(GuruFocus, February 11, 2010) Investment Guru Robert Bruce manages a very small fund – the Bruce Fund. The 2009 annual report discloses that the fund has $185 million total assets. The Fund manager manages money quietly. He does not grant media interview, nor does he write column articles for newspaper or magazines.
(Datasource: Morningstar)
The fund invests in stocks, bonds and anything in-between. As far as stocks are concerned, it is a very concentrated portfolio too. GuruFocus shows as of December 31, 2009, he held about $95 million in 32 stocks. Robert Bruce also tends to concentrate on his favorite sectors, right now, the favorite is Health Care (28.8%), followed by Consumer Goods (22.3%), Oil & Gas (14.1%) and Financials (9.2%).
Google Finance, however shows the Bruce Fund allocate 37.72% in stock, 29.66% in bonds, 20.82% in convertible, and 9.84% in cash. Google Finance does not tell what the date for the asset allocation data, presumably it is rather recent. If true, the more recent asset allocation is more constructive on the equity side (37.72% vs. 34.98%), but not by a large degree.
Back in June, the fund manager made the following remark about the stock mark in the annual 2009 report:
No. 1: American Italian Pasta Company (AIPC, Financial), Weightings: 17.03% - 459,800 Shares
American Italian Pasta Company is the largest producer and one of the fastest-growing marketers of dry pasta in North America. American Italian Pasta Company has a market cap of $818.2 million; its shares were traded at around $38.86 with a P/E ratio of 11.6 and P/S ratio of 1.3.
Bruce owns the stocks since before 1Q 2007. He has made good money on this stock as AIPC trade around $10 back in 2007. Now it is changing hand at around $35 per share. Annual 2009 report shows his cost in this stock is $1.3 million, and market value as of June 30 was $9.1 million.
No. 2: America Service Group Inc. (ASGR, Financial), Weightings: 11.47% - 683,097 Shares
America Service Group Inc., through its subsidiaries Prison Health Services, Inc. America Service Group Inc. has a market cap of $142.2 million; its shares were traded at around $15.29 with a P/E ratio of 26.8 and P/S ratio of 0.3. The dividend yield of America Service Group Inc. stocks is 1.3%.
Interesting stock idea! I wonder how many people want to be a doctor serving the inmates and how many investors knows how to invest in companies engaged in prison related services.
Bruce started to buy this stock in 4Q05, and has been buying shares as the stock dropped all the way to $6 per share in 1Q08; Now that the stock has recovered to it 2005 level, Bruce made money by sticking to his investment thesis.
No. 3: Amerco (UHAL, Financial), Weightings: 8.62% - 162,900 Shares
AMERCO, is the holding company for U-Haul International, Inc. Amerco has a market cap of $929 million; its shares were traded at around $47.37 with a P/E ratio of 40.2 and P/S ratio of 0.4. Amerco had an annual average earning growth of 10.6% over the past 10 years.
Bruce held this stock since before 4Q05 and bought more shares as the stock tanked. Despite the follow-up, he is still behind with this stock.
No. 4: Arena Resources Inc. (ARD, Financial), Weightings: 6.7% - 147,100 Shares
ARENA RESOURCES, INC. is engaged in oil and natural gas acquisition, exploration, development and production, with activities in Oklahoma, Texas, New Mexico and Kansas. Arena Resources Inc. has a market cap of $1.55 billion; its shares were traded at around $40.39 with a P/E ratio of 42.5 and P/S ratio of 7.4. Arena Resources Inc. had an annual average earning growth of 112% over the past 5 years.
Enter the Oil & Gas play for Bruce. But he has been winding down this stock. Back in 2005, he owned 1.02 million shares, now he has 147 thousand shares. Stock price though, has gone from $14 back in 2005 to $40 today. Nice trade!
No. 5: Kinross Gold Corp. (KGC, Financial), Weightings: 6.62% - 344,848 Shares
Kinross Gold Corporation is an entrepreneurial mining company which has become a million-ounce gold producer. Kinross Gold Corp. has a market cap of $12.64 billion; its shares were traded at around $18.17 with a P/E ratio of 56.8 and P/S ratio of 7.9. The dividend yield of Kinross Gold Corp. stocks is 0.6%. Kinross Gold Corp. had an annual average earning growth of 12% over the past 5 years.
This might be Bruce’s Gold hedge. He owned the stock since in or before 2006. He has kept his holdings for the past two years, unchanged.
No. 6: ATP Oil & Gas Corp. (ATPG, Financial), Weightings: 5.87% - 307,900 Shares
ATP OIL & GAS is engaged in the acquisition, development and production of natural gas and oil properties in the outer continental shelf of the Gulf of Mexico, in the shallow-deep waters of the Gulf of Mexico and in the Southern Gas Basin of the U. Atp Oil & Gas Corp. has a market cap of $781 million; its shares were traded at around $15.44 with a P/E ratio of 154.4 and P/S ratio of 1.2. Atp Oil & Gas Corp. had an annual average earning growth of 71.2% over the past 5 years.
Another oil play, but Bruce lost good money on this one. 2009 annual report shows he spent about $9.6 million to purchase his shares, but those stocks worth about $4.6 million today.
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Performance
Performance of the fund, however, is nothing but small. For the past ten years, MorningStar calculates that through 02-11-2010 it had an annualized return of 17.62%, handily beat the market index, and 99% of the other funds in the same category (MorningStar designated “moderate allocation” category). However, 3 and 5-year performances are level impressive, especially during the past three years, it fell behind 59% of the fund in the same category. The Bruce Fund illustrate that 3-year is too short a period to evaluate a fund manager.(Datasource: Morningstar)
Investment Style
If you invest in the Bruce Fund, you have to be very patient. Morningstar shows its annual turnover rate is 16%. At this rate, it takes roughly more than 6 years for the fund manager turn over the fund. In another word, Robert Bruce holds his stocks for a long time.The fund invests in stocks, bonds and anything in-between. As far as stocks are concerned, it is a very concentrated portfolio too. GuruFocus shows as of December 31, 2009, he held about $95 million in 32 stocks. Robert Bruce also tends to concentrate on his favorite sectors, right now, the favorite is Health Care (28.8%), followed by Consumer Goods (22.3%), Oil & Gas (14.1%) and Financials (9.2%).
| Industry | 2009-09-30 | 2009-12-31 |
|---|---|---|
| Technology | 0.7% | 0.6% |
| Financials | 8.7% | 9.2% |
| Utilities | 4% | 3.6% |
| Telecommunications | 1.9% | % |
| Consumer Services | 7.8% | 8.6% |
| Health Care | 30.9% | 28.8% |
| Consumer Goods | 18.8% | 22.3% |
| Industrials | 3.5% | % |
| Basic Materials | 7% | 6.6% |
| Oil & Gas | 12.7% | 14.1% |
Current Outlook
At least as of June, 2009, fund manager Robert Bruce was rather bearish towards stock market. The fund manager listed it asset allocation as of June 30, 2009 in its annual report (see table below). Bond and cash accounts for more than 60% of his assets.Google Finance, however shows the Bruce Fund allocate 37.72% in stock, 29.66% in bonds, 20.82% in convertible, and 9.84% in cash. Google Finance does not tell what the date for the asset allocation data, presumably it is rather recent. If true, the more recent asset allocation is more constructive on the equity side (37.72% vs. 34.98%), but not by a large degree.
Back in June, the fund manager made the following remark about the stock mark in the annual 2009 report:
We are not of the opinion that the second half of the calendar year will see a marked improvement in the economy or the stock market in general. We have tried to position the Fund accordingly. We believe the time to be more aggressive is still further down the road. Management continues to screen investment opportunities for their long-term capital appreciation potential versus the risks that investment might present. Areas of recent interest have been various bonds selling at discounts to par value and offering a reasonable yield. The bonds as well as the stocks in the portfolio encompass significant investment risks, which are again outlined in the prospectus.,In other words, as of June, 2009 if the manager was excited about anything at all, it was about bonds. The economy has shown a bit of loosing up lately, it could be that Robert Bruce is dipping into the water and be more bullish towards the stocks.
Top Holdings
Aside from bonds and cash, Bruce keeps a portion of his morning in stocks. I have to say he owns a collection of fine but surprising companies:No. 1: American Italian Pasta Company (AIPC, Financial), Weightings: 17.03% - 459,800 Shares
American Italian Pasta Company is the largest producer and one of the fastest-growing marketers of dry pasta in North America. American Italian Pasta Company has a market cap of $818.2 million; its shares were traded at around $38.86 with a P/E ratio of 11.6 and P/S ratio of 1.3.
Bruce owns the stocks since before 1Q 2007. He has made good money on this stock as AIPC trade around $10 back in 2007. Now it is changing hand at around $35 per share. Annual 2009 report shows his cost in this stock is $1.3 million, and market value as of June 30 was $9.1 million.
No. 2: America Service Group Inc. (ASGR, Financial), Weightings: 11.47% - 683,097 Shares
America Service Group Inc., through its subsidiaries Prison Health Services, Inc. America Service Group Inc. has a market cap of $142.2 million; its shares were traded at around $15.29 with a P/E ratio of 26.8 and P/S ratio of 0.3. The dividend yield of America Service Group Inc. stocks is 1.3%.
Interesting stock idea! I wonder how many people want to be a doctor serving the inmates and how many investors knows how to invest in companies engaged in prison related services.
Bruce started to buy this stock in 4Q05, and has been buying shares as the stock dropped all the way to $6 per share in 1Q08; Now that the stock has recovered to it 2005 level, Bruce made money by sticking to his investment thesis.
No. 3: Amerco (UHAL, Financial), Weightings: 8.62% - 162,900 Shares
AMERCO, is the holding company for U-Haul International, Inc. Amerco has a market cap of $929 million; its shares were traded at around $47.37 with a P/E ratio of 40.2 and P/S ratio of 0.4. Amerco had an annual average earning growth of 10.6% over the past 10 years.
Bruce held this stock since before 4Q05 and bought more shares as the stock tanked. Despite the follow-up, he is still behind with this stock.
No. 4: Arena Resources Inc. (ARD, Financial), Weightings: 6.7% - 147,100 Shares
ARENA RESOURCES, INC. is engaged in oil and natural gas acquisition, exploration, development and production, with activities in Oklahoma, Texas, New Mexico and Kansas. Arena Resources Inc. has a market cap of $1.55 billion; its shares were traded at around $40.39 with a P/E ratio of 42.5 and P/S ratio of 7.4. Arena Resources Inc. had an annual average earning growth of 112% over the past 5 years.
Enter the Oil & Gas play for Bruce. But he has been winding down this stock. Back in 2005, he owned 1.02 million shares, now he has 147 thousand shares. Stock price though, has gone from $14 back in 2005 to $40 today. Nice trade!
No. 5: Kinross Gold Corp. (KGC, Financial), Weightings: 6.62% - 344,848 Shares
Kinross Gold Corporation is an entrepreneurial mining company which has become a million-ounce gold producer. Kinross Gold Corp. has a market cap of $12.64 billion; its shares were traded at around $18.17 with a P/E ratio of 56.8 and P/S ratio of 7.9. The dividend yield of Kinross Gold Corp. stocks is 0.6%. Kinross Gold Corp. had an annual average earning growth of 12% over the past 5 years.
This might be Bruce’s Gold hedge. He owned the stock since in or before 2006. He has kept his holdings for the past two years, unchanged.
No. 6: ATP Oil & Gas Corp. (ATPG, Financial), Weightings: 5.87% - 307,900 Shares
ATP OIL & GAS is engaged in the acquisition, development and production of natural gas and oil properties in the outer continental shelf of the Gulf of Mexico, in the shallow-deep waters of the Gulf of Mexico and in the Southern Gas Basin of the U. Atp Oil & Gas Corp. has a market cap of $781 million; its shares were traded at around $15.44 with a P/E ratio of 154.4 and P/S ratio of 1.2. Atp Oil & Gas Corp. had an annual average earning growth of 71.2% over the past 5 years.
Another oil play, but Bruce lost good money on this one. 2009 annual report shows he spent about $9.6 million to purchase his shares, but those stocks worth about $4.6 million today.
Conclusion
Robert Bruce is a patient and concentrated investor. He manages his risk by allocate funds among stocks, bonds, and cask.GuruFocus provides real time information and insights of Investment Gurus such as Warren Buffett and Robert Bruce for Premium Members. If you are not a premium member, click here to sign up or upgrade. 7-Day Free Trial is available.
