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I scan a couple of dozen quarterly 13F reports, looking for group think, over-speculation and concentration in specific sectors of the market and in individual stocks.
I also scan for what high-metabolic overachievers don’t own or over-own. For example, Berkshire Hathaway BRK.B holds around 30% of its portfolio in Apple AAPL . Hardly anyone else is inventorying it, but they do own widely internet and e-commerce stocks that Warren Buffett is allergic to. Namely, Facebook, Amazon AMZN , Alphabet and Alibaba BABA . Microsoft MSFT , over a $1 trillion market capitalization, also is under-owned by almost all players. A big mistake because latest 12 months, Microsoft has levitated steadily some 70%.
Why pay big fees to money managers who duplicate the Nasdaq 100 Index NDAQ in their portfolios? This is the case for Tiger Global Management and Coatue Management, Appaloosa Management and Lone Pine Capital. Ironically, Pershing Square Capital Management held a 15% position in Berkshire Hathaway. Normally, money managers are allergic to owning other money managers’ stock. Why give ‘em a leg up? Pershing is a value player so maybe Berkshire fits into Bill Ackman’s portfolio construct.
I went the other way, spring of 2020 with GDP mired in a shut-down country miasma. I bought more Amazon, my play on a shut-in country. Everyone was light in energy and basic industrials, many missing the snappy 20% lifting in May.
I’m a believer in “looking over the valley” on stocks with solid competitive position on the board and sound balance sheets. It got me to Walt Disney DIS and Zoetis ZTS but not General Electric GE , Macy’s M and Ford Motor F . Wish ‘em luck.
For the 2020 March quarter, Tiger Global Management persisted in their construct of internet and e-commerce paper, maintaining a high static ratio of 62%, only exceeded by Berkshire Hathaway’s stay-put portfolio of bank stocks and Apple. No Apple at Tiger.
Meanwhile Coatue, an $8 billion asset house, showed 100% turnover, a zero-static ratio, selling 40% of assets and buying 44%. Netflix NFLX was numero uno at 8.4%, a big beneficiary of stay-at-home viewing during the country’s shut-in modality. When does this end?
What caught my eye at Renaissance Technologies is the portfolio was a pure distillation of a construct in non-cyclical stocks like Bristol-Myers Squibb BMY and ending with Humana HUM . This broad-brush technique mainly focused on pharmaceuticals.
Conagra Brands CAG was a 44% position in Java Partners, also supporting a zero-static ratio, but under a billion in assets. Depreciation was $411 million in the March, 2020 quarter. Is this money management or sheer speculation?
Berkshire’s portfolio, more than ever was dominated by its 35% position in Apple, some 5.6% of Apple’s capitalization. American Express AXP at 18.8% of the company’s market value dates back to early sixties. I put American Express in the same category as Walt Disney. They’re great look-over-the-valley plays when the country gets back to normalization. Wells Fargo WFC , a 5% position, is the worst acting of big-capitalization bank stocks. Static ratio for Berkshire’s portfolio is high at 60%, but went higher in previous years.
Appaloosa, lost around 17% of its asset value in the March quarter and continues with asset churning at a zero-static ratio. You’re buying Nasdaq 100 herein. Top four positions account for 52% of the portfolio – Amazon, Alibaba, Alphabet and Facebook. New faces account for 43% of assets. I think all of us could do better sitting in our armchairs.
Carl Icahn’s portfolio always keeps high static ratio at 68%, higher than Buffett’s list. Market depreciation was over 30%. This is a special situation portfolio still energy heavy, with Occidental Petroleum OXY and Cheniere Energy. I don’t get it. What’s the theme, Carl? Commodity recovery coming?
Greenlight Capital loss nearly half its invested capital in the March quarter. Top three positions, half its capital, rest in properties I’ve never heard of: Green Brick Partners, Brighthouse Financial and AerCap Holdings. From its February high, Green Brick was cut in half but has come back some. Paulson had a horrific quarter, too, down nearly 45%. There’s a gold play now with 25% of assets therein.
Finally, we get to Pershing Square Capital Management, a $6.5 billion house that held its own in the March quarter, an outstanding report bar none. Short selling? Some 60% in cash was reinvested and its static ratio a low 10%. Pershing now owns 22% of Howard Hughes, a 9% portfolio position. I don’t get the Berkshire Hathaway holding. If you like Apple and bank stocks why not buy them directly and eliminate the premium over book value, some 20% that Berkshire carries? Lowe’s LOW , the major position at 16% of assets was a great-recovery spec tied to the home-improvement sector, and a play on a turnover in the existing housing-stock inventory. I missed such a good bet. Hilton Worldwide Holdings, a pure spec on recovery in hotel occupancy and revenue per room, for me discounts half the recovery in store next two years.
Wannabe billionaires have to grind it out stock picking, quarter over quarter. But, centurion billionaires like Bill Gates, Jeff Bezos, Mark Zuckerberg and Jack Ma made it through the capitalized value of their companies, not their net-asset value. If you measured net worth by what jingles in your pocket, book value, you’d have to reduce such owner net worth substantially, anywhere from 50% to 80%.
Ironically, Warren Buffett has taken Berkshire Hathaway to a net worth of $375 billion, with the premium over book value down to 20%, closer to 40% in previous years. Ironically, Buffett’s used free cash flow to buy control of industrials like Burlington Northern Santa Fe, Johns Manville, Lubrizol and Precision Castparts. This is legacy kind-of-activism, something money managers hardly ever do. For them, it’s always the next couple of quarters that count.
Sosnoff and / or his managed accounts own: Facebook, Amazon, Alphabet, Alibaba, Microsoft, Walt Disney, Zoetis, Ford Motor bonds, Netflix, and Wells Fargo preferreds.
Source: Forbes – Money
