Glenn Greenberg (Trades, Portfolio)’s Brave Warrior Advisors recently disclosed its 13F portfolio updates for the third quarter of 2021, which ended on Sept. 30.
The firm was originally founded as Chieftain Capital Management in 1984, and when the partners split the firm up into two separate companies in 2010, Greenberg’s firm was renamed Brave Warrior Investors. Greenberg likes to run a highly concentrated portfolio, which he considers to be a “defense against ignorance,” since the more companies you own, the less you know about each. He prefers to invest in companies that have little competition, high return on invested capital, good balance sheet strength and attractive valuations.
As per its latest 13F filing for the quarter ended in September, Brave Warrior Advisors’ top trade of the quarter was a reduction in its Aon PLC (AON, Financial) investment. The firm also established a new position in Apollo Global Management Inc. (APO, Financial), added to Fidelity National Financial Inc. (FNF, Financial) and sold out of Dollar Tree Inc. (DLTR, Financial).
Aon
Greenberg’s firm cut its investment in Aon (AON, Financial) by 1,135,564 shares, leaving a remaining holding of only 114,865 shares and reducing the equity portfolio by 9.31%. Shares were trading for an average price of $268.54 in the three months through the end of September.
London-based Aon is a British global insurance company that sells a range of financial risk-mitigation products, including insurance, reinsurance and pension administration plans. It operates in 120 countries, and its biggest segment in terms of assets under management is the retirement segment.
The company has a financial strength rating of 4 out of 10; while the cash-debt ratio of 0.1 is low, the Piotroski F-Score of 4 out of 9 indicates financial stability. Its profitability is rated 8 out of 10 on the back of a three-year revenue per share growth rate of 7.4% and a three-year Ebitda per share growth rate of 24.6%.
Shares of Aon traded around $298.53 on Nov. 22 for a market cap of $65.78 billion. According to the GuruFocus Value chart, the stock is modestly overvalued.
Apollo Global Management
Brave Warrior Advisors established a new stake worth 2,507,036 shares in Apollo Global Management (APO, Financial), giving the stock a 5.41% weight in the equity portfolio at the quarter’s average price of $60.19 per share.
Apollo is a global alternative investment manager that invests in credit, private equity and real assets. The company raises, invests and manages credit, private equity and real assets funds as well as strategic investment accounts for institutional and individual investors.
The company has a financial strength rating of 4 out of 10. The Altman Z-Score is 1.59, suggesting the potential for liquidity issues, though the interest coverage ratio of 6.35 shows the company has enough cash to make the interest payments on its debt. Its profitability is rated 7 out of 10. The return on invested capital has recently fallen below the weighted average cost of capital, indicating value destruction, though history indicates that this is not usually the case.
Shares of Apollo traded around $75.85 on Nov. 22 for a market cap of $18.70 billion. According to the GF Value chart, the stock is modestly undervalued.
Fidelity National Financial
The firm increased its Fidelity National Financial (FNF, Financial) holding by 2,505,759 for a total stake of 8,792,405 shares, adding 3.98% to its equity portfolio weight. During the quarter, shares were changing hands for around $46.13 apiece.
Fidelity National Financial is a provider of title insurance and settlement services for the real estate and mortgage industries. Headquartered in Jacksonville, Florida, Fidelity is the leading title insurance company in the United States.
The company has a financial strength rating of 5 out of 10 on the back of a strong interest coverage ratio of 30.96 and a very healthy Piotroski F-Score of 7 out of 9. Its profitability is rated 6 out of 10, with the return on equity and return on assets outperforming 95% and 80% of industry peers.
Shares of Fidelity traded around $52.35 on Nov. 22 for a market cap of $14.90 billion. According to the GF Value chart, the stock is fairly valued.
Dollar Tree
The firm sold out of its 949,378-share stake in Dollar Tree (DLTR, Financial). Previously, the stock had a 3.24% weight in the equity portfolio. Shares were trading for an average price of $96.18 during the quarter.
Headquartered in Chesapeake, Virginia, Dollar Tree is an American chain of discount variety stores. It operates through the Dollar Tree, Family Dollar and Dollar Tree Canada brands, which together have more than 15,000 locations throughout 48 U.S. states and five Canadian provinces.
The company has a financial strength rating of 5 out of 10. The Altman Z-Score of 3.4 and Piotroski F-Score of 8 out of 9 show a fortress-like balance sheet. Its profitability is rated 7 out of 10. The ROIC is almost always higher than the WACC, indicating the company is creating value as it grows.
Shares of Dollar Tree traded around $132.56 on Nov. 22 for a market cap of $29.81 billion. According to the GF Value chart, the stock is modestly overvalued.
Portfolio overview
As of the quarter’s end, the firm held shares of 24 common stock positions in an equity portfolio valued at $2.86 billion. The turnover for the quarter was 14%.
The top holding was Anthem Inc. (ANTM, Financial) with a 17.90% weight in the equity portfolio, followed by Fidelity National Financial with 13.96% and Primerica Inc. (PRI, Financial) with 10.23%.
In terms of sector allocation, the firm has by far the highest weighting in financial services, followed distantly by health care and then energy.
