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Tweedy Browne – Third Quarter Stock Buy

November 12, 2013 | About:
Holly LaFon

Holly LaFon

273 followers
Founded over 90 years ago, Tweedy Browne is a $19 billion investment firm still following in the steps of Benjamin Graham. Their funds returned a solid 5.3% and 8.47% for the third quarter, but the stock market’s continued climb reduced the number of undervalued opportunities. As the firm’s managers write in their third quarter letter:

“Cash reserves in all four of our Funds have been slowly but steadily increasing over the last year as global equity markets gained momentum. As valuations have climbed, risks now appear somewhat higher. Bargain hunting remains challenging, but we have plenty of dry powder should the markets present us with an opportunity.”

Tweedy Browne bought one new stock during the third quarter, a modest position in Connecticut Water Service Inc. (CTWS).

Connecticut Water Service Inc. (CTWS)

Tweedy Browne purchased 6,483 shares of Connecticut Water Service in the third quarter when the price averaged $30. The position accounts for just 0.005% of their total portfolio.

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Connecticut Water Service’s Tuesday share price is around $32.87, near a 10-year high. The company is a regulated public water utility that provides drinking water to almost 90,000 customers in 56 towns in Connecticut. Its market capitalization is $361.9 million.

Connecticut water’s per-share growth rates over the past five years are 6.7% for revenue, 9.5% for EBITDA and 7.2% for book value. In the second quarter it produced $22.55 million in revenue, compared to $21.35 million in the second quarter the previous year. It also reported earnings of $4.31 million, compared to $4.16 million the previous year. Free cash flow totaled $78,000 compared to a negative $35.52 million the previous year.

The company reported return on equity of 9.2% in the second quarter, down from 18.8% the previous year, and a net margin of 19.1%, compared to 19.5% the previous year.

Its dividend yield is close to a 10-year low, at 3%. Connecticut Water Service trades with a P/E of 22.3, P/B of 1.9 and P/S of 3.78, which is close to a five-year low.

Chart of the company’s 10-year revenue and earnings history:

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The only other guru with a position in Connecticut Water is Mario Gabelli, after Jim Simons sold out in the second quarter.

Tweedy Browne’s top five portfolio positions are Johnson & Johnson (JNJ), Banco Santander Brasil SA (BSBR), Halliburton Company (HAL), Cisco Systems Inc. (CSCO) and Devon Energy Corp. (DVN).

The top sectors represented in their portfolio are 27.9% in financial services, 19.7% energy and 15.4% industrials.

See more Tweedy Browne stocks in their portfolio here. Also check out the Undervalued Stocks, Top Growth Companies and High Yield stocks of Tweedy Browne.

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Rating: 4.0/5 (2 votes)

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