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Geoff Gannon
Geoff Gannon

Glenn Greenberg’s New Buys: Growth Stocks for Value Investors

February 15, 2012 | About:
Glenn Greenberg – formerly of Chieftain Capital now of Brave Warrior Capital – bought some new stocks last quarter. They were:

· Vistaprint (VPRT)

· Adobe Systems (NASDAQ:ADBE)

· Oracle (NYSE:ORCL)

· Globe Specialty Metals (NASDAQ:GSM)

Greenberg is an especially interesting investor to watch. In fact, he’s one of my favorite Gurus to watch. Why?

Because he holds such concentrated positions.

For example – although these are new positions – Greenberg already has 5.2% of his portfolio in Vistaprint, 3.3% in Adobe and 2.1% in Oracle. Globe Specialty Metals is a measly 0.3% position. But other than that we’re talking about position sizes that – right off the bat – are as big as some Gurus’ top positions ever get.

You know I’m a big believer in focused investing. Not diversification. But concentration. So I like to steal ideas from investors who love their stocks enough to risk a good portion of their portfolio on every new idea.

I’ve never been sure why people are fascinated by some Guru’s one-percent position. If one Guru is buying 100 stocks and another Guru is buying 20 stocks – I’m going to look at the list of 20 stocks first.

Have you ever met anyone with 100 good ideas? I haven’t.

Greenberg is also interesting to follow because he is a true qualitative investor.

(Weirdly: Glenn’s son, Spencer Greenberg, is a quant.)

Glenn Greenberg thinks a lot about the stocks he buys as businesses. In fact – aside from Charlie Munger and Warren Buffett – I don’t think I’ve ever heard any investor talk as much about the businesses he owns as Greenberg does.

So Greenberg’s new buys are one of my favorite places to look for stock ideas. Certainly, if there’s a company Greenberg is buying that you haven’t heard of – you should start researching it immediately. Because this is not a guy who buys cigar butts. He buys world-class businesses.

Adobe (NASDAQ:ADBE) is a good example of this. Adobe has a GuruFocus business predictability ranking of 5 stars. The company’s revenue per share line almost perfectly matches its 10-year trend line. Operating margins at Adobe are over 20%. If Warren Buffett bought tech businesses – other than IBM (IBM) – he’d buy businesses like Adobe.

One question to consider when looking at the stocks Glenn Greenberg buys is valuation. Since Greenberg is very big on buying great businesses, he sometimes has to compromise a bit on price.

But Greenberg is obviously a value investor. Or at least a "growth at a reasonable price" investor. Many of the stocks he buys are trading at low valuations relative to their past. Although they aren’t always trading at low prices relative to their peers.

For instance, Adobe doesn’t look cheaper than Microsoft (MSFT). Of course, maybe Greenberg prefers Adobe – as a business – to Microsoft. His second biggest position is Google (GOOG) so it’s possible Greenberg is not a big believer in Microsoft’s moat.

It’s interesting to see how much of Greenberg’s portfolio is now in some sort of software company. Google is 16% of Greenberg’s portfolio. Adobe is 3%. And Oracle is 2%. That may not sound like much – but it’s extremely unlikely that Greenberg would start buying Adobe or Oracle if he really intended them to stay such small positions. It’s much more likely that if Greenberg gets the chance to buy more of those two stocks at the right price – you’ll soon see Adobe and Oracle rise towards the top of Greenberg’s biggest positions.

Vistaprint (VPRT) is the most interesting new buy from Greenberg. Personally, it’s the first company I’d be looking at.

Vistaprint hasn’t been public company for very long. In fact it’s only been in existence for 11 years. But it has delivered an impressive growth performance since going public in 2005.

Vistaprint serves a very fragmented market. It had over 5 million customers in over 120 countries when it went public. That sounds like an impossibly high number. But Vistaprint is focused on handling printing and graphic design for companies with fewer than 10 employees. Which is a huge market. In the U.S. alone, there are more than 20 million businesses with fewer than 10 employees.

Vistaprint’s investment appeal is explained quite succinctly in its 10-K:

“Our total revenues have grown from $6.1 million for the fiscal year ended June 30, 2001 to $670.0 million for the fiscal year ended June 30, 2010. All of our revenue growth has been organic.”

So what’s the downside to Vistaprint?

We’re talking about a stock with a P/E around 20, a P/B of more than 5, a P/S ratio near 2, no dividend, etc.

In other words: a growth stock.

Talk to Geoff About Glenn Greenberg’s New Buys [email protected]

About the author:

Geoff Gannon

Rating: 3.9/5 (23 votes)



Vgm - 5 years ago    Report SPAM
Interesting piece. Thanks. Greenberg is my favorite also, and for the same reason: his confidence to be concentrated in just a few stocks (typically 10 or less in a $1B portfolio - it used to be around $2B before the split to form Brave Warrior).

He rarely talks in public, but gave a fabulous lecture at Columbia Business School a couple of years ago (published in the Spring 2010 edition of Graham & Doddsville) where he discussed his approach in detail, and talked about how he analyzed Google among others. He also talked about how he uses FCF as his metric.

One thing which might differ a little from what you wrote about position size, is that he said in his lecture that there's nothing wrong with starting a new position, continuing to do the analysis, and then deciding whether or not to stay in. From time to time in the past he has started a position and then exited it very quickly - but not often.
Greg Speicher
Greg Speicher - 5 years ago    Report SPAM
Geoff, great stuff, as always. I think you are spot on in your comments about Greenberg. Here is my write-up on his Columbia talk: http://gregspeicher.com/?p=3896, for those who are interested.

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