This is the Q3 portfolio update for long term value shop Tweedy Browne. Among the more noteworthy positions to their funds were Bank of New York Mellon, Teleperformance, MasterCard, Zurich Financial, Ottogi, and SK Gas.
In their third quarter shareholder letter just published, Tweedy Browne thinks that global equity valuations, while not extraordinary cheap, do appear to be quite reasonable. Considering the firm warned us about the market overvaluation in 2007, this comment is more comforting to value investors.
These are their comment on some of their positions:
Bank of New York Mellon is a securities servicing provider bank with the leading market share in custody of assets. It has the highest credit rating of any of its leading competitors and has Tier 1 capital ratio of 11.4% of assets. It was named custodian for the TARP bailout funds during the crisis. These kinds of banks have sold in the past at premium multiples to traditional lending banks, given the stability of their business models. At purchase, we paid roughly 11 times 2010 consensus earnings, 9.1 times 2011 estimated earnings, and 64% of our estimates of intrinsic value.
Teleperformance is a French outsourcing company with the largest market share in a very fragmented global market, operating call centers in 46 countries, and employing 91,000 employees who speak a wealth of languages on 80,000 work stations. At purchase, it was trading at roughly 7.3 times 2010 earnings before interest and taxes ("EBIT"), and a little over 12 times earnings.
MasterCard is one of the world's leading payment processing and brand licensing companies that collects a toll on transactions and purchase volumes on MasterCard branded credit and debit cards. They do not issue cards or extend credit. They are growing rapidly, particularly outside the U.S., which now accounts for 55% of revenue. While there are regulatory risks associated with an investment in MasterCard, we believe the quality of the company's business, its growth prospects, its competitive position, and its compelling valuation more than offset these risks. At purchase, it was trading at roughly two thirds of our estimate of intrinsic value applying a multiple of 12 times 2011 EBIT.
Zurich Financial is a Swiss-based diversified multi-line insurance carrier that at purchase was trading at approximately 8 times 2010 earnings and at a slight premium to book value with a dividend yield just north of 7%. In addition, we added two new smaller capitalization South Korean companies: Ottogi, a manufacturer of seasonings and instant foods; and SK Gas, a company that imports and distributes liquefied petroleum gas to households, the transportation industry and to petrochemical products manufacturers. At purchase Ottogi was trading at two-thirds of estimated intrinsic value based on a valuation of 10 times EBITA, and SK Gas was trading at roughly 50% of book value; and 4x after-tax earnings assuming that the company's ROE in the future averages at least 12%. Over the last 8 years, the average return on equity for SK Gas was 16%. Both companies have grown at attractive rates in the past.
Tweedy Browne buys Wells Fargo & Company, Mastercard Inc., sells Federated Investors Inc., The Home Depot Inc. during the 3-months ended 09/30/2010, according to the most recent filings of his investment company, Tweedy Browne CO LLC. Tweedy Browne owns 59 stocks with a total value of $2.8 billion. These are the details of the buys and sells.
This is the sector weightings of his portfolio:
These are the top 5 holdings of Tweedy Browne
Added: Bank Of Ny Mellon Cp (BK, Financial)
Tweedy Browne added to their holdings in Bank Of Ny Mellon Cp by 328.08%. Their purchase prices were between $24.16 and $26.85, with an estimated average price of $25.46. The impact to their portfolio due to this purchase was 1.03%. Their holdings were 1,431,817 shares as of 09/30/2010.
Bank of New York is a bank holding company and one of the world's larger financial institutions. Bank Of Ny Mellon Cp has a market cap of $34.2 billion; its shares were traded at around $28.17 with a P/E ratio of 12.04 and P/S ratio of 2.51. The dividend yield of Bank Of Ny Mellon Cp stocks is 1.28%.
Added: Baxter International Inc. (BAX, Financial)
Tweedy Browne added to their holdings in Baxter International Inc. by 17.73%. Their purchase prices were between $41.65 and $48.02, with an estimated average price of $44.46. The impact to their portfolio due to this purchase was 0.78%. Their holdings were 3,017,466 shares as of 09/30/2010.
