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Every quarter, many money managers have to disclose what they've bought and sold. Their latest moves can shine a bright light on smart stock picks.
Today let's look at Gardner, Russo & Gardner, a hedge fund company with a record that speaks for itself. Over the past 25 years, according to the folks at GuruFocus.com, it has posted a cumulative gain of about 2,341%, versus 830% for the S&P 500. Over the past 10 full years, it gained 122%, versus 35% for the S&P 500.
To get a sense of the company's investment style, look at its well-respected partner, Thomas Russo. He's known for favoring companies with strong free cash flow, robust balance sheets, and hefty returns on assets. He's also a value guy, aiming to buy such companies at undervalued prices.
Gardner, Russo & Gardner's stock portfolio totaled $6.2 billion in value as of Dec. 31. The company's biggest holdings, representing more than 30% of total assets, were Philip Morris International, Nestle, and Berkshire Hathaway. (Note that the company's holdings are not in just one fund, but spread out over various funds and accounts.)
So what does Gardner, Russo & Gardner's latest quarterly 13F filing tell us? Here are a few interesting details:
New holdings include TJX (NYSE: TJX ) , operator of T.J.Maxx, Marshalls, and HomeGoods. The company has been growing revenue at about 6% annually over the past few years, which isn't bad for a large retailer. Better still, earnings have been growing at a faster clip, suggesting improvements in efficiency and profit margins. The company's dividend is small, but it, too, has been growing briskly. Expectations for the second quarter are strong, as sales at stores open more than a year grew by 8% in May over year-ago levels.
Among holdings in which Gardner, Russo & Gardner increased its stake was Bank of America (NYSE: BAC ) , which is down about 37% over the past year and has averaged annual losses of more than 30% over the past five years. It was part of a multibillion-dollar settlement with the Department of Justice and will be informing some 200,000 borrowers that they might be eligible for principal forgiveness on their mortgages. On the recovering-from-the-mortgage-mess front, it's lagging its peers -- leaving some investors thinking that things can only improve from here. One of the bank's strategies is hiring more bankers to serve small businesses, as they're the lifeblood of our economy.
The hedge fund company reduced its stake in lots of companies, including General Electric (NYSE: GE ) . Some might find this premature, as GE finally announced what many were waiting for -- that its GE Capital unit has resumed paying dividends to its parent company. That not only signals improved health, but it will also put more cash in GE's pocket, for dividends to shareholders, acquisitions, or other beneficial allocations. GE has been investing in alternative energies, transportation, and emerging markets, among other initiatives.
Finally, Gardner, Russo & Gardner unloaded several companies, such as Ford (NYSE: F ) and Las Vegas Sands (NYSE: LVS ) . Now that car sales have finally picked up, Ford has been experiencing a sales surge -- but also faces a vexing problem: It's struggling to keep up with demand. Las Vegas Sands, meanwhile, has been a powerhouse in Macau, one of the most profitable gambling sites around. But growth is slowing in Macau (to nearly a three-year low), and Sands recently gave up on appealing a land-rights rejection there. Still, even slower growth remains strong growth, and Las Vegas Sands is one of the most successful gambling specialists around.
We should never blindly copy any investor's moves, no matter how talented the investor. But it can be useful to keep an eye on what smart folks are doing, and 13F forms can be great places to find intriguing candidates for our portfolios.
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