Tweedy Browne (Trades, Portfolio) Co. LLC posted its third-quarter 2019 results this past Friday. During the quarter, the value-oriented investing firm reduced its holdings of 38 stocks and sold out of three positions, including Mastercard Inc. (MA, Financial). The fund also bought a new position in Unilever NV (XAMS:UNA, Financial) and added shares to its Fox Corp. (FOX, Financial) and Berkshire Hathaway Inc. (BRK.A, Financial) holdings.
Established in 1920 by Forest Birchard Tweedy, the mutual fund company’s history is grounded in undervalued securities. Its Benjamin Graham-style value investing approach focuses on long-term investment in undervalued securities that have strong growth potential, above-average dividend yields and established dividend history.
As of the end of the third quarter, Tweedy, Browne’s equity portfolio is valued at $2.83 billion and consists of 47 stocks. In terms of weighting, the fund’s heaviest sectors are financial services (29.2%), technology (27.14%) and consumer defensive (11.52%).
Below are the stocks the fund bought this past quarter.
Unilever NV
The fund had one new buy this quarter; it purchased 3,574,701 shares of Unilever, which gives it a weight of 7.6% in the equity portfolio. During the quarter, the stock traded at an average price of 54.06 euros ($60.17) per share.
Unilever is a global-reaching consumer products company that owns over 400 diverse brands, including Dove, Axe, Lipton and Knoor. The company has a primary focus on sustainability, and on products such as soap that improve basic health and hygiene. It has a market cap of 137.62 billion euros and an enterprise value of 162.43 billion euros.
The company has a GuruFocus financial strength rating of 5 out of 10 and a profitability score of 8 out of 10. It has a price-earnings ratio of 15.01, a price-book ratio of 10.84, an operating margin of 24.81% and an interest coverage of 18.33. According to the Peter Lynch chart, the company is trading at approximately fair value given its current price-earnings ratio.
Unilever’s dividend yield is 3.07%, and it has a dividend payout ratio of 0.44. Its three-year dividend growth rate is 3.07%, beating 56.76% of industry competitors, and a three-year average share buyback ratio of 2. Although the company’s three-year revenue growth is slow at 0.5%, its three-year Ebitda growth is at 26.5%, showing that shareholder returns are improving.
Fox Corp.
During the quarter, the fund also added 1,241,221 shares of Fox, bringing the total number of shares owned up to 1,299,471. The stock traded at an average price of $34.53 during the quarter.
When Disney (DIS, Financial) acquired 21st Century Fox in March 2019, the TV content producer kept its news and sports networks, as well as several regional networks networks, under the Fox logo. Fox operates 28 broadcast TV stations. It has a market cap of $19.95 billion and an enterprise value of $23.48 billion.
Fox has a GuruFocus financial strength score of 5.7 out of 10 and a profitability score of 5 out of 10. It has a price-earnings ratio of 12.83, a price-book ratio of 2.02, an operating margin of 21.35% and an interest coverage of 11.98. Since its issuance in March 2019, Fox's share price has declined from a high of $41.73 to a current value of $31.36 as of Nov. 4.
Since Fox is the opposite of a spinoff (having part of its company bought instead of part of the company separating), the share price may have suffered due to negative investor sentiment.
Fox has a dividend yield of 1.44% and a dividend payout ratio of 0.9, which beats 93.1% of competitors in the entertainment industry.
Berkshire Hathaway
Tweedy, Browne added 19 shares of Berkshire Hathaway Class A stock this quarter, impacting the equity portfolio by 0.21%. The shares traded at an average price of $309,558 during the quarter.
Berkshire Hathaway is an American multinational conglomerate holding company. Headquartered in Omaha, Nebraska, this company is famous for its chairman and CEO, Warren Buffett (Trades, Portfolio), who has earned the nickname "Oracle of Omaha." Berkshire's Class A stock has a market cap of $533.97 billion and an enterprise value of $515.35 billion.
GuruFocus has assigned Berkshire a financial strength score of 4 out of 10 and a profitability score of 6 out of 10. The company has a price-earnings ratio of 17.58, a price-book ratio of 1.39, an operating margin of 11.07% and a cash-debt ratio of 0.45. Despite fluctuations in revenue and net income in 2019, the price of Berkshire shares has remained in a steady range.
Berkshire Hathaway does not pay a dividend.
Disclaimer: The author owns no shares in any of the stocks mentioned.
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