Former Berkshire Investor Lou Simpson Buys SBA Communications, Adds to Apple

Manager endorsed by Buffett reports portfolio

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May 22, 2017
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The man Warren Buffett (Trades, Portfolio) chose to lead investments at Berkshire Hathaway (BRK.A, Financial)(BRK.B, Financial) subsidiary GEICO, Lou Simpson (Trades, Portfolio), last week reported his latest portfolio update for his personal fund.

Simpson bought only one new stock, SBA Communications Corp. (SBAC), according to his second-quarter portfolio. The investor increased his holdings of Tyler Technologies Inc. (TYL, Financial), Hexcel Corp. (HXL, Financial), Sensata Technologies Holding (ST, Financial), Axalta Coating Systems Ltd. (AXTA, Financial), Apple (AAPL, Financial) and WABCO Holdings Inc. (WBC, Financial) as well. Notably for an investor philosophically similar to Buffett, Simpson sold out three holdings associated with him: LiLAC Group (LILAK, Financial), Berkshire Hathaway Inc. (BRK.A, Financial) and Wells Fargo & Co. (WFC, Financial)

The 80-year-old manager retired from autonomously managing about $2.5 billion at Berkshire in 2011, with a record Buffett said made him “a cinch to be inducted into the investment Hall of Fame.” From 1980-2004, Simpson averaged annual gains of 20.3%, with only three down years. Today, he is the chairman and managing member of SQ Advisors LLC as well as an adviser at Prem Watsa (Trades, Portfolio)’s Fairfax Partners.

Simpson maintains a concentrated portfolio of 14 stocks valued around $2.6 billion, connecting with a statement he has made in the past: “If we could find 15 positions that we really had confidence in, we’d be in 15 positions.” By percentage, Liberty Global (LBTYK), Brookfield Asset Management (BAM, Financial) and Charlies Schwab Corp. (SCHW) top his portfolio by size, and he kept roughly 10% of it in Berkshire’s B-shares, though he reduced the position by 20% during the quarter.

Simpson’s new buy

SBA Communications Corp. (SBA)

The investor added 1,159,699 shares of SBA Communications Corp., which traded for an average price of $110.45 for the quarter, making the holding 5.3% of his portfolio. SBA Communications owns and operates wireless communications towers in the U.S. and internationally, primarily for the four biggest wireless carriers: AT&T (T), Verizon (VZ), T-Mobile and Sprint (S).

SBA Communications has a $16.21 billion market cap, and its stock traded for around $133.60 per share Monday afternoon, with a price-earnings ratio of 272.63 and price-sales ratio of 9.98. SBA Communications Corp. had annual average earnings growth of 20.8% over the past 10 years. GuruFocus rated the business a predictability rank of 5-star.

Biggest increases

Tyler Technologies Inc. (TYL, Financial)

Simpson added 179,498 shares of Tyler Technologies to his holding of 879,647 shares, giving him 879,647 shares in all. Simpson bought the stock in the fourth quarter when the price averaged $155, and in the first quarter the price averaged $152. As of the end of the second quarter, Tyler Technologies held 5.33% of the portfolio.

Tyler Technologies has a market cap of $6.28 billion; its stock traded for around $169.23 Monday afternoon with a price-earnings ratio of 52.47 and price-sales ratio of 8.47. Tyler Technologies had an annual average earnings growth of 18.8% over the past 10 years. GuruFocus rated it the business predictability rank of 5-star.

Hexcel Corp. (HXL, Financial)

Simpson bought 352,022 shares of Hexcel Corp. in the first quarter, adding to his position of 1,610,367 shares he began in the fourth quarter. The stock traded for $48 on average in the fourth quarter and $53 on average in the first quarter. In all, he holds 1,962,389 shares of Hexcel, worth 4.09% of the portfolio.

Hexcel Corp. has a market cap of $4.59 billion, and the stock traded around $50.47 Monday afternoon, with a price-earnings ratio of 18.30 and price-sales ratio of 2.41. The trailing 12-month dividend yield of Hexcel Corp. is 0.87%; the forward dividend yield is 0.88%. Hexcel had annual average earnings growth of 13.6% over the past 10 years. GuruFocus rated Hexcel the business predictability rank of 3-star.

Sensata Technologies Holding (ST, Financial)

Simpson bought 386,591 shares of Sensata Technologies in the first quarter, which raised his holding to 3,105,449 shares. He started the position in the third quarter when the price averaged around $38, added in the fourth quarter when it averaged $38 and in the first quarter, it averaged $42. Sensata occupies 5.18% of the portfolio.

Sensata Technologies Holding has a market cap of $6.8 billion, and its stock traded for around $40.57 per share Monday afternoon, with a price-earnings ratio of 25.39 and price-sales ratio of 2.12. Sensata Technologies Holding had annual average earnings growth of 17.4% over the past five years.

Axalta Coating Systems Ltd. (AXTA, Financial)

Simpson added 659,237 shares of Axalta Coating Systems to his holding of the company, increasing it to 6,110,726 shares. He started the position in the third quarter when the price averaged $28, increased when it averaged $26 and in the first quarter, it averaged $30. His Axalta Coating position represented 7.5% of his portfolio at quarter-end.

Axalta Coating Systems Ltd. has a market cap of $7.6 billion; its shares traded around $31.41 Monday afternoon with a price-earnings ratio of 101.3 and price-sales ratio of 1.78.