Value investors manage their portfolios based on the following ideas:

  • calculating “intrinsic value” based on fundamental analysis
  • buying stocks that are considered cheap compared to their intrinsic value - a “margin of safety”

The value investor philosophy is based on the assumption that a stock can be severely mispriced relative to its intrinsic value because of recent economic, political or other events but in the long run its price will match the company’s value as a business.

Now, there are these things called 13F filings - documents that large institutional investment managers are required to submit for the SEC detailing ther most significant positions.

The downside of the 13F filings is that they are published for each quarter with a 45-day delay so the information in them are a few months old when they are made public. However, the portfolios of value investors should include stocks with long term potential so a few months of delay should not mean much with regards to the long-term value they assigned to them. I had the idea to check their wors performing stocks because if they really did their homework (which I assume they did) AND they bought stocks with a “margin of safety” (also assumed) AND the stocks are even cheaper now than when they bought them then those stocks should be a strong buy.

So let’s do the following:

  • take a look at the 13F filings of the most famous value investors at WhaleWisdom
  • find stocks in their portfolios that went down since they bought them
  • check trends in their portfolios
  • buy those stocks

I took a look at the public porfolios of

  • Howard Marks (Oaktree Capital)
  • Phil Town (Rule One Fund)
  • Warren Buffett (Berkshire Hathaway)
  • Joel Greenblatt (Gotham Asset Management)
  • Michael Burry (Scion Capital)
  • Seth Klarman (Baupost Group)
  • Monish Pabrai (Dalal Street)

I was looking for stocks where the long term trend (last 10-20-30 years if possible) was clearly positive but the current price is quite depressed.

Bought the following stocks:

  • FMC - $29.95 / share
  • Constellation Brands - $139.73 / share
  • Lululemon - $179.13 / share
  • Charter Communications - $245.04 / share
  • Magnachip - $3.12 / share
  • Sprouts Farmers Market - $109.37 / share
  • Liberty Broadband - $56.18 / share
  • Organon - $9.05 / share
  • Gentex - $26.32 / share
  • Wendy’s - $9.02 / share
  • Flowers Foods - $12.56 / share
  • Conagra - $18.47 / share
  • Kosmos Energy - $1.61 / share
  • Huntsman - $8.75 / share
  • Brown-Forman - $27.00 / share

I did this with a relatively small portion of my portfolio and after months of moving money off the stock market i.e. being bored of waiting for a dip. I have to admit, I might have been hasty - I didn’t do much research, just looked at a bunch of numbers like PE, revenue, income growth and most importantly the price charts and the prices of the stocks relative to the price the mentioned investors paid for them.

Since these were bought on the premise of being good value stocks, I should be holding on to them and not be emotional about short term swings. Ideally I wouldn’t touch these positions for the coming 2-5 years. Sounds tough to do.