In a recent interview, Brian Bares shared a list of reading materials he and his team employ in their analysis. Bares said he likes to read business biographies because the writing transmits the passion of entrepreneurs to the readers. He also believes financial books in general make for good reading, but he thinks serious investors should read “as many annual reports as possible” because they are the face of a business. Bares said he finds Berkshire Hathaway’s annual reports and partnership letters to be a great source of information that can help an investor look at stocks as business entities. Bares puts emphasis on the necessity to understand the business behind the stock in order to be successful in the market. He also identified Valueline as a key source of information for his investment team, stating that it helps them identify and track trends specific to each industry and also helps an investor understand the specifics of financial statements for all types of businesses.
Brian Bares founded Bares Capital Management in 2000 and runs it as a long-only fund. Bares Capital’s management team employs fundamental analysis with a bottom up approach to make stock picks mostly among small- and micro-cap companies. Bares Capital stands out among fellow funds as it limits the growth of assets under management to maintain a high return. At the end of the first quarter, the fund’s equity portfolio carried an estimated value of $1.38 billion and had significant exposure to technology and industrial sectors, which accounted for 35% and 32% of the portfolio respectively. So let’s take a look at the five largest equity bets Bares Capital had at the end of the quarter.
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Gartner Inc (NYSE:IT) opens the top 5 positions of Bares Capital Management at the end of the first quarter. The fund’s stake in the IT research and advisory firm amounted to approximately 1.01 million shares worth $90.8 million. During the first three months of 2016, Gartner Inc (NYSE:IT) registered a boost in popularity among the funds followed by Insider Monkey. The number of long positions rose to 16 from 13 at the end of December. Robert Joseph Caruso‘s Select Equity Group increased its holding of the stock by 133% to 715,