Founded by the late William Ruane, investment firm Ruane Cunniff (Trades, Portfolio) has revealed its portfolio for the second quarter of this year. Top trades include reductions in the firm’s Arista Networks Inc. (ANET, Financial) and Jacobs Engineering Group Inc. (J, Financial) positions, additions to its Anthem Inc. (ANTM, Financial) and Micron Technology Inc. (MU, Financial) holdings and selling out of all Mastercard Inc. (MA, Financial) shares.
Ruane, Cunniff & Goldfarb are value investors focused on the intrinsic value of business. They are long-term investors that will buy a stock and hold it for a long time, even if the stock seems to be overvalued. They look at common stocks as units of ownership in a business and purchase them when the price appears low in relation to the value of the total enterprise.
Portfolio overview
At the end of the quarter, the firm’s portfolio contained 35 stocks and had not established any new holdings. It was valued at $11.28 billion and has seen a turnover rate of 5%. Top holdings include CarMax Inc. (KMX, Financial), Facebook Inc. (FB, Financial), UnitedHealth Group Inc. (UNH, Financial), Credit Acceptance Corp. (CACC, Financial) and Anthem.
The top sectors represented are communication services (34.99%), financial services (20.03%) and technology (16.74%).
Arista Networks
The firm slashed its position in Arista Networks (ANET, Financial) during the quarter. The sale of 815,927 shares cut the position by 56.83% as shares rose to an average price of $333.29. Overall, the sale had a -2.32% impact on the equity portfolio and GuruFocus estimates the total gain of the position at 57.73%.
Arista Networks is a software and hardware provider for the networking solutions sector. Operating as one business unit, the company’s products are targeted for high-performance networking applications, while service revenue comes from technical support. Customer markets include data centers, enterprises, service providers and campuses. The company is headquartered in Santa Clara, California, and generates most of its revenue in the Americas. It also sells into Europe, the Middle East, Africa and Asia-Pacific.
On Aug. 16, the stock was trading at $364.66 per share with a market cap of $27.91 billion. According to the GF Value Line, the stock is trading at a modestly overvalued rating.
GuruFocus gives the company a financial strength ratio of 7 out of 10 and a profitability rank of 9 out of 10. There are currently two severe warning signs issued for inventory building up and assets growing faster than revenue. The company’s exemplary profitability rank is propped up by operating and net margins that beat at least 96% of competitors in the hardware industry and are well above historical norms.
Ruane Cunniff (Trades, Portfolio) is the largest guru shareholder in Arista Networks (ANET, Financial) with Pioneer Investments (Trades, Portfolio), Jim Simons (Trades, Portfolio)' Renaissance Technologies, Steven Cohen (Trades, Portfolio), Ken Fisher (Trades, Portfolio)s and Andreas Halvorsen (Trades, Portfolio) following behind.
Anthem
Managers of the firm doubled down on a new holding in Anthem (ANTM, Financial) with the purchase of an additional 672,156 shares. The holding grew by 57.36% with the purchase as shares traded at an average price of $381 during its second quarter of ownership. The firm has gained an estimated 8.22% on the holding with share prices leveling off and the purchase had a 2.27% impact on the equity portfolio.
Anthem is one of the largest private health insurance organizations nationwide, providing medical benefits to roughly 43 million medical members. The company offers employer, individual and government-sponsored coverage plans. Anthem differs from its peers in its unique position as the largest single provider of Blue Cross Blue Shield branded coverage, operating as the licensee for the Blue Cross Blue Shield Association in 14 states. Through acquisitions, such as the Amerigroup deal in 2012, Anthem's reach expands beyond those states through government-sponsored programs such as Medicaid.
As of Aug. 16, the stock was trading at $371.26 per share with a market cap of $90.45 billion. The shares are fairly valued according to the GF Value Line.
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 are currently no severe warning signs issued for the company, but a medium warning sign is issued for new long-term debt. The company’s cash-to-debt ratio of 0.23 ranks it worse than 82.61% of industry competitors and falls shy of the company’s median ratio of 0.24.
