Tom Russo, portfolio manager at Gardner Russo & Gardner, oversees roughly $5 billion and has a unique investing strategy. He buys stocks for an exceptionally long hold period, often decades. His favorite sectors are alcohol, tobacco and global luxury and consumer goods companies with plenty of emerging market growth. A company’s ability to reinvest also signals future profitability for him.
The smaller stocks in Russo’s portfolio belong to his partners. Only the new additions to the largest holdings are his. In the second quarter, the largest new adds he made are: Heineken Holding NV (HKHHF, Financial), Berkshire Hathaway (BRK.A, Financial), Nestle Sa Reg (NSRGY, Financial) and Pernod Ricard (PDRDF, Financial).
Heineken Holding NV (HKHHF)
In the second quarter, Russo added 760,576 shares to his Heinken holding at an average price of $44. He ended the quarter with 8,816,727 shares. Over the last ten years, Heinken shares have returned almost 56%. They are up almost 6% since Russo’s second-quarter purchase.
Netherlands-based Heineken Holding is the holding company for the Heineken group, Europe’s largest brewer, which owns over 170 beer brands and is the “world’s most international brewer,” with distributors in 71 countries.
In 2011, the company increased revenue 6.1%, EBIT 2.8% and consolidated beer volume 12.8% over the previous year. The company is also focused on a key aspect for Russo, emerging market growth. In 2011 it acquired two breweries in Ethiopia, where the beer market has grown approximately 20 percent annually over the last five years. It also has operations in 20 countries in Africa and a presence in Asia Pacific. In the emerging markets in the Americas, it purchased beer operations in Mexico and Brazil.
Berkshire Hathaway (BRK.A)
Russo added 211 shares to his Berkshire Hathaway holding, which he has had since 1983, in the second quarter of 2012 at an average price of $120,902 per share. It was his second-largest purchase of shares since the second quarter of 2007. At quarter end he owned 4,377 shares of the company. Berkshire shares are up more than 100% over the last ten years and more than 11% year to date.
May 19, Russo went on Bloomberg to talk about his Berkshire investment. “… The shares are compressed in valuation, because there’s been so much worry over the direction long term for Berkshire, and I think they’ve put into place so many ways that investors can win going forward that it’s an important position for us at around 10%.” He also said he expected Berkshire would repurchase its shares in the future and the long-term-focused culture would continue into the future, even after a succession of leadership after Warren Buffett.
In the last ten years, Berkshire’s revenue grew 12.8% annually on average, and EBITDA grew 17.5%. In the first quarter of 2012, its net earnings more than doubled, from $1.6 billion in the first quarter of 2012, to $3.4 billion. In the first quarter of 2011 significant catastrophic events resulted in after-tax losses of approximately $1.1 billion in its underwriting results, whereas it had no significant losses due to catastrophes in the first quarter of 2012.
Nestle Sa Reg (NSRGY)
Russo initiated a position in Nestle in the first quarter of 2011. He bought 9,762,471 shares at an average price of $55.50. He has been adding to the position since then, including a second-quarter purchase of 413,840 shares at an average price of $59. At quarter end he owned 10,980,615 shares of the company.
Switzerland-based Nestle SA is a global food and beverage company with operations in 86 countries. In a talk at the 8th Annual Investor Conference in May 2011, Russo said, “So in the case of Nestle the appeal is this brand portfolio, and these brands are familiar, trusted and already ubiquitous globally.” Twenty-nine of the company’s brands have sales of over $1.1 billion.
Russo said in a June CNBC interview that “Nestle’s products seen for quality and helpfulness around the world. And those brands are coveted in the emerging and developing markets. And our businesses are charged with the responsibility of investing against those brands to have them available in the right packaging size, the right outlets, for the economies as they develop and advance, so consumers around the world can enjoy their products.”
Pernod Ricard (PDRDF)
Tom Russo bought 225,833 shares of Pernod Ricard in the second quarter at an average price of $101, bringing his quarter-end total holding to 3,556,617 shares. The stock is up 101% over the last ten years and 22% year to date.
Pernod Ricard is a supplier of premium wine and spirits with operations in 70 countries. Pernod derives one-third of its activity from Asian markets.
In the first nine months of its 2011/2012 financial year ended March 31, 2012, Pernod reported a 7% increase in sales, with 9% of organic growth, 17% growth in emerging markets and 3% growth in mature markets. Emerging markets represented 77% of its organic sales growth. Western Europe was the only geographic region to report declined sales – it was down 1%, primarily due to Spain, which was down 5%, the UK, down 4%, and Italy, down 12%. Germany and France both saw increases of 8%.
See Tom Russo’s portfolio here. Also check out the Undervalued Stocks, Top Growth Companies and High Yield stocks of Tom Russo.
The smaller stocks in Russo’s portfolio belong to his partners. Only the new additions to the largest holdings are his. In the second quarter, the largest new adds he made are: Heineken Holding NV (HKHHF, Financial), Berkshire Hathaway (BRK.A, Financial), Nestle Sa Reg (NSRGY, Financial) and Pernod Ricard (PDRDF, Financial).
Heineken Holding NV (HKHHF)
In the second quarter, Russo added 760,576 shares to his Heinken holding at an average price of $44. He ended the quarter with 8,816,727 shares. Over the last ten years, Heinken shares have returned almost 56%. They are up almost 6% since Russo’s second-quarter purchase.
Netherlands-based Heineken Holding is the holding company for the Heineken group, Europe’s largest brewer, which owns over 170 beer brands and is the “world’s most international brewer,” with distributors in 71 countries.
In 2011, the company increased revenue 6.1%, EBIT 2.8% and consolidated beer volume 12.8% over the previous year. The company is also focused on a key aspect for Russo, emerging market growth. In 2011 it acquired two breweries in Ethiopia, where the beer market has grown approximately 20 percent annually over the last five years. It also has operations in 20 countries in Africa and a presence in Asia Pacific. In the emerging markets in the Americas, it purchased beer operations in Mexico and Brazil.
Berkshire Hathaway (BRK.A)
Russo added 211 shares to his Berkshire Hathaway holding, which he has had since 1983, in the second quarter of 2012 at an average price of $120,902 per share. It was his second-largest purchase of shares since the second quarter of 2007. At quarter end he owned 4,377 shares of the company. Berkshire shares are up more than 100% over the last ten years and more than 11% year to date.
May 19, Russo went on Bloomberg to talk about his Berkshire investment. “… The shares are compressed in valuation, because there’s been so much worry over the direction long term for Berkshire, and I think they’ve put into place so many ways that investors can win going forward that it’s an important position for us at around 10%.” He also said he expected Berkshire would repurchase its shares in the future and the long-term-focused culture would continue into the future, even after a succession of leadership after Warren Buffett.
In the last ten years, Berkshire’s revenue grew 12.8% annually on average, and EBITDA grew 17.5%. In the first quarter of 2012, its net earnings more than doubled, from $1.6 billion in the first quarter of 2012, to $3.4 billion. In the first quarter of 2011 significant catastrophic events resulted in after-tax losses of approximately $1.1 billion in its underwriting results, whereas it had no significant losses due to catastrophes in the first quarter of 2012.
Nestle Sa Reg (NSRGY)
Russo initiated a position in Nestle in the first quarter of 2011. He bought 9,762,471 shares at an average price of $55.50. He has been adding to the position since then, including a second-quarter purchase of 413,840 shares at an average price of $59. At quarter end he owned 10,980,615 shares of the company.
Switzerland-based Nestle SA is a global food and beverage company with operations in 86 countries. In a talk at the 8th Annual Investor Conference in May 2011, Russo said, “So in the case of Nestle the appeal is this brand portfolio, and these brands are familiar, trusted and already ubiquitous globally.” Twenty-nine of the company’s brands have sales of over $1.1 billion.
Russo said in a June CNBC interview that “Nestle’s products seen for quality and helpfulness around the world. And those brands are coveted in the emerging and developing markets. And our businesses are charged with the responsibility of investing against those brands to have them available in the right packaging size, the right outlets, for the economies as they develop and advance, so consumers around the world can enjoy their products.”
Pernod Ricard (PDRDF)
Tom Russo bought 225,833 shares of Pernod Ricard in the second quarter at an average price of $101, bringing his quarter-end total holding to 3,556,617 shares. The stock is up 101% over the last ten years and 22% year to date.
Pernod Ricard is a supplier of premium wine and spirits with operations in 70 countries. Pernod derives one-third of its activity from Asian markets.
In the first nine months of its 2011/2012 financial year ended March 31, 2012, Pernod reported a 7% increase in sales, with 9% of organic growth, 17% growth in emerging markets and 3% growth in mature markets. Emerging markets represented 77% of its organic sales growth. Western Europe was the only geographic region to report declined sales – it was down 1%, primarily due to Spain, which was down 5%, the UK, down 4%, and Italy, down 12%. Germany and France both saw increases of 8%.
See Tom Russo’s portfolio here. Also check out the Undervalued Stocks, Top Growth Companies and High Yield stocks of Tom Russo.