Baxter engages in the worldwide development, manufacture and distribution of a diversified line of products, systems and services used primarily in the health-care field. Baxter International Inc. has a market cap of $30.11 billion; its shares were traded at around $51.52 with a P/E ratio of 13.21 and P/S ratio of 2.4. The dividend yield of Baxter International Inc. stocks is 2.25%. Baxter International Inc. had an annual average earning growth of 7.1% over the past 10 years. GuruFocus rated Baxter International Inc. the business predictability rank of 3.5-star.
Added: Johnson & Johnson (JNJ, Financial)
Tweedy Browne added to their holdings in Johnson & Johnson by 3.72%. Their purchase prices were between $57.02 and $62.43, with an estimated average price of $59.49. The impact to their portfolio due to this purchase was 0.21%. Their holdings were 2,596,770 shares as of 09/30/2010.
Johnson & Johnson is engaged in the manufacture and sale of a broad range of products in the health care field in many countries of the world. Johnson & Johnson has a market cap of $178.08 billion; its shares were traded at around $64.65 with a P/E ratio of 13.61 and P/S ratio of 2.88. The dividend yield of Johnson & Johnson stocks is 3.34%. Johnson & Johnson had an annual average earning growth of 10.8% over the past 10 years. GuruFocus rated Johnson & Johnson the business predictability rank of 4.5-star.
Added: Broadridge Financial Solutions Inc. (BR, Financial)
Tweedy Browne added to their holdings in Broadridge Financial Solutions Inc. by 53.65%. Their purchase prices were between $18.96 and $23.13, with an estimated average price of $21.09. The impact to their portfolio due to this purchase was 0.2%. Their holdings were 681,945 shares as of 09/30/2010.
Broadridge is a global provider of technology-based outsourcing solutions to the financial services industry. Broadridge Financial Solutions Inc. has a market cap of $2.73 billion; its shares were traded at around $21.51 with a P/E ratio of 14.06 and P/S ratio of 1.23. The dividend yield of Broadridge Financial Solutions Inc. stocks is 2.79%.
Added: Automatic Data Processing Inc. (ADP, Financial)
Tweedy Browne added to their holdings in Automatic Data Processing Inc. by 83.24%. Their purchase prices were between $38.61 and $42.64, with an estimated average price of $40.74. The impact to their portfolio due to this purchase was 0.19%. Their holdings were 278,974 shares as of 09/30/2010.
Automatic Data Processing, Inc. is one of the largest providers of computerized transaction processing, data communication, and information services in the world. Automatic Data Processing Inc. has a market cap of $22.58 billion; its shares were traded at around $45.84 with a P/E ratio of 19.34 and P/S ratio of 2.53. The dividend yield of Automatic Data Processing Inc. stocks is 2.97%. Automatic Data Processing Inc. had an annual average earning growth of 1.9% over the past 10 years. GuruFocus rated Automatic Data Processing Inc. the business predictability rank of 4-star.
Added: Arthur J. Gallagher & Co. (AJG, Financial)
Tweedy Browne added to their holdings in Arthur J. Gallagher & Co. by 84.98%. Their purchase prices were between $24.29 and $26.73, with an estimated average price of $25.47. The impact to their portfolio due to this purchase was 0.11%. Their holdings were 240,049 shares as of 09/30/2010.
Arthur J. Gallagher & Co. and its subsidiaries are engaged in providing insurance brokerage, risk management, employee benefit and other related services to clients in the United States and abroad. Arthur J. Gallagher & Co. has a market cap of $3.03 billion; its shares were traded at around $28.83 with a P/E ratio of 22.01 and P/S ratio of 1.75. The dividend yield of Arthur J. Gallagher & Co. stocks is 4.44%. Arthur J. Gallagher & Co. had an annual average earning growth of 6.1% over the past 10 years.
Added: At&t Inc. (T, Financial)
Tweedy Browne added to their holdings in At&t Inc. by 34.61%. Their purchase prices were between $24.29 and $28.92, with an estimated average price of $26.67. The impact to their portfolio due to this purchase was 0.11%. Their holdings were 399,822 shares as of 09/30/2010.
AT&T Inc. is a premier communications holding company. At&t Inc. has a market cap of $172.96 billion; its shares were traded at around $29.27 with a P/E ratio of 13.01 and P/S ratio of 1.41. The dividend yield of At&t Inc. stocks is 5.74%. At&t Inc. had an annual average earning growth of 2.8% over the past 10 years.
Added: G&k Services Inc. (GKSR, Financial)
Tweedy Browne added to their holdings in G&k Services Inc. by 26.4%. Their purchase prices were between $19.49 and $23.62, with an estimated average price of $21.72. The impact to their portfolio due to this purchase was 0.05%. Their holdings were 317,148 shares as of 09/30/2010.
G&K Services, Inc. is a market leader in branded identity apparel programs and facility services in the United States, and is the largest such provider in Canada. G&k Services Inc. has a market cap of $534.02 million; its shares were traded at around $28.74 with a P/E ratio of 22.11 and P/S ratio of 0.64. The dividend yield of G&k Services Inc. stocks is 1.32%.
New Purchase: Wells Fargo & Company (WFC, Financial)
Tweedy Browne initiated holdings in Wells Fargo & Company. Their purchase prices were between $23.25 and $28.57, with an estimated average price of $26.11. The impact to their portfolio due to this purchase was 1.07%. Their holdings were 1,179,221 shares as of 09/30/2010.
Wells Fargo & Company is a diversified financial services company providing banking, insurance, investments, mortgage and consumer finance services through stores, its Internet site and other distribution channels across North America as well as internationally. Wells Fargo & Company has a market cap of $152.92 billion; its shares were traded at around $29.22 with a P/E ratio of 16.89 and P/S ratio of 1.55. The dividend yield of Wells Fargo & Company stocks is 0.68%. Wells Fargo & Company had an annual average earning growth of 5.1% over the past 10 years.
New Purchase: Mastercard Inc. (MA, Financial)
Tweedy Browne initiated holdings in Mastercard Inc.. Their purchase prices were between $191.98 and $223, with an estimated average price of $208.23. The impact to their portfolio due to this purchase was 0.82%. Their holdings were 100,815 shares as of 09/30/2010.
MASTERCARD INCORPORATED advances global commerce by providing a critical economic link among financial institutions, businesses, cardholders and merchants worldwide. Mastercard Inc. has a market cap of $33.54 billion; its shares were traded at around $256.29 with a P/E ratio of 19.24 and P/S ratio of 6.58. The dividend yield of Mastercard Inc. stocks is 0.23%.
Reduced: Federated Investors Inc. (FII, Financial)
Tweedy Browne reduced to their holdings in Federated Investors Inc. by 23.07%. Their sale prices were between $20.17 and $23.32, with an estimated average price of $21.54. The impact to their portfolio due to this sale was -0.33%. Tweedy Browne still held 1,749,639 shares as of 09/30/2010.
Federated Investors, Inc. is a provider of investment management and related financial services. Federated Investors Inc. has a market cap of $2.62 billion; its shares were traded at around $25.46 with a P/E ratio of 15.34 and P/S ratio of 2.23. The dividend yield of Federated Investors Inc. stocks is 3.77%. Federated Investors Inc. had an annual average earning growth of 3% over the past 10 years.
Reduced: The Home Depot Inc. (HD, Financial)
Tweedy Browne reduced to their holdings in The Home Depot Inc. by 38.69%. Their sale prices were between $27.07 and $31.81, with an estimated average price of $28.87. The impact to their portfolio due to this sale was -0.87%. Tweedy Browne still held 1,952,562 shares as of 09/30/2010.
Home Depot is the one of world's largest home improvement retailer. The Home Depot Inc. has a market cap of $53.16 billion; its shares were traded at around $31.92 with a P/E ratio of 17.54 and P/S ratio of 0.8. The dividend yield of The Home Depot Inc. stocks is 2.96%. The Home Depot Inc. had an annual average earning growth of 10.2% over the past 10 years.
In their third quarter shareholder letter just published, Tweedy Browne thinks that global equity valuations, while not extraordinary cheap, do appear to be quite reasonable. Considering the firm warned us about the market overvaluation in 2007, this comment is more comforting to value investors.
These are their comment on some of their positions:
Bank of New York Mellon is a securities servicing provider bank with the leading market share in custody of assets. It has the highest credit rating of any of its leading competitors and has Tier 1 capital ratio of 11.4% of assets. It was named custodian for the TARP bailout funds during the crisis. These kinds of banks have sold in the past at premium multiples to traditional lending banks, given the stability of their business models. At purchase, we paid roughly 11 times 2010 consensus earnings, 9.1 times 2011 estimated earnings, and 64% of our estimates of intrinsic value.
Teleperformance is a French outsourcing company with the largest market share in a very fragmented global market, operating call centers in 46 countries, and employing 91,000 employees who speak a wealth of languages on 80,000 work stations. At purchase, it was trading at roughly 7.3 times 2010 earnings before interest and taxes ("EBIT"), and a little over 12 times earnings.
MasterCard is one of the world's leading payment processing and brand licensing companies that collects a toll on transactions and purchase volumes on MasterCard branded credit and debit cards. They do not issue cards or extend credit. They are growing rapidly, particularly outside the U.S., which now accounts for 55% of revenue. While there are regulatory risks associated with an investment in MasterCard, we believe the quality of the company's business, its growth prospects, its competitive position, and its compelling valuation more than offset these risks. At purchase, it was trading at roughly two thirds of our estimate of intrinsic value applying a multiple of 12 times 2011 EBIT.
Zurich Financial is a Swiss-based diversified multi-line insurance carrier that at purchase was trading at approximately 8 times 2010 earnings and at a slight premium to book value with a dividend yield just north of 7%. In addition, we added two new smaller capitalization South Korean companies: Ottogi, a manufacturer of seasonings and instant foods; and SK Gas, a company that imports and distributes liquefied petroleum gas to households, the transportation industry and to petrochemical products manufacturers. At purchase Ottogi was trading at two-thirds of estimated intrinsic value based on a valuation of 10 times EBITA, and SK Gas was trading at roughly 50% of book value; and 4x after-tax earnings assuming that the company's ROE in the future averages at least 12%. Over the last 8 years, the average return on equity for SK Gas was 16%. Both companies have grown at attractive rates in the past.
Tweedy Browne buys Wells Fargo & Company, Mastercard Inc., sells Federated Investors Inc., The Home Depot Inc. during the 3-months ended 09/30/2010, according to the most recent filings of his investment company, Tweedy Browne CO LLC. Tweedy Browne owns 59 stocks with a total value of $2.8 billion. These are the details of the buys and sells.
- New Purchases: MA, WFC,
- Added Positions: ADP, AJG, BAX, BK, BR, GKSR, JNJ, T,
- Reduced Positions: FII, HD,
This is the sector weightings of his portfolio:
| Consumer Goods | 28.4% |
| Financials | 21.9% |
| Industrials | 14.5% |
| Health Care | 12.1% |
| Consumer Services | 9.2% |
| Oil & Gas | 8.1% |
| Telecommunications | 4.8% |
These are the top 5 holdings of Tweedy Browne
- PHILIP MORRIS INTERNATIONAL INC (PM) - 6,543,508 shares, 13.25% of the total portfolio. Shares added by 0.05%
- CocaCola FEMSA S.A.B. De C.V. (KOF) - 2,063,250 shares, 5.83% of the total portfolio. Shares reduced by 11.05%
- Johnson & Johnson (JNJ) - 2,596,770 shares, 5.81% of the total portfolio. Shares added by 3.72%
- Berkshire Hathaway Inc. (BRK.A) - 1,222 shares, 5.5% of the total portfolio. Shares reduced by 0.08%
- ConocoPhillips (COP) - 2,519,109 shares, 5.23% of the total portfolio. Shares added by 1.04%
Added: Bank Of Ny Mellon Cp (BK, Financial)
Tweedy Browne added to their holdings in Bank Of Ny Mellon Cp by 328.08%. Their purchase prices were between $24.16 and $26.85, with an estimated average price of $25.46. The impact to their portfolio due to this purchase was 1.03%. Their holdings were 1,431,817 shares as of 09/30/2010.
Bank of New York is a bank holding company and one of the world's larger financial institutions. Bank Of Ny Mellon Cp has a market cap of $34.2 billion; its shares were traded at around $28.17 with a P/E ratio of 12.04 and P/S ratio of 2.51. The dividend yield of Bank Of Ny Mellon Cp stocks is 1.28%.
Added: Baxter International Inc. (BAX, Financial)
Tweedy Browne added to their holdings in Baxter International Inc. by 17.73%. Their purchase prices were between $41.65 and $48.02, with an estimated average price of $44.46. The impact to their portfolio due to this purchase was 0.78%. Their holdings were 3,017,466 shares as of 09/30/2010.
Baxter engages in the worldwide development, manufacture and distribution of a diversified line of products, systems and services used primarily in the health-care field. Baxter International Inc. has a market cap of $30.11 billion; its shares were traded at around $51.52 with a P/E ratio of 13.21 and P/S ratio of 2.4. The dividend yield of Baxter International Inc. stocks is 2.25%. Baxter International Inc. had an annual average earning growth of 7.1% over the past 10 years. GuruFocus rated Baxter International Inc. the business predictability rank of 3.5-star.
Added: Johnson & Johnson (JNJ, Financial)
Tweedy Browne added to their holdings in Johnson & Johnson by 3.72%. Their purchase prices were between $57.02 and $62.43, with an estimated average price of $59.49. The impact to their portfolio due to this purchase was 0.21%. Their holdings were 2,596,770 shares as of 09/30/2010.
Johnson & Johnson is engaged in the manufacture and sale of a broad range of products in the health care field in many countries of the world. Johnson & Johnson has a market cap of $178.08 billion; its shares were traded at around $64.65 with a P/E ratio of 13.61 and P/S ratio of 2.88. The dividend yield of Johnson & Johnson stocks is 3.34%. Johnson & Johnson had an annual average earning growth of 10.8% over the past 10 years. GuruFocus rated Johnson & Johnson the business predictability rank of 4.5-star.
Added: Broadridge Financial Solutions Inc. (BR, Financial)
Tweedy Browne added to their holdings in Broadridge Financial Solutions Inc. by 53.65%. Their purchase prices were between $18.96 and $23.13, with an estimated average price of $21.09. The impact to their portfolio due to this purchase was 0.2%. Their holdings were 681,945 shares as of 09/30/2010.
Broadridge is a global provider of technology-based outsourcing solutions to the financial services industry. Broadridge Financial Solutions Inc. has a market cap of $2.73 billion; its shares were traded at around $21.51 with a P/E ratio of 14.06 and P/S ratio of 1.23. The dividend yield of Broadridge Financial Solutions Inc. stocks is 2.79%.
Added: Automatic Data Processing Inc. (ADP, Financial)
Tweedy Browne added to their holdings in Automatic Data Processing Inc. by 83.24%. Their purchase prices were between $38.61 and $42.64, with an estimated average price of $40.74. The impact to their portfolio due to this purchase was 0.19%. Their holdings were 278,974 shares as of 09/30/2010.
Automatic Data Processing, Inc. is one of the largest providers of computerized transaction processing, data communication, and information services in the world. Automatic Data Processing Inc. has a market cap of $22.58 billion; its shares were traded at around $45.84 with a P/E ratio of 19.34 and P/S ratio of 2.53. The dividend yield of Automatic Data Processing Inc. stocks is 2.97%. Automatic Data Processing Inc. had an annual average earning growth of 1.9% over the past 10 years. GuruFocus rated Automatic Data Processing Inc. the business predictability rank of 4-star.
Added: Arthur J. Gallagher & Co. (AJG, Financial)
Tweedy Browne added to their holdings in Arthur J. Gallagher & Co. by 84.98%. Their purchase prices were between $24.29 and $26.73, with an estimated average price of $25.47. The impact to their portfolio due to this purchase was 0.11%. Their holdings were 240,049 shares as of 09/30/2010.
Arthur J. Gallagher & Co. and its subsidiaries are engaged in providing insurance brokerage, risk management, employee benefit and other related services to clients in the United States and abroad. Arthur J. Gallagher & Co. has a market cap of $3.03 billion; its shares were traded at around $28.83 with a P/E ratio of 22.01 and P/S ratio of 1.75. The dividend yield of Arthur J. Gallagher & Co. stocks is 4.44%. Arthur J. Gallagher & Co. had an annual average earning growth of 6.1% over the past 10 years.
Added: At&t Inc. (T, Financial)
Tweedy Browne added to their holdings in At&t Inc. by 34.61%. Their purchase prices were between $24.29 and $28.92, with an estimated average price of $26.67. The impact to their portfolio due to this purchase was 0.11%. Their holdings were 399,822 shares as of 09/30/2010.
AT&T Inc. is a premier communications holding company. At&t Inc. has a market cap of $172.96 billion; its shares were traded at around $29.27 with a P/E ratio of 13.01 and P/S ratio of 1.41. The dividend yield of At&t Inc. stocks is 5.74%. At&t Inc. had an annual average earning growth of 2.8% over the past 10 years.
Added: G&k Services Inc. (GKSR, Financial)
Tweedy Browne added to their holdings in G&k Services Inc. by 26.4%. Their purchase prices were between $19.49 and $23.62, with an estimated average price of $21.72. The impact to their portfolio due to this purchase was 0.05%. Their holdings were 317,148 shares as of 09/30/2010.
G&K Services, Inc. is a market leader in branded identity apparel programs and facility services in the United States, and is the largest such provider in Canada. G&k Services Inc. has a market cap of $534.02 million; its shares were traded at around $28.74 with a P/E ratio of 22.11 and P/S ratio of 0.64. The dividend yield of G&k Services Inc. stocks is 1.32%.
New Purchase: Wells Fargo & Company (WFC, Financial)
Tweedy Browne initiated holdings in Wells Fargo & Company. Their purchase prices were between $23.25 and $28.57, with an estimated average price of $26.11. The impact to their portfolio due to this purchase was 1.07%. Their holdings were 1,179,221 shares as of 09/30/2010.
Wells Fargo & Company is a diversified financial services company providing banking, insurance, investments, mortgage and consumer finance services through stores, its Internet site and other distribution channels across North America as well as internationally. Wells Fargo & Company has a market cap of $152.92 billion; its shares were traded at around $29.22 with a P/E ratio of 16.89 and P/S ratio of 1.55. The dividend yield of Wells Fargo & Company stocks is 0.68%. Wells Fargo & Company had an annual average earning growth of 5.1% over the past 10 years.
New Purchase: Mastercard Inc. (MA, Financial)
Tweedy Browne initiated holdings in Mastercard Inc.. Their purchase prices were between $191.98 and $223, with an estimated average price of $208.23. The impact to their portfolio due to this purchase was 0.82%. Their holdings were 100,815 shares as of 09/30/2010.
MASTERCARD INCORPORATED advances global commerce by providing a critical economic link among financial institutions, businesses, cardholders and merchants worldwide. Mastercard Inc. has a market cap of $33.54 billion; its shares were traded at around $256.29 with a P/E ratio of 19.24 and P/S ratio of 6.58. The dividend yield of Mastercard Inc. stocks is 0.23%.
Reduced: Federated Investors Inc. (FII, Financial)
Tweedy Browne reduced to their holdings in Federated Investors Inc. by 23.07%. Their sale prices were between $20.17 and $23.32, with an estimated average price of $21.54. The impact to their portfolio due to this sale was -0.33%. Tweedy Browne still held 1,749,639 shares as of 09/30/2010.
Federated Investors, Inc. is a provider of investment management and related financial services. Federated Investors Inc. has a market cap of $2.62 billion; its shares were traded at around $25.46 with a P/E ratio of 15.34 and P/S ratio of 2.23. The dividend yield of Federated Investors Inc. stocks is 3.77%. Federated Investors Inc. had an annual average earning growth of 3% over the past 10 years.
Reduced: The Home Depot Inc. (HD, Financial)
Tweedy Browne reduced to their holdings in The Home Depot Inc. by 38.69%. Their sale prices were between $27.07 and $31.81, with an estimated average price of $28.87. The impact to their portfolio due to this sale was -0.87%. Tweedy Browne still held 1,952,562 shares as of 09/30/2010.
Home Depot is the one of world's largest home improvement retailer. The Home Depot Inc. has a market cap of $53.16 billion; its shares were traded at around $31.92 with a P/E ratio of 17.54 and P/S ratio of 0.8. The dividend yield of The Home Depot Inc. stocks is 2.96%. The Home Depot Inc. had an annual average earning growth of 10.2% over the past 10 years.
