Idexx Laboratories Inc. has a market cap of $3.33 billion; its shares were traded at around $57.64 with a P/E ratio of 26.2 and P/S ratio of 3.2. Idexx Laboratories Inc. had an annual average earning growth of 17.5% over the past 10 years. GuruFocus rated Idexx Laboratories Inc. the business predictability rank of 4.5-star.
No. 3: The TJX Companies Inc. (TJX, Financial), Weightings: 8.74% - 16,906,863 Shares
TJX Companies, Inc. is an off-price retailer of apparel and home fashions in the U. The Tjx Companies Inc. has a market cap of $16.83 billion; its shares were traded at around $41.26 with a P/E ratio of 12.6 and P/S ratio of 0.8. The dividend yield of The Tjx Companies Inc. stocks is 1.5%. The Tjx Companies Inc. had an annual average earning growth of 11.5% over the past 10 years. GuruFocus rated The Tjx Companies Inc. the business predictability rank of 4.5-star.
No. 4: Fastenal Company (FAST, Financial), Weightings: 7.12% - 11,521,673 Shares
Fastenal Company sells industrial and construction supplies grouped into eleven product lines. Fastenal Company has a market cap of $7.33 billion; its shares were traded at around $49.7 with a P/E ratio of 33.8 and P/S ratio of 3.8. The dividend yield of Fastenal Company stocks is 1.7%. Fastenal Company had an annual average earning growth of 17.4% over the past 10 years. GuruFocus rated Fastenal Company the business predictability rank of 5-star.
The Morningstar discussion uses this stock as an example to show the fund is willing to follow Charlie Munger in investing in businesses compounding at high rate and paying a reasonable price for them:
Breen: Absolutely, Fastenal, which you guys cover…
Dorsey: Fastenal, Precision Castparts, there's a lot of names in there, which I think some sort of died-in-the-wool value managers might turn up their noses at, but frankly it's worked well for them, because they, I think, really followed the Charlie Munger philosophy that there are some businesses that are worth paying up a little bit more for, then you ride those for a long time, and it compounds value, and I give them a lot of respect for that.
Breen: And Munger says, if it compounds capital at a high rate, you can't really overpay for it. So people, the classic value guys would look at those companies and say I can't buy this at a P/E of 22, but if it's growing 30% a year compounded for a decade, that's actually cheap. So sort of "price is what you pay, value is what you get" type of thing.
No. 5: Valeant Pharmaceuticals International (VRX, Financial), Weightings: 6.95% - 10,788,269 Shares
Valeant Pharmaceuticals International is a global, publicly traded, research-based specialty pharmaceutical company that discovers, develops, manufactures and markets a broad range of pharmaceutical products. Valeant Pharmaceuticals International has a market cap of $4.94 billion; its shares were traded at around $64.42 with a P/E ratio of 24.9 and P/S ratio of 6.
To see the complete stock holdings of The Sequoia Fund, click: http://www.gurufocus.com/holdings.php?GuruName=Ruane+Cunniff&sort=position
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