COF - Tracking Ruane Cunniff & Goldfarb's Portfolio - Q4 2022 Update

Summary

• Ruane, Cunniff, & Goldfarb’s 13F portfolio value decreased from $6.73B to $6.40B this quarter. The number of positions increased from 31 to 32.
• They dropped Wayfair and decreased UnitedHealth, Elevance Health, and Netflix.
• The top three positions are Charles Schwab, Intercontinental Exchange, and UnitedHealth, and they add up to ~30% of the portfolio.

This article is part of a series that provides an ongoing analysis of the changes made to Ruane, Cunniff & Goldfarb's 13F portfolio on a quarterly basis. It is based on their regulatory 13F Form filed on 2/13/2023. Please visit our Tracking Ruane, Cunniff, & Goldfarb's Portfolio article for an idea on their investment philosophy and our previous update for the moves during Q3 2022.

This quarter Ruane, Cunniff, & Goldfarb's 13F portfolio value decreased ~5% from $6.73B to $6.40B. The number of holdings increased from 31 to 32. 16 of those stakes are significantly large (more than ~0.5% of the portfolio each) and they are the focus of this article. The top three positions are at ~30% while the top five are at ~47% of the 13F assets: Charles Schwab, Intercontinental Exchange, UnitedHealth, Formula One, and Alphabet.

The firm is best known as the investment advisor of the Sequoia Fund ( SEQUX ) which has a venerable ~53-year track record (July 15, 1970 inception, 12.92% annualized return compared to 10.85% for the S&P 500 index). The performance for 2022 was terrible: Negative 30.52% compared to Negative 18.11% for the S&P 500 index. After new management took over in Q1 2016, the portfolio has seen a significant shift to information & services businesses from asset-intensive manufacturing & retail. Also, the cash allocation which had averaged ~20% since inception is now close to zero. The following significant stakes in Sequoia's portfolio are not in the 13F report as they are not 13F securities: Constellation Software ( OTCPK:CNSWF ), Eurofins Scientific SE ( OTCPK:ERFSF ), Rolls-Royce Holdings plc ( OTCPK:RYCEY ), SAP SE ( SAP ), and Universal Music Group ( OTCPK:UMGNF ). Bill Ruane was a Benjamin Graham pupil. To learn about Benjamin Graham's teachings, check out the classics The Intelligent Investor and Security Analysis .

Stake Disposals:

Wayfair Inc. ( W ): W was a 2.27% of the 13F portfolio stake purchased in Q3 2019 at prices between $106 and $152. Next quarter saw a ~40% stake increase at prices between $80 and $118. That was followed with another ~30% increase in Q1 2020 at prices between ~$24 and ~$110. The four quarters through Q1 2021 saw a ~75% reduction at prices between ~$47 and ~$346. Q3 2021 saw a ~80% stake increase at prices between ~$239 and ~$317. That was followed with a one-third increase next quarter at prices between ~$190 and ~$280. Q2 2022 saw another ~45% stake increase at prices between ~$44 and ~$117. The disposal this quarter was at prices between ~$28 and ~$42. The stock currently trades at $49.81.

Stake Decreases:

Charles Schwab ( SCHW ): SCHW is now the largest 13F position at 10.98% of the portfolio. It was first purchased in Q2 2016 at a cost-basis of ~$29. Q1 2020 saw a ~40% stake increase at prices between $28.50 and $49. There was a ~17% selling next quarter at prices between $32.50 and $43. The stock is now at ~$80. Last few quarters have seen minor trimming.

Intercontinental Exchange ( ICE ): The large (top three) ~10% ICE stake was purchased in Q3 2020 at prices between ~$92 and ~$107. There was a ~90% stake increase in Q2 2022 at prices between ~$90 and ~$133. The stock currently trades at ~$104. Last two quarters have seen a ~5% trimming.

UnitedHealth ( UNH ): UNH is a large (top three) 9.36% of the portfolio stake. It was established in Q4 2019 at prices between $215 and $296 and increased by ~300% next quarter at prices between ~$195 and ~$305. Q3 2020 saw a ~30% stake increase at prices between ~$291 and ~$324. There was a ~25% selling in Q2 2022 at prices between ~$452 and ~$546. That was followed with a ~15% reduction this quarter at prices between ~$499 and ~$555. The stock currently trades at ~$489.

Formula One Group ( FWONA ) ( FWONK ): Sequoia's Q4 2016 letter disclosed a new stake in Liberty Media Formula One. They participated in Liberty's acquisition of Formula One and acquired the shares at a discounted price of $25. There was a 24% stake increase in Q2 2017 at prices between $30.50 and $37. The six quarters through Q3 2019 had seen a ~18% selling at prices between $28.50 and $43 and that was followed with similar selling next quarter at prices between $40 and $46. Last three years have seen only minor adjustments. FWONA is currently at ~$63. The stake is now a large position at ~9% of the portfolio.

Note: their ownership stake in Formula One Group is ~4.7%.

Alphabet Inc. ( GOOG ) ( GOOGL ) : GOOG is now at 7.92% of the portfolio. It was first purchased in 2008 and that original stake was almost sold out the following year. In 2010, a much larger position was built in the low-teens price-range. Recent activity follows: Q2 2019 saw a one-third reduction at prices between ~$52 and ~$64. That was followed with a ~60% reduction over the six quarters through Q4 2020 at prices between ~$53 and ~$107. Last three quarters saw a ~27% reduction at prices between ~$83 and ~$144. The stock currently trades at ~$92.

