Since founding Century Management in 1974, Arnie Van Den Berg has handily beaten all of the indices. Mr. Van Den Berg is a value investor and considers himself a student of Benjamin Graham. He usually holds 35-40 companies when fully invested, and invests primarily in U.S.-headquartered companies.
Since inception, Century Management has applied value investment strategies as its investment philosophy. The value approach to investing always considers the risk of an investment prior to evaluating the potential reward. Century espouses a four principled philosophy of investing. The four principles are: Always Use a Business Approach, Always Use a Margin of Safety, The Market Acts like a Manic-Depressive, Price Determines Return. Century’s defines its business approach: “We approach the purchase of a stock as if we were entering into a business transaction. Therefore, we look at a business as an ongoing concern. If the business is not in a good industry, if sellers are asking too much, or if the business plan and process do not make any sense, then we don't buy the company.” Using a "Margin of Safety" allows Century to create a favorable risk and reward scenario. It allows them to put the odds in our favor. Century characterizes the market as a manic-depressive, “At the extremes, the market is not very efficient or rational and is, therefore, subject to the manic-depressive swings of the investing public. The majority of investors let their emotions take over their decision-making process in deciding whether to buy, sell or hold.” Combining these principles with robust analyses of price and returns rounds out Century’s investment philosophies.
Arnold Van Den Berg remains concerned about the state of the economic recovery, bringing less optimism to his analyses than his peers: “The difficulty lies in not knowing how much lower individual stock prices may go nor how much more short-term pain we must endure before we become the potential beneficiary of what is likely to be much higher returns into the future. While we might have already seen the market bottom, nobody can truly tell where the bottom of the market will be.”
Although many analysts are commenting on the bright possibilities inherent in an economic rebound, Van Den Berg remains cautious. His main concern for his portfolio comes in measuring the market's prospects in comparison to more stable bond returns. “In our opinion, the most important portfolio characteristic we would like to bring to your attention is the value comparison between stocks and bonds today,” he says. Van Den Berg’s pragmatic approach to the economic recovery is reflected in his conservatism.
Top Five Holdings in 2010
Number of Shares
Walmart Stores Inc
Coca Cola Company
Applied Materials Inc
Microsoft Corporation is engaged in developing, manufacturing, licensing and supporting a range of software products and services for different types of computing devices. Its software products and services include operating systems, server applications, information worker productivity applications, business solutions applications, computing applications, software development tools, and video games. It also designs and sells hardware, including the Xbox 360 gaming and entertainment console and accessories, the Zune digital music and entertainment device and accessories, and Microsoft personal computer (PC) hardware products.
Their shares trade around $26.68, with a P/E ratio of 11.31 and an EPS of $2.36.In the last quarter of 2010, Microsoft had revenue of $19.53 billion and a net income of $6.63 billion. Cloud computing and mobile device have become increasingly dominant aspects of the computing market, but despite the strength of its competitors, Microsoft is well-positioned. Van Den Berg evaluates Micorsoft’s potential: “Given the return potential of this company, along with its AAA financial security, we have to ask the following question: Why would investors buy its bonds, or for that matter U.S. Treasury bonds, instead of Microsoft stock?”
Walmart Stores Inc. (NYSE:WMT)
Wal,art Stores Inc. operates retail stores. The company operates in three business segments: Walmart U.S., International and Sam’s Club. The Walmart U.S. segment operates retail stores in different formats in the United States, as well as Walmart’s online retail operations, walmart.com. The international segment consists of retail operations in 14 countries and Puerto Rico. The international segment includes different formats of retail stores and restaurants, including discount stores, supercenters and Sam’s Clubs that operate outside the United States. The Sam’s Club segment consists of membership warehouse clubs in the United States and the segment’s online retail operations, samsclub.com.
Their shares trade around $55.02, with a P/E ratio of 13.1 and an EPS of $4.02. In the last quarter of 2010, Walmart had revenue of $116 billion and a net income of $7.42 billion. Walmart has continued to grow over the last ten years, and it’s entire 39 year history has showed an increase in yield. Walmart has become a staple of the American consumer, providing cheap goods and services targeting the average family. Van Den Berg has run several scenarios surrounding Walmart’s financial numbers, but he firmly believes Walmart will provide excellent profits over the coming years, and has confidently made it a crucial holding in his portfolio.
The Coca-Cola Company is the owner and marketer of nonalcoholic beverage brands. It also manufactures, distributes and markets concentrates and syrups used to produce nonalcoholic beverages. The Company owns or licenses and markets more than 500 nonalcoholic beverage brands, primarily sparkling beverages but also a variety of still beverages, such as waters, enhanced waters, juices and juice drinks, ready-to-drink teas and coffees, and energy and sports drinks.
Their shares trade around $64.00, with a P/E ratio of 12.68 and an EPS of $5.05. In the last quarter of 2010, CocaCola had revenue of $10.4 billion and a net income of $5.7 billion.
Applied Materials Inc. (NASDAQ:AMAT)
Applied Material, Inc. provides manufacturing equipment, services and software to the global semiconductor, flat panel display, solar photovoltaic and related industries. Applied’s customers include manufacturers of semiconductor wafers and chips, flat panel liquid crystal displays , solar PV cells and modules, and other electronic devices. These customers may use what they manufacture in their own end products or sell the items to other companies for use in advanced electronic components. Applied is a semiconductor fabrication equipment supplier. It is also a supplier of LCD fabrication equipment to the flat panel display industry and is the supplier of solar PV manufacturing systems to the solar industry. Applied operates in four segments: Silicon Systems Group, Applied Global Services, Display, and Energy and Environmental Solutions.
Their shares trade around $15.23, with a P/E ratio of 17.73 and an EPS of $4.79.In the last quarter of 2010, Applied Materials had revenue of $2.69 billion and a net income of $680 million.
Colgate-Palmolive Company is a consumer products company. Colgate’s products are marketed in over 200 countries and territories. The company manages its business in two product segments: Oral, Personal and Home Care, and Pet Nutrition. The Oral, Personal and Home Care segment is operated through four operating segments: North America, Latin America, Europe/South Pacific and Greater Asia/Africa. During the year ended December 31, 2010, the revenues of Oral, Personal and Home Care products accounted for 43%, 22% and 22%, respectively, of its total revenues. During 2010, the revenues of Pet Nutrition products accounted for 13% of the Company’s total revenues.
Their shares trade around $84.88, with a P/E ratio of 17.73 and an EPS of $4.79. In the last quarter of 2010, Colgate Palmolive had revenue of $3.99 billion and a net income of $899 million.
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