Towards the end of last year, I wrote an article on Norbert Lou, the founder and portfolio manager of Punch Card Management. Lou is an incredibly successful investor, but he rarely gives interviews.
According to an interview from 2015, which was published in Santangel's Review, Lou's "greatest differentiator" was his ability to find "rare undervalued and underfollowed" companies that can compound intrinsic value at an extraordinary rate for long periods.
The same article claimed that since the investment management firm was founded, it had compounded investors' capital at an annual rate of 14.5%. However, as the fund set out with $10 million in assets, which had grown to $250 million, I kept coming up with a CAGR of 22.3%, which I think is likely due to the fact that regulatory filings exclude the cash in portfolios.
I think Lou is one of the most interesting fund managers I've discovered, and with that in mind, I thought it might be interesting to trawl through Punch Card's historical 13F filings to see which companies the fund manager has owed over the years.
Going through the numbers
Looking back, it would appear Punch Card's first 13F was filed for the quarter ending Dec. 31, 2007. The report detailed $160 million of securities and six individual stock holdings. The largest holding, accounting for around 34% of the total 13F value, was Quilmes Industrial (Quinsa), Societe Anonyme, a subsidiary of ABInbev (BUD, Financial). The parent made an offer to acquire the 10% of the shares it did not own in December 2007.
The second and third largest holdings, respectively, were Ambassadors Group and American Eagle Outfitters (AEO, Financial). These holdings together accounted for around 56% of 13F assets.
The next 13F, detailing the period to the end of March 2008, shows Ambassadors and American Eagle were still significant holdings, but Punch Card had also acquired a 15% holding in Loews (L, Financial) and a 14% holding in Bear Stearns.
By the last quarter of 2008, Punch Card's portfolio looked very different. Its 13F listed just $33 million of securities (excluding cash), of which $11 million was invested in Ambassadors.
Punch Card's last 13F before it disappeared off the radar for several years (probably because the fund's assets dropped below the $100 million reporting requirement) showed $40 million of assets.
The position in Ambassadors was worth $22 million, just under $10 million was invested in eBay (EBAY, Financial) and $5.5 million was invested in BNSF, with $2.5 million in Berkshire Hathaway B Shares (BRK.B, Financial).
When the fund started reporting again, for the three months to the end of 2013, it listed $119 million of assets. The most significant holding was Berkshire Hathaway at $66 million, followed by Wells Fargo (WFC) at $23 million and Baidu (BIDU) $30 million. By the end of 2014, Baidu was gone. Punch Card listed just Berkshire and Wells as holdings.
By the end of 2015, Baidu was back. Punch Card had also added Carecom Inc. (CRCM, Financial) and T Rowe Price (TROW, Financial). A year later, these holdings had vanished. The portfolio was back to its three core holdings.
From what I can tell, Wells was then traded out for Winnebago Industries Inc. (WGO, Financial) in the first quarter of 2019. Today, the portfolio contains just three stocks: Berkshire, Winnebago and Ally Financial (ALLY, Financial).
Conclusion
When I originally covered Punch Card, I believed Lou's approach to investing was to buy and hold good stocks for extended periods. However, looking back at the firm's trading history, it would appear that it was far more active. It has owned a few core holdings, but it has also actively traded in and out of other positions. It would also appear as if the investor made some mistakes around the time of the financial crisis, which took a couple of years from which to recover.
Still, it's challenging to draw any concrete conclusions because Punch Card has been known to hold a large percentage of its assets in cash. These assets are not reported on a 13F. The filings only give part of the picture.
Disclosure: The author owns no share mentioned.
Not a Premium Member of GuruFocus? Sign up for a free 7-day trial here.