Micron Technology ( MU ) and Elevance Health ( ELV ): MU is a 3.72% of the portfolio position built over the two quarters through Q3 2021 at prices between ~$74 and ~$96 and the stock currently trades well below that range at ~$57. Last quarter saw a one-third reduction at prices between ~$49 and ~$65. That was followed with a ~3% trimming this quarter. The 6.62% ELV stake was established in H1 2021 at prices between ~$288 and ~$402 and it is now at ~$484. Q2 2022 saw a ~42% reduction at prices between ~$444 and ~$530. That was followed with a ~16% selling this quarter at prices between ~$454 and ~$547.

CarMax Inc. ( KMX ): KMX is currently at ~6% of the 13F portfolio. It was purchased in Q2 2016 at prices between $46 and $56 and increased by ~70% in Q4 2016 at prices between $48.50 and $66. Q4 2017 saw a ~30% selling at prices between $64 and $77 while next quarter there was a ~80% increase at prices between $59 and $72. The eleven quarters through Q4 2020 had seen a ~45% selling at prices between ~$44 and ~$109. The stock is now at $69.49. Last several quarters have also seen minor trimming.

Credit Acceptance Corp. ( CACC ): CACC is a 5.92% stake established in Q1 2017 at prices between $185 and $221. There was a ~25% stake increase in Q4 2020 at prices between $288 and $356. Q3 2021 saw a ~18% selling at prices between ~$438 and ~$670. That was followed with a one-third reduction next quarter at prices between ~$582 and ~$696. The stock is now at ~$456. Last four quarters also saw minor trimming.

Note: They have a ~6.2% ownership stake in Credit Acceptance Corp.

Meta Platforms ( META ): The 5.57% META position saw a whopping ~600% stake increase in Q1 2018 at prices between $152 and $193. The next two quarters had seen another ~27% increase at prices between $155 and $218. Q1 2019 saw an about turn: ~23% reduction at prices between $124 and $173. Q1 2021 saw a ~13% stake increase at prices between ~$246 and ~$299. Last quarter also saw a ~11% stake increase. The stock currently trades at ~$171. There was a ~3% trimming this quarter.

Taiwan Semi ( TSM ): The 5.24% of the portfolio TSM stake was purchased in Q4 2019 at prices between $46.50 and $59. There was a ~130% stake increase in Q2 2020 at around the same price range. Q1 2021 saw a ~12% selling while in Q3 2021 there was a ~20% stake increase. Last quarter saw a ~30% selling at prices between ~$69 and ~$92. The stock currently trades at ~$87. There was a minor ~3% trimming this quarter.

Note: their investment thesis is based on the following: fabs are capital intensive (~$10B per facility) and the leader naturally has a strong moat thereby yielding big profit margins. Debatably, they produce the most important manufactured component in the modern economy. It is essentially a monopoly, and the main concern is geopolitical risks.

Jacobs Solutions ( J ), previously Jacobs Engineering: J is a ~5% long-term stake first purchased in 2012. Recent activity follows: Q2 2018 saw a ~20% increase at prices between $56.50 and $67 while the next six quarters saw minor trimming. There was a ~25% selling in Q1 2020 at prices between ~$63 and ~$104. That was followed with a similar reduction in Q2 2021 at prices between ~$129 and ~$143. The stock currently trades at ~$120. Last six quarters also saw minor trimming.

Capital One Financial ( COF ): COF is a ~4% of the portfolio position established last quarter at prices between ~$91 and ~$116 and the stock currently trades at ~$109. There was a minor ~3% trimming this quarter.

Berkshire Hathaway ( BRK.A ) ( BRK.B ) : Berkshire stake is now at 3.84% of the portfolio. It is a very long-term position that was the largest stake in their first 13F filing in 1999. Recent activity follows: Q1 2018 saw a one-third selling at prices between ~$191 and ~$217. The nine quarters through Q1 2022 had seen the large stake sold down at prices between ~$169 and ~$359. Next quarter saw another one-third selling at prices between ~$268 and ~$353. The stock is now at ~$303. Last two quarters also saw minor trimming.

Liberty Broadband ( LBRDK ): LBRDK is a 3.77% of the portfolio position purchased in Q1 2018 at prices between $86 and $97 and increased by ~20% next quarter at prices between $69 and $85. Q1 2020 saw a ~18% reduction at prices between ~$91 and ~$139. There was a ~23% stake increase in Q1 2021 at prices between ~$143 and ~$157. The stock currently trades at ~$90. Last seven quarters saw minor trimming.

Netflix Inc. ( NFLX ): NFLX is a 2.90% of the portfolio position purchased in Q4 2020 at prices between ~$471 and ~$554. There was a ~15% stake increase in Q2 2021 at prices between ~$485 and ~$555. That was followed with a ~85% stake increase in Q1 2022 at prices between ~$331 and ~$597. Next quarter also saw another ~45% stake increase at prices between ~$166 and ~$392. Last quarter saw an about turn: ~40% selling at prices between ~$174 and ~$249. That was followed with another ~50% reduction this quarter at prices between ~$214 and ~$320. The stock currently trades at ~$335.

The spreadsheet below highlights changes to Ruane, Cunniff, & Goldfarb's 13F stock holdings in Q4 2022:

For further details see: