Tracking Ruane, Cunniff & Goldfarb’s Portfolio – Q4 2021 Update (MUTF:SEQUX)

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 2/14/2022. 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 2021.

This quarter Ruane, Cunniff & Goldfarb’s 13F portfolio value increased from $11.13B to $11.71B. The number of holdings increased from 33 to 34. 18 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 ~26% while the top five are at ~40% of the 13F assets: Alphabet, UnitedHealth, CarMax, Meta Platforms, and Taiwan Semi.

The firm is best known as the investment advisor of the Sequoia Fund (MUTF:SEQUX) which has a venerable ~51-year track record (July 15, 1970 inception, 13.99% annualized return compared to 11.50% 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 ~2%. 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), Prosus NV (OTCPK:PROSY), Rolls-Royce Holdings plc (OTCPK:RYCEY), 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 Increases:

Wayfair Inc. (W): W is a 5.12% 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. Last quarter saw a ~80% stake increase at prices between ~$239 and ~$317. That was followed with a one-third increase this quarter at prices between ~$190 and ~$280. The stock currently trades at ~$125.

Note: Wayfair has seen a previous roundtrip. It was a very small 0.76% of the portfolio position purchased in Q1 2019 at prices between $85 and $172 and disposed next quarter at prices between $138 and $164.

Stake Decreases:

Alphabet Inc. (GOOG) (GOOGL): GOOG is the largest 13F stake at 9.84% 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 mid-200s price-range. Recent activity follows: Q2 2019 saw a one-third reduction at prices between $1036 and $1288. That was followed with a ~60% reduction over the six quarters through Q4 2020 at prices between ~$1057 and ~$2138. The stock currently trades at ~$2736. Last four quarters have also seen minor trimming.

UnitedHealth (UNH): The large (top three) ~8% UNH position 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. The stock currently trades at ~$506. Last five quarters have seen only minor adjustments.

CarMax Inc. (KMX): KMX is currently the third-largest stake in the 13F portfolio at 7.75%. 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 ~$105. Last few quarters have seen only minor adjustments.

Meta Platforms (FB), previously Facebook: The FB 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. The stock currently trades at ~$217 and it is now at 7.60% of the portfolio. There was a ~10% stake increase last quarter while this quarter there was minor trimming.

Taiwan Semi (TSM): The top-five 7.17% 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. The stock currently trades at ~$107. Q1 2021 saw a ~12% selling while last quarter saw a ~20% stake increase. There was marginal 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.

Micron Technology (MU) and Anthem, Inc. (ANTM): MU is a 6.19% of the portfolio position built over the last two quarters at prices between ~$74 and ~$96 and the stock currently trades at ~$79. The ~7% ANTM stake was established last year at prices between ~$288 and ~$402 and it is now at ~$478. There was a minor ~3% trimming this quarter in both stakes.

Charles Schwab (SCHW): SCHW is a ~6% portfolio stake purchased in Q2 2016 at a cost-basis of ~$29. Q1 2020 saw a ~40% stake increase at prices between $28.50 and $49. The stock is now at ~$90. There was a ~17% selling in Q2 2020 at prices between $32.50 and $43. Last six quarters also saw minor trimming.

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 stock is now at ~$60 and the stake is at 5.92% of the portfolio. 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 two years have seen only minor adjustments.

Note: their ownership stake in Formula One Group is ~5%.

Credit Acceptance Corp. (CACC): CACC is a 5.25% 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. Last quarter saw a ~18% selling at prices between ~$438 and ~$670. That was followed with a one-third reduction this quarter at prices between ~$582 and ~$696. The stock is now at ~$517.

Note: They have a ~6% ownership stake in Credit Acceptance Corp.

Liberty Broadband (LBRDK): LBRDK is a 4.92% 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 ~$141. Last three quarters saw minor trimming.

Intercontinental Exchange (ICE): The ~4% ICE stake was purchased in Q3 2020 at prices between ~$92 and ~$107 and the stock currently trades at ~$137. Last few quarters have seen only minor adjustments.

Netflix, Inc. (NFLX): NFLX is a ~4% of the portfolio position purchased in Q4 2020 at prices between ~$471 and ~$554 and the stock currently trades well below that range at ~$381. There was a ~15% stake increase in Q2 2021 at prices between ~$485 and ~$555. Last two quarters saw minor trimming.

Note: the Netflix investment thesis is based around the idea that as the global trend toward subscription-based streaming video consumption accelerates, the leaders will be more profitable than the leaders of the cable era.

Walt Disney (DIS): DIS is a fairly large 3.71% of the portfolio position established in Q2 2020 at prices between $94 and $127 and the stock currently trades at ~$140. Last few quarters have seen only minor adjustments.

Jacobs Engineering Group (J): J is a 3.49% 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 ~$141. Last two quarters also saw minor trimming.

Berkshire Hathaway (BRK.A) (BRK.B): Berkshire stake is now at 3.61% 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. Last two years have seen another ~80% reduction at prices between ~$169 and ~$300. The stock is now at ~$342.

The spreadsheet below highlights changes to Ruane, Cunniff, & Goldfarb’s 13F stock holdings in Q4 2021: