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Henry Tan
Henry Tan
Articles (46) 

Analysis of David J. Winter's Wintergreen Fund and his top holdings

August 20, 2011 | About:

The Wintergreen Fund is an investment management firm located in Mountain Lakes, NJ. The firm was founded in 2005 by David J. Winters, a career investment professional hailing from Franklin Mutual Advisers. Winters boasts of over 20 years of investment experience, working with legendary managers such as Max Heine, Seth Klarman and Michael Price. Winters is a graduate of Cornell University with a BA in Economics and holder of the coveted CFA designation. Currently, Winter’s flagship investment vehicle is the Wintergreen Fund (WGRNX).

You can buy really high-quality companies today, because people have given up on equities.”

The stated objective of the Wintergreen fund is simply “capital appreciation”. Utilizing a value-oriented approach to their investments, Winters opts for a global geographic horizon to screen for securities trading at a significant discount from intrinsic value. At its very core, Winters prefers to maintain a simple policy of no policy in terms of a formulaic approach to investments. That is, the firm prefers to maintain their flexibility in their investments by approaching all investments as unique with firm and industry specific traits. As such, the firm has not established a proprietary formula in their investment strategy. However, the firm acknowledges the usage of bottoms up investing, with special consideration to metrics such as the book value to market value ratio, cash flow analysis, and earnings multiples.

Deviating from most equity funds, the Wintergreen Fund dabbles into both arbitrage and debt investments. In terms of their arbitrage strategy, the firm utilizes pairs trading as their basis of arbitrage. This strategy at its very core calls for the simultaneous purchase of an equity, and the short sale of a correlated equity that deviated at a larger value then normal from the purchased equity. This strategy relies on the deviation to be corrected in order to yield a capital gain. In addition, the Wintergreen Fund will purchase debt of all levels and grades, from firms experiencing a financial restructuring phase to those declaring bankruptcy. When pertinent, Winters will also “take an activist role, where it will seek to influence or control management…” or do so via proxy investments, to maximize value for the fund.

“I believe that the Fund’s current portfolio is the very best that I ever managed.”

Looking forward, the firm “whole-heartedly anticipates improved economic horizons.” This optimistic outlook can be attributed to Winter’s assessment that his firm’s current portfolio is extremely well positioned. While Winters acknowledges that the recovery in the Western world will be “gradual”, the developing world will be quite a bit more “forceful”. This is because Winters feels that the future growth will primarily originate from overseas, particularly in areas such as Asia and Latin America, as billions of people are “ascending into the middle class with disposable income”. With that in mind, Winters feel that these people will demand more and more luxuries as their income increases. As such, The Wintergreen Fund is placing strategic investments in companies that sell beverages, food, elevators, watches and jewelry.

As a direct result of their investment strategies, the firm currently has a 6.14% return for the year. In 2010, the firm returned 21.09%, while the benchmark returned 15.1%. Since it's inception in 2005, the firm has outperformed the benchmark 4 out of the 5 years, only underperforming in 2008 by 2%. The firm boasts of a cumulative return of 46% since inception, compared against the S&P’s 17.96%. In terms of the annualized average returns for the same period, the firm returned 7.54% annually, while the benchmark returned 3.22%.

The following charts and tables demonstrate the sector breakdown of all equities held, along with the top five holdings. Wintergreen manages approximately $553 million in a concentrated portfolio of 16 equities. As seen in the first two tables, most of the firm’s equities are in financials, consumer goods, and oil & gas holdings. In terms of notable change, basic materials were completely eliminated from the portfolio, at an impact of 11.2% to the aggregate portfolio. These holdings were diverted to financials and technology at 6.5% and 2.7% respectively. The top five holdings, due to their concentrated amounts, comprise 56.52% of the portfolio. All of these holdings saw minor changes in terms of shares held, with none exceeding 3.11%.





