Charles de Vaulx (Trades, Portfolio) has revealed IVA Worldwide Fund's portfolio for the third quarter. Top trades of the quarter include new buys in Wells Fargo & Co. (WFC, Financial) and Heineken NV (XAMS:HEIA, Financial) alongside reductions in Berkshire Hathaway Inc. Class A shares (BRK.A, Financial) and LKQ Corp. (LKQ, Financial).
De Vaulx is the chief investment officer and portfolio manager at International Value Advisers, LLC, which he joined in 2008. He employs a value oriented approach and will seek investments in companies of any size. His investments typically have financial strength, temporarily depressed earnings or entrenched franchises.
Portfolio overview
At the end of the quarter the portfolio contained 64 stocks, with four new holdings in Wells Fargo, Heineken, Tapestry Inc. (TPR, Financial) and Quarate Retail Inc. (QRTEP.PFD, Financial). It was valued at $1.44 billion and has seen a turnover rate of 5%.
Top holdings include Bayerische Motoren Werke AG (XTER:BMW), Astellas Pharma Inc. (TSE:4503), Berkshire Hathaway Inc. Class B shares (BRK.B), Newmont Corp. (NEM) and Cie Financiere Richemont SA (XSWX:CFR).
By weight, the top three sectors represented are financial services (21.87%), consumer cyclical (19.19%) and industrials (15.35%).
Wells Fargo
The largest new buy of the quarter for the guru came from the addition of Wells Fargo. The portfolio saw the purchase of 1.68 million shares that traded at an average price of $24.66 during the quarter. Overall, the purchase had an impact of 2.75% on the portfolio and GuruFocus estimates the total gain on the holding at 17.07% since it was purchased.
Wells Fargo is one of the largest banks in the United States, with approximately $1.9 trillion in balance sheet assets. The company is split into three segments for reporting purposes: community banking; wholesale banking; and wealth and investment management. The bulk of Wells Fargo's lending takes place in the U.S.
On Dec. 3, the stock was trading at $28.87 per share with a market cap of $119.36 billion. The GF Value line shows that Wells Fargo is a possible value trap and investors should think twice before investing.
GuruFocus gives the company a financial strength rating of 3 out of 10, a profitability rank of 4 out of 10 and a valuation rank of 9 out of 10. There is currently one severe warning sign issued for poor financial strength. Despite the warning sign, a Piotroski F-Score of 5 indicates a typical financial situation for a stable company with revenue and net income remaining relatively stable over the last seven years.
Berkshire Hathaway
Continuing on a four year trend the guru once again reduced his stake in Berkshire Hathaway Class A shares. An additional 196 shares were sold during the third quarter for a 53.41% reduction in the holding. The shares that were sold traded at an average price of $306,568.78 during the quarter. The sale had an overall impact of -2.68% on the portfolio and GuruFocus estimates the total gain at 106.58%.
Berkshire Hathaway is a holding company with a wide array of subsidiaries engaged in diverse activities. The firm's core business segment is insurance, run primarily through Geico, Berkshire Hathaway Reinsurance Group and Berkshire Hathaway Primary Group. Berkshire has used the excess cash thrown off from these and its other operations over the years to acquire Burlington Northern Santa Fe, Berkshire Hathaway Energy and the firms that make up its manufacturing, service and retailing operations.
As of Dec. 3, the stock was trading at $344,750 per share with a market cap of $538.67 billion. According to the GF Value line the stock is trading at fair value.
GuruFocus gives the company a financial strength rating of 5 out of 10, a profitability rank of 7 out of 10 and a valuation rank of 3 out of 10. There is one severe warning sign issued for assets growing faster than revenue. Debt has increased alongside cash over the years, resulting in a low cash-to-debt ratio of 0.25.
LKQ
During the quarter, the holding in LKQ saw a significant 42.48% cut in shares. The 1.45 million shares traded at an average price of $29.46 during the quarter. Approaching two years in the portfolio, the holding has gained an estimated 13.55% and the sale had an impact of -1.95%.
LKQ is a leading global distributor of non-OEM automotive parts. Initially formed in 1998 as a consolidator of auto salvage operations in the United States, it has since greatly expanded its scope to include distribution of new mechanical and collision parts, specialty auto equipment and remanufactured and recycled parts in both Europe and North America. It still maintains its auto salvage business and owns over 75 LKQ pick-your-part junkyards.
The stock traded at $36.50 per share with a market cap of $11.11 billion on Dec. 3. The GF Value line gives the stock a modestly overvalued rating.
GuruFocus gives the company a financial strength rating of 5 out of 10, a profitability rank of 8 out of 10 and a valuation rank of 8 out of 10. There are two severe warning signs issued for assets growing faster than revenue and a declining operating margin of 8.54%. The weighted average cost of capital is greater than the return on invested capital, which will destroy value as the company grows.
Oracle
The third quarter saw the long-term holding in Oracle Corp. (ORCL) sold entirely. The remaining 653,088 shares were sold at an average price of $56.78. Overall, the sale had a -1.85% impact on the portfolio, and GuruFocus estimates the total gain of the holding at 38.26%.
Oracle provides database technology and enterprise resource planning software to enterprises around the world. Founded in 1977, Oracle pioneered the first commercial SQL-based relational database management system. Today, Oracle has 430,000 customers in 175 countries, supported by its base of 136,000 employees.
On Dec. 3, the stock traded at $59.35 per share with a market cap of $179.21 billion. It is trading at fair value according to the GF Value line.
GuruFocus gives the company a financial strength rating of 4 out of 10, a profitability rank of 9 out of 10 and a valuation rank of 5 out of 10. The superior profitability rank is supported by operating and net margin percentages that outdo at least 94% of competitors.
Heineken
A new holding was established during the quarter in Heineken with the purchase of 267,534 shares. The shares were purchased at an average price of 79.74 euros per share ($96.85) during the quarter. GuruFocus estimates the holding has gained 13.02% during its short lifetime. The purchase had an impact of 1.66% on the portfolio.
Heineken is Western Europe's largest beer producer, and following the Anheuser-Busch InBev (XBRU:ABI) acquisition of SABMiller, it is the world's second-largest brewer. It has the leading position in many European markets, including the Netherlands, Austria, Greece and Italy. Its flagship brand, Heineken, is the world's leading international premium lager. Its brand portfolio spans nonalcoholic, Belgian and craft beer. Heineken is the world's biggest cider producer.
As of Dec. 3, the stock was trading at €90.12 per share with a market cap of €51.87 billion. The GF Value line gives the stock a fair value rating.
GuruFocus gives the company a financial strength rating of 4 out of 10, a profitability rank of 8 out of 10 and a valuation rank of 2 out of 10. There are currently two severe warning signs issued for new long-term debt and assets growing faster than revenue. Operating cash flow has steadily increased over the last several years and free cash flow supports dividend payouts.
Disclosure: Author owns no stocks mentioned.
Read more here:
- December Members Egagement Meeting Recap
- Ruane Cunniff's Top 5 Trades of the 3rd Quarter
- Chuck Royce's Firm's Stop 5 Sells of the 3rd Quarter
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