Buffett’s Former Stock Picker Lou Simpson’s Q3 Portfolio Increases
Simpson’s firm began with approximately $1.3 billion in assets under management which had grown to approximately $1.64 billion at March 31, 2013.
As of the third quarter, Simpson’s portfolio contains 13 stocks, with an aggregate fair value of $1.87 billion. He bought no new stocks during the quarter, but made notable increases to a number of his holdings.
Simpson’s Top 3 Increases
U.S. Bancorp (USB)
Simpson increased his holding of U.S. Bancorp by 13,328% in the third quarter. This meant adding 1,865,955 shares at an average price of $37 per share to his existing holding of 14,000 shares purchased at an average of $25 per share in the fourth quarter of 2011, for a total of 1,879,955 shares at quarter-end. U.S. Bancorp shares now comprise 3.7% of his portfolio.
U.S. Bancorp is the parent company of U.S. Bank, the fifth largest commercial bank in the U.S., with $321 million in assets. After climbing almost 45%, U.S. Bancorp shares are currently near a 10-year high at $39.22 each.
Financially, the bank has five-year per-share revenue growth rates of: 6.1% for revenue, 1.8% for EBITDA, 9.2% for free cash flow and 14.7% for book value. It also has reported annual return on equity and return on assets increases since 2009, reaching 14.8% and 1.6%, respectively, for the third quarter of 2013.
For the third quarter of 2013, U.S. Bancorp had $1.47 billion in net income, or $0.76 per diluted common share, an increase from $1.47 billion, or $0.74 per diluted common share for the third quarter of 2012. Net revenue declined 1.2% year over year to $4.89 billion.
In addition, U.S. Bancorp’s nonperforming assets declined 2.1% year over year, and average total loans grew 5.7% year over year.
The company has a P/E ratio of 13.2, P/B ratio of 2 and P/S ratio of 3.7, which is close to a five-year high.
Warren Buffett also holds U.S. Bancorp, in a position sized at 463,131,632 shares, equal to 8.72% of shares outstanding.
United Parcel Service Inc. (UPS)
Simpson increased his holding size in UPS by 52.8%, adding 759,941 shares purchased at an average price of $88 each, to his existing holding of 1,439,345 shares purchased in the second quarter of 2013 at an average price of $86. His largest holding, its total at quarter end was 2,199,286 shares of the company, comprising 10.7% of his portfolio.
UPS is the world’s largest package delivery company by both revenue and volume, and supply chain solutions provider. Its shares have gained 42.5% over the decade to trade for $101.28 each on Monday, near a 10-year high.
UPS annual per-share growth rates for the past five-year period are 3.8% for revenue and 1.6% for free cash flow. EBITDA declined at a rate of 10.9%, while book value also declined at a rate of 11.1%, over the past period.
The company increased its return on equity to 120.4% for the third quarter from 17.3% for fiscal year 2012. It also increased return on assets to 11.6% from 2.1% in the same periods.
For the third quarter UPS grew revenue by 3.4% year over year to $13.5 billion, led by U.S. e-commerce shipments and strong European export growth. Diluted earnings per share grew by 9.4% to $1.16. UPS also generated $3.6 billion of free cash flow, repurchased 33 million shares for $2.9 billion and paid dividends of $1.7 billion.
UPS has a P/E ratio of 66.1 and PB ratio of 26, which is close to a 10-year high. Its P/S ratio at 1.77 is close to a five-year high.
Buffett holdings 59,400 shares of UPS, in a position sized at 0.01% of shares outstanding and which he reduced in the second and third quarters.
Wells Fargo (WFC)
Simpson in the third quarter increased his Wells Fargo position by 20.25%, adding 731,356 shares trading at an average price of $42 to his existing holding of 3,611,414 shares of a holding initiated in the fourth quarter of 2011. His total share count at quarter-end was 4,342,770, comprising 9.6% of his portfolio.
Wells Fargo is a financial services company with more than 9,000 stores and 12,000 ATMs around the world, and $1.5 trillion in assets. With shares up 57.5% over the past decade, Wells Fargo is also trading near a 10-year high of $44.48 per share on Monday.
The bank had the following annual per-share growth rates over the past five years: 2.9% for revenue and 8.4% for book value. Its EBITDA per share declined at a rate of 0.6% over the same period. Its return on equity stands at 13.2% and return on assets at 1.6% as of the third quarter. Both have grown annually since 2010.
For the third quarter, Wells Fargo reported a 13% year over year jump in net income to $5.6 billion, and 13% increase in diluted earnings per share of $0.99, both of which were company records. Revenue declined to $20.5 billion from $21.2 billion the previous year. Its nonperforming assets declined by $4.6 billion to $20.7 billion, and total average core deposits grew by $44.9 billion to $940.3 billion.
The company has a P/E ratio of 11.8%, P/B ratio of 1.6 and P/S ratio of 2.8, which is close to a five-year high.
Buffett controls 8.7% of Wells Fargo shares outstanding, in a holding sized at 463,131,623 shares.
For more Lou Simpson trades, visit his portfolio here. Also check out the Undervalued Stocks, Top Growth Companies and High Yield stocks of Lou Simpson.
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