David Williams, Manager of Columbia Value and Restructuring Fund certainly had his ups and downs. According to a March 2008 Barron’s interview, his fund ranked top 5% by Morningstar among large-cap funds based on one-, three-, five- and 10-year returns. Then 2008 hit, and the fund lost 47.4% for the year. The losses were so deep that even a 46.9% recovery for the next year (2009) does not restore the fund to breakeven. YTD, the fund is down 2.52% vs. S&P 500’s decline of 1.20% -- the difference between the two immaterial. For the past 10 years through June 30, 2010, the fund climbed at 2.94% per year while the stock market declined 1.59%. The Fund underperformed S&P 500 slightly during the past 3 to 5 years. Check out the fund’s website for details.
Barron’s Interview Highlights
The Barron’s interview cited above is a bit outdated, although there is no indication that he has shifted from his investment style. Here are some highlights from the interview on his investment strategy:
With the benefit of the hindsight, it is interesting to read on his take on companies such as Lehman Brothers and Morgan Stanley, and his assessment on the status of subprime crisis at the time (March 2008). On Lehman Brothers, he said
And on the Subprime Crisis:
Of course we know now what happened afterwards, Lehman Brothers filed for bankruptcy in September, 2008 and the Subprime Crisis got a lot worse before it topped off. Even a veteran like David Williams could be so far of the mark when it comes to assess the macro situation and individual companies.
Sector Shifts
Williams’s fund has the stated strategy of focusing on company restructuring and/or industry consolidations. As of June 30, 2010, the fund has $5.8 billion invested in 60 stocks. Since he emphasizes on shifts in industry trends, it worth notice that he has increased holdings in financials (from 13.5 to 18.2%) in the recent quarter:
Manager’s Recent Comment
David Williams does not come out and talk about his fund and investments a lot. In the 2009 annual report (Page 37) that was published in March, 2010, he provided the following view towards the US economy and market:
After the publication of the annual report, we saw he increased holdings in Consumer Goods and Consumer Services slightly. Perhaps he has second thoughts on this two sectors. He continues to be light on Healthcare and Utilities.
Top Holdings
David Williams takes relatively concentrated bet. These are his top holdings as of June 30, 2010:
No. 1: Lorillard Inc. (LO, Financial), Weightings: 4.47% - 3,600,000 Shares
Lorillard the third largest manufacturer of cigarettes in the United States. Lorillard, Inc has a market cap of $11.65 billion; its shares were traded at around $76.24 with a P/E ratio of 12.4 and P/S ratio of 2.3. The dividend yield of Lorillard, Inc stocks is 5.4%.
Union Pacific Corp. consists of one reportable segment, rail transportation, and the company's other product lines. Union Pacific Corp. has a market cap of $37.78 billion; its shares were traded at around $74.67 with a P/E ratio of 16.5 and P/S ratio of 2.7. The dividend yield of Union Pacific Corp. stocks is 1.8%. Union Pacific Corp. had an annual average earning growth of 3.3% over the past 10 years.
PETROBRAS-ADR C is an integrated company operating in exploration, production, refining, retailing and transportation of petroleum and its byproducts at home and abroad. Petroleo Brasileiro S.a.petrobras has a market cap of $92.33 billion; its shares were traded at around $36.4 with a P/E ratio of 9.2 and P/S ratio of 1. The dividend yield of Petroleo Brasileiro S.a.petrobras stocks is 0.4%. Petroleo Brasileiro S.a.petrobras had an annual average earning growth of 22.7% over the past 10 years. GuruFocus rated Petroleo Brasileiro S.a.petrobras the business predictability rank of 4-star.
In the Barron’s interview, David Williams discussed this stock:
American Movil is the provider of wireless communications services in Mexico. America Movil S.a.b. De C.v. has a market cap of $70.44 billion; its shares were traded at around $49.61 with a P/E ratio of 15 and P/S ratio of 2.5. The dividend yield of America Movil S.a.b. De C.v. stocks is 0.5%. America Movil S.a.b. De C.v. had an annual average earning growth of 32.7% over the past 10 years.
Harris Corporation is an international company focused on communications equipment for voice, data and video applications. Harris Corp. has a market cap of $5.78 billion; its shares were traded at around $44.53 with a P/E ratio of 10.7 and P/S ratio of 1.2. The dividend yield of Harris Corp. stocks is 1.9%. Harris Corp. had an annual average earning growth of 36.6% over the past 10 years. GuruFocus rated Harris Corp. the business predictability rank of 4.5-star.
IBM uses advanced information technology to provide customer solutions. International Business Machines Corp has a market cap of $164.65 billion; its shares were traded at around $128.4 with a P/E ratio of 12.2 and P/S ratio of 1.7. The dividend yield of International Business Machines Corp stocks is 2%. International Business Machines Corp had an annual average earning growth of 10.7% over the past 10 years.
Conclusion
David Williams has not changed much of his top holdings in the past quarters and these are the companies he use to hedge against risk of high inflation and taxation and slow growth.
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Read the Barron’s March 2008 interview of David Williams here.
Check out his full June 30, 2010 equity portfolio here.
Read the 2009 annual report
Barron’s Interview Highlights
The Barron’s interview cited above is a bit outdated, although there is no indication that he has shifted from his investment style. Here are some highlights from the interview on his investment strategy:
Barron's: There are various approaches to value investing, from managers who buy deeply discounted, even hated stocks to those who buy growth stocks at attractive prices. Where do you fit on the spectrum?
Williams: We like to buy companies cheap, preferably with a restructuring or something going on to create shareholder value in the future.
Cheap in terms of price/earnings ratios?
Whatever metric the market uses for a particular security is what we typically use. We really get excited about a stock when it's not only cheap based on one metric -- let's say price to cash flow, or price to earnings -- but when we feel the sum of the parts is being ignored by the market.
And by restructuring, do you mean bankruptcy?
Definitely not. We just mean companies taking a different direction. They are addressing their problems, possibly by using a new business model, or there is a new CEO. There are number of things that would suggest a company is going to improve its operations.
With the benefit of the hindsight, it is interesting to read on his take on companies such as Lehman Brothers and Morgan Stanley, and his assessment on the status of subprime crisis at the time (March 2008). On Lehman Brothers, he said
Lehman Brothers [LEH] probably managed itself a little better [than some other Wall Street firms] through the recent difficulties. It's a big company, but they've also got, perhaps, a little more strength in some of the fixed-income areas than Morgan Stanley. As an investor, I like to spread the risk a little bit. As you can see, companies like Citigroup[C] have been clocked, whereas Lehman and Morgan Stanley, at least on a relative basis, haven't been hurt quite as badly. Lehman is in a little bit better shape. Perhaps it's a little pricier, but its earnings are going to stay a little more predictable.
And on the Subprime Crisis:
The worst of the subprime situation is probably behind us. The Federal Reserve is working now on behalf of investors, and beyond that you've got all kinds of attention on the problem, including from regulators. As things get resolved, which is going to be sooner rather than later, Morgan Stanley is going to have a great pop, if only a pop in its P/E ratio.
Of course we know now what happened afterwards, Lehman Brothers filed for bankruptcy in September, 2008 and the Subprime Crisis got a lot worse before it topped off. Even a veteran like David Williams could be so far of the mark when it comes to assess the macro situation and individual companies.
Sector Shifts
Williams’s fund has the stated strategy of focusing on company restructuring and/or industry consolidations. As of June 30, 2010, the fund has $5.8 billion invested in 60 stocks. Since he emphasizes on shifts in industry trends, it worth notice that he has increased holdings in financials (from 13.5 to 18.2%) in the recent quarter:
| Industry | 2010-03-31 | 2010-06-30 |
|---|---|---|
| Technology | 8.1% | 8.9% |
| Financials | 13.5% | 18.2% |
| Utilities | 0% | % |
| Telecommunications | 4.4% | 4.7% |
| Consumer Services | 4.1% | 6.6% |
| Health Care | 4.9% | 3.7% |
| Consumer Goods | 7% | 8.7% |
| Industrials | 15.2% | 15.1% |
| Basic Materials | 15.9% | 14.4% |
| Oil & Gas | 15.8% | 15% |
Manager’s Recent Comment
David Williams does not come out and talk about his fund and investments a lot. In the 2009 annual report (Page 37) that was published in March, 2010, he provided the following view towards the US economy and market:
We remain concerned about the risks of inflationary pressures, higher taxes and slowing growth in the domestic economy, and we have positioned the fund in an attempt to hedge these risks while taking advantage of healthier growth trends overseas. In this regard, we have maintained an emphasis on commodities, including mining and energy companies, that can prosper with inflation. At the same time, we have tried to deemphasize companies that we believe are highly exposed to risks in the U.S. economy by underweighting the consumer groups, both discretionary and staples, as well as health care corporations and utilities. We continue to favor corporations that earn significant profits outside the United States.
After the publication of the annual report, we saw he increased holdings in Consumer Goods and Consumer Services slightly. Perhaps he has second thoughts on this two sectors. He continues to be light on Healthcare and Utilities.
Top Holdings
David Williams takes relatively concentrated bet. These are his top holdings as of June 30, 2010:
No. 1: Lorillard Inc. (LO, Financial), Weightings: 4.47% - 3,600,000 Shares
Lorillard the third largest manufacturer of cigarettes in the United States. Lorillard, Inc has a market cap of $11.65 billion; its shares were traded at around $76.24 with a P/E ratio of 12.4 and P/S ratio of 2.3. The dividend yield of Lorillard, Inc stocks is 5.4%.
Union Pacific Corp. consists of one reportable segment, rail transportation, and the company's other product lines. Union Pacific Corp. has a market cap of $37.78 billion; its shares were traded at around $74.67 with a P/E ratio of 16.5 and P/S ratio of 2.7. The dividend yield of Union Pacific Corp. stocks is 1.8%. Union Pacific Corp. had an annual average earning growth of 3.3% over the past 10 years.
PETROBRAS-ADR C is an integrated company operating in exploration, production, refining, retailing and transportation of petroleum and its byproducts at home and abroad. Petroleo Brasileiro S.a.petrobras has a market cap of $92.33 billion; its shares were traded at around $36.4 with a P/E ratio of 9.2 and P/S ratio of 1. The dividend yield of Petroleo Brasileiro S.a.petrobras stocks is 0.4%. Petroleo Brasileiro S.a.petrobras had an annual average earning growth of 22.7% over the past 10 years. GuruFocus rated Petroleo Brasileiro S.a.petrobras the business predictability rank of 4-star.
In the Barron’s interview, David Williams discussed this stock:
The stock has gone more or less straight up in the past few years, although it sold off a bit last week. How does this holding jibe with your value-stock philosophy?Of course that was over two years ago and things have changed since. Oil field has been discovered; oil prices have seen ups and downs; and PBR prices have its own movements, but David Williams has held this stock:
It's not cheap. But there has been a disbelief that energy prices can stay high, and that's reflected in the discount to net asset value that the market gives to most of these oil companies. With crude oil at around $100 per barrel, Petrobras has a net present value of around $140 a share.
What do you mean when you talk about net asset value?
These companies hire engineers to evaluate their holdings and reserves and give them a present value, or a net present value. In the case of Petrobras, the net present value is roughly $140 a share, versus its stock price of around 114.
American Movil is the provider of wireless communications services in Mexico. America Movil S.a.b. De C.v. has a market cap of $70.44 billion; its shares were traded at around $49.61 with a P/E ratio of 15 and P/S ratio of 2.5. The dividend yield of America Movil S.a.b. De C.v. stocks is 0.5%. America Movil S.a.b. De C.v. had an annual average earning growth of 32.7% over the past 10 years.
Harris Corporation is an international company focused on communications equipment for voice, data and video applications. Harris Corp. has a market cap of $5.78 billion; its shares were traded at around $44.53 with a P/E ratio of 10.7 and P/S ratio of 1.2. The dividend yield of Harris Corp. stocks is 1.9%. Harris Corp. had an annual average earning growth of 36.6% over the past 10 years. GuruFocus rated Harris Corp. the business predictability rank of 4.5-star.
IBM uses advanced information technology to provide customer solutions. International Business Machines Corp has a market cap of $164.65 billion; its shares were traded at around $128.4 with a P/E ratio of 12.2 and P/S ratio of 1.7. The dividend yield of International Business Machines Corp stocks is 2%. International Business Machines Corp had an annual average earning growth of 10.7% over the past 10 years.
Conclusion
David Williams has not changed much of his top holdings in the past quarters and these are the companies he use to hedge against risk of high inflation and taxation and slow growth.
GuruFocus provides real time information and insights of Investment Gurus such as Warren Buffett and David Williams for Premium Members. If you are not a premium member, click here to sign up or upgrade. 7-Day Free Trial is available.
Read the Barron’s March 2008 interview of David Williams here.
Check out his full June 30, 2010 equity portfolio here.
Read the 2009 annual report