Anthem (ANTM, Financial) is also held by Baillie Gifford (Trades, Portfolio), the Vanguard Health Care Fund (Trades, Portfolio), Hotchkis & Wiley and First Eagle Investment (Trades, Portfolio).
Micron
The firm’s Micron (MU, Financial) position also saw a boost during the second quarter. The purchase of an additional 2.82 million shares grew the holding by 53.02%. The shares traded at an average price of $84.58 during the quarter. The purchase had a 2.13% impact on the equity portfolio overall and GuruFocus estimates the firm has lost 17.10% on the holding.
Micron historically focused on designing and manufacturing DRAM for PCs and servers. The company then expanded into the NAND flash memory market. It increased its DRAM scale with the purchase of Elpida (completed in mid-2013) and Inotera (completed in December 2016). The DRAM and NAND products are tailored to PCs, data centers, smartphones, game consoles, automotives and other computing devices.
Micron’s stock was trading at $70.71 per share with a market cap of $79.60 billion on Aug. 16. According to the GF Value Line, the stock is trading at a modestly overvalued rating.
GuruFocus gives the company a financial strength rating of 7 out of 10, a profitability rank of 8 out of 10 and a valuation rank of 4 out of 10. There is currently one severe warning sign issued for assets growing faster than revenue. In line with the warning sign, the company’s revenue and net income have drastically fallen off over the last three years.
Other top gurus invested in Micron (MU, Financial) include Primecap Management, Li Lu (Trades, Portfolio), David Tepper (Trades, Portfolio), Seth Klarman (Trades, Portfolio) and Pioneer Investments (Trades, Portfolio).
Mastercard
Mastercard (MA, Financial) got the axe after over a year of consistent reductions in the portfolio. The remaining 503,701 shares were sold at an average price of $371.26 throughout the quarter and gained the firm an estimated 834.55% return. Overall, the sale had a -1.69% impact on the equity portfolio.
Mastercard is the second-largest payment processor in the world, having processed $4.8 trillion in purchase transactions during 2020. Mastercard operates in over 200 countries and processes transactions in over 150 currencies.
On Aug. 16, the stock was trading at $362.03 per share with a market cap of $356.92 billion. The stock is given a modestly overvalued rating by the GF Value Line.
GuruFocus gives the company a financial strength rating of 5 out of 10, a profitability rank of 9 out of 10 and a valuation rank of 1 out of 10. There is currently one severe warning sign issued for assets growing faster than revenue. A strong balance between return on invested capital and the weighted average cost of capital aids the company’s strong profitability rank.
Chuck Akre (Trades, Portfolio), Warren Buffett (Trades, Portfolio), Ken Fisher (Trades, Portfolio), Baillie Gifford (Trades, Portfolio) and Pioneer Investments (Trades, Portfolio) all maintain positions in Mastercard (MA, Financial).
Jacobs Engineering
The firm’s top five trades were rounded out with a 21.54% reduction in its Jacobs Engineering (J, Financial) position. Managers sold 838,068 shares that traded at an average price of $136.52 during the quarter. Overall, the sale had a -1.02% impact on the equity portfolio and GuruFocus estimates the total gain of the holding at 73.95%.
Jacobs Engineering is a global provider of engineering, design, procurement, construction and maintenance services as well as cyber engineering and security solutions. The company serves industrial, commercial and government clients in a wide variety of sectors. Jacobs Engineering employs approximately 55,000 workers.
As of Aug. 16, the stock was trading at $137.80 per share with a market cap of $18.03 billion. The stock is significantly overvalued according to the GF Value Line.
GuruFocus gives the company a financial strength rating of 5 out of 10, a profitability rank of 6 out of 10 and a valuation rank of 1 out of 10. There are currently no severe warning signs issued for the company, but numerous medium warning signs are issued for a wide range of financial issues. The company’s cash flows took a large hit in 2019 before recovering last year.
Top guru shareholders in Jacobs Engineering (J, Financial) include Primecap Management, Barrow, Hanley, Mewhinney & Strauss, Simons' firm, Joel Greenblatt (Trades, Portfolio) and Chuck Royce (Trades, Portfolio).