Canadian Natural Resources (NYSE:CNQ)

Canadian Natural Resources explores for, develops, and markets crude oil and natural gas. Their shares trade at $33.43 with a market capitalization of $36.56 billion. Winters acquired each share of CNQ at an estimated price of $33.44, yielding a near net zero capital loss. Canadian Natural is the largest holding of the aggregate portfolio, at 16.94% of all equities held. From quarter to quarter, Winters increased his holdings of CNQ by 3.11%.

CNQ has a P/E ratio of 28.91, a P/B ratio of 1.87, and a P/S ratio of 2.92. Earnings for the year were $1.16 per share, with a dividend yield of 1.10%. CNQ’s net income was reported at $1.7 billion on sales of $13.1 billion, yielding a net margin of approximately 12.97%. Over the last 10 years, on an annual basis, CNQ has grown its revenues and earnings by 23.4% and 19.7% respectively.

Canadian Natural Resources plans to repair an oil sand plant, at an estimated cost of $2 billion. Canadian Natural Resources in their last quarter dealt with a variety of issues stemming from weather to wildfires in the Canadian wilderness, which inhibited their operations.

GuruFocus rated CNQ with the business predictability rank of 2.5 stars.

Franklin Resources (NYSE:BEN)

Franklin Resources is an international investment management firm offering management and banking services. Shares of BEN closed at $110.63, with a market capitalization of $24.40 billion. The cost of acquisition per share of BEN is $78.79, yielding a potential capital gain exceeding 40%. Franklin Resources is the 2nd largest equity held, at 11.87% of the composite portfolio. From quarter to quarter, holdings of BEN decreased by 1.52%.

Franklin Resources has a P/E ratio of 13.19, a P/S ratio of 4.35, and a P/B ratio of 3.34. Revenues for the year topped $5.8 billion, with a net income of $1.4 billion, yielding a profit margin of approximately 24.80%. Furthermore, earnings were reported at $8.39 per share, with a dividend yield of .90%. BEN has grown its revenues and earnings by annual rates of 13.2% and 17.2% over the last 10 years.

Franklin Resources acquired Balanced Equity Management in a transaction with terms not yet disclosed to the public. Balanced Equity Management is an Australian investment management firm with over $10 billion AUD under management.

GuruFocus rated BEN with the business predictability rank of 3 stars.

Berkshire Hathaway (NYSE:BRK.B)

Berkshire Hathaway is an insurance provider and the holding company of legendary investor Warren Buffett. Buffet utilizes the “float” of Berkshire Hathaway to finance his investments, which has evolved from share acquisitions to outright purchases of businesses deemed valuable by Buffet. Class B shares of Berkshire closed at $68.33 with a market capitalization of $168.99 billion. Each share of BRK.B has an estimated cost of $73.75, yielding a capital loss potential of 7.3%. BRK.B is the third largest holding of the portfolio, at 11.34% of all equities held. From quarter to quarter, Winters increased his holdings of Berkshire by 1.05%.

BRK.B has a P/E ratio of .01, a P/B ratio of 1.15, and a P/S ratio of 1.32. Revenues for the year were reported at $136 billion, with a net income of $13.4 billion, rendering a net margin of 9.8%. Earnings for BRK.B were reported at $7,457 per share. Berkshire has grown its revenues and earnings by average rates of 13.8% and 18.5% annually, over the last 10 years.

Warren Buffet made a bid for Transatlantic Holdings (TRH) at $52 a share, in a deal worth approximately $3.25 billion. Transatlantic Holdings is engaged in the reinsurance industry, which aligns with the core of Berkshire’s insurance operation. According to Reuters, the offer has expired, but talks continue as Buffet attempts to acquire TRH.

GuruFocus rated BRK.B with the business predictability rank of 1 star.

Reynolds American (NYSE:RAI)

Reynolds American is a cigarette manufacturer operating under their RJR Tobacco and American Snuff segments. RAI closed at an estimated price of $35.76, with a market capitalization of $20.84 billion. RAI has an estimated cost of $32.05 per share, yielding a capital gain of 11.5%. From quarter to quarter, holdings of RAI decreased by 2.14%.

RAI has a P/E ratio of 15.54, a P/B ratio of 3, and a P/S ratio of 2.28. Earnings for the year were reported at $2.30 for the year, with a current dividend yield at 5.93%. Revenues topped $8.5 million, with a net margin reported at 15.54%. Historically, RAI has, on average, grown its revenues and free cash flow by .7% and 11% respectively, over the last 5 years.

Currently, the tobacco industry is in the midst of challenging the federal government’s attempt to place graphic images depicting possible long term effects of smoking. In addition, RAI has reaffirmed its EPS estimate of $2.66 for 2011.

GuruFocus rated RAI with the business predictability rank of 1 star.

Philip Morris International (NYSE:PM)

Phillip Morris International engages in the development and sale of cigarettes and tobacco products internationally. Flagship brands of the firm include Marlboro, Virginia Slims and Parliaments. PM closed at $68.83 with a market capitalization of $120.90 billion. Philip Morris’s cost of acquisition in the portfolio is estimated at $49.42, yielding a potential capital gain of 39.2%. From quarter to quarter, the position of PM remained constant.

PM has a P/E ratio of 15.75, a P/B ratio of 34.64, and a P/S ratio of 1.75. Revenues for the year totaled in at $67 billion, with a net income of $7.5 billion, an 11.07% margin. The dividend yield currently stands at 3.72%, with earnings per share for the year reported at $4.09. In the last year, PM has grown its revenues and earnings by 12.2% and 19.5% respectively.

Currently, the tobacco industry is in the midst of challenging the federal government’s attempt to place graphic images depicting possible long term effects of smoking. In other news, for the year of 2011, PM raised their guidance by 15 cents to a range of $4.70 to $4.80 earnings per share.

For more information regarding David J. Winters, and the Wintergreen Fund, please visit:


Rating: 2.6/5 (23 votes)


Batbeer2 premium member - 6 years ago
Top 10 holdings of the Wintergreen fund:

Jardine Matheson Holdings Ltd. 8.0%

Swatch Group AG, Bearer 5.7%

Canadian Natural Resources Ltd. 5.6%

British American Tobacco plc 5.2%

Anglo American plc 4.8%

Schindler Holding AG - PC 4.6%

Genting Malaysia Bhd 3.9%

Imperial Tobacco Group plc 3.9%

Berkshire Hathaway Inc., Class B 3.5%

Nestle SA 3.4%

Would the inclusion of the missing holdings have an impact on your analysis of sector concentration and "shares held" ?
Blue Cove Partners
Blue Cove Partners - 6 years ago    Report SPAM

I think this article has a number of very misleading errors. The holdings are all incorrect. BRK.B has a PE of 0.01. Please check your numbers. Thanks
The Belgian
The Belgian - 6 years ago    Report SPAM

The portfolio set out in this article does not capture the non US-listed securities, which represent the largest portion of the Wintergreen Fund's portfolio and which includes great companies such as Jardine Matheson Holdings, The Swatch Group and Schindler Holding. Relevant datas and thoughtful articles are available on the Wintergreen Fund's website. Have fun and thank you David Winters for your brilliant digging skills !
Htan - 6 years ago    Report SPAM
In terms of the data I posted, it was from the 13F filed by Winters for Q2. While the 13F does have shortcomings such as not always listing international securities, I like having a audited "snapshot" of his holdings that can be used as a means of comparison quarter to quarter. The other methods would be a year to year comparison, but I feel that quarterly changes are important as a means of following gurus.

However, I will make sure to acknowledge address this deviation from international holdings when pertient in the future.

Thank you for the feedback.


I had made my original calculation based on BRK.B price / Brk.A earnings, but if utilized in terms of Brk.A / Brk.A Earnings, it stand at approximately 14.05 as of closing today. I do apologize for the confusion.

Cheekychino - 5 years ago    Report SPAM
im pretty sure your calculation was based on google finance...

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