The following is an analysis of the most current portfolio of Mr. Zeke Ashton. The analysis will use a system that I designed that is based on the ratio that Mr. Warren Buffet released to the public in 1986, which he coined “Owner Earnings.” For those new to this type of analysis, I would recommend reading an introduction to my system by clicking here. My goal is ultimately to analyze the portfolios of each Guru highlighted here on Guru Focus, and then to subsequently re-analyze them every quarter when possible as changes are made. My purpose in writing these articles is to show the power of Mr. Buffett’s ratio in analyzing stocks, ETF’s, Mutual Funds and individual portfolios. If one can fill their portfolios with companies that score high using my system and avoid those which fail, one should be able to increase the probability of becoming a successful investor in my opinion. Profile of Mr. Ashton:
Mr. Ashton is the managing partner of Centaur Capital Partners and manages the investments for the Centaur Value Fund. He is also manager of the Tilson Dividend Fund (TILDX), which is ranked 5 stars by Morningstar. Previously Mr. Ashton was employed as an investment analyst for The Motley Fool (TMF). While at TMF, Mr. Ashton developed and produced investing seminars, subscription investing newsletters, and stock research reports in addition to writing online investing articles. Mr. Ashton also wrote investment columns with an emphasis on value investing for TMF on a free-lance basis. Prior to his work at TMF, Mr. Ashton was employed as a senior analyst and project manager in the Zurich, Switzerland office of Infinity Systems, where he provided financial system consulting to Swiss regional and private banks. From 1995 to 1999, Mr. Ashton was employed as a senior analyst and project manager for Wall Street Systems, a New York-based treasury and risk management software company. In this role Mr. Ashton provided consulting services to various clients in Germany, Italy, and the United Kingdom. Mr. Ashton graduated from Austin College in Sherman, Texas in 1995 with degrees in Economics and German.
Before I begin this analysis, I would like to first disclose that I know Zeke personally as we worked together at the Motley Fool from 2000-2001. I also did not discuss this article beforehand with Mr. Ashton prior to writing it. Though I personally consider Zeke one of the best value investors living as well as a great portfolio manager (from my following his career closely for more than a decade) but that does not mean I will take it easy on him in this analysis. I will let his portfolio do the talking for him and the objective results will be derived from putting him through the same rigorous system analysis that I will put every other Guru through.
So let us begin by presenting his portfolio as analyzed by my system:
As you can see from the high rankings in the table above that Zeke is a serious student of Warren Buffett and must be a true believer in the power of owner earnings. Out of the twenty non-financial stock holdings in this portfolio he has 14 (70%) coming in with a price to owner earnings of less than 15 and 15 (75%) coming in with a CapFlow of less than 50%. Only in the FROIC department has he underperformed with only 7(35%) of his stocks coming in at 15%+. Like Mr. Weitz (that I wrote about yesterday), it is very hard to find companies that are pure value plays that also have strong FROIC’s. This is so because as a classic value investor (which Zeke clearly is) price to book value plays a big part in any classic value investor’s stock selection.
I am very impressed with his stock pick P.F. Chang’s China Bistro (PFCB) and will have to look into that for my own client’s portfolios. Just that one example shows you the power of GuruFocus as a research tool. In my work I go through 7000 stocks every quarter and I find it refreshing to be able to look at what other Pros are buying and selling without having to do all the research on my own. I can also type in a ticker in the quote search box and find out which Guru’s own a stock I am interested in, within seconds. GuruFocus gives me a clear advantage over my fellow pros, who don’t subscribe to the premium service. Performance is everything in my business and having over 100+ Guru’s best ideas at my fingertips helps me find some very interesting stocks to buy. Dr. Charlie Tian has created something amazing here and someday it will become part of every pro’s and serious individual investors research. How else can you find great stock picks like PFCB that Zeke found?
But with every compliment I also am not shy about criticizing and I took a look at his smaller holdings like TransAtlantic Petroleum (TAT), Himax Technologies (HIMX) and IDT(IDT) and couldn’t come up with a reason why he bought those and walked away scratching my head. But those are just tiny holdings so we will let them slide. I also can’t understand his Coinstar (CSTR) purchase but he is up big on that one, so he must have found out some point that eludes me in my research.
Zeke is a Hedge Fund manager and thus has the ability to buy Puts and Calls and from reviewing those positions I am especially impressed with his Puts that you can find by going here
With the Eurozone ready to blow up, I think with the puts he has in place he will be able to practice “capital appreciation through capital preservation” as those three positions will make him a lot of money if the Eurozone blows a gasket due to the downgrades that are coming from the major rating agencies.
Therefore when we do our final score on Zeke’s portfolio we get 1.80, so he is still below the master Warren Buffett, but being considered second to Warren Buffett is not a bad thing. The final score is a non-weighted average of each portfolio’s total score divided by its total non-financial holdings.
Disclaimer: Always remember that these are the results of our research based on the methodology that I have outlined above and in other articles previously published. This research is provided as an educational tool and should not be considered investment advice, but just the results of our research. There are many ways to analyze a stock and you should never blindly follow anyone’s work without doing your own due diligence or by seeking the help of an investment advisor, if you so need one. As Registered Investment Advisors, we see it as our responsibility to advise the following: We take our research seriously, we do our best to get it right, and we “eat our own cooking,” but we could be wrong. Please note, investments involve risk and unless otherwise stated, are not guaranteed. Past performance cannot be used as an indicator to determine future results. Strategies mentioned may not be suitable for everyone. We do not know your personal financial situation, so the information contained in this communiqué represents the opinions of Peter “Mycroft” Psaras, and should not be construed as personalized investment advice. Information expressed does not take into account your specific situation or objectives, and is not intended as recommendations appropriate for you. Before acting on any information mentioned, it is recommended to seek advice from a qualified tax or investment adviser to determine whether it is suitable for your specific situation.
About the author:
From his work on free cash flow in the investment process, Mycroft has now decided to bring his theories to the field of money management as well as work as an independent consultant for Hedge Funds, Pension Funds and ...More Institutions in general. His dream is to someday soon open a mutual fund where he can help as many people as he can benefit from what he has learned over the years.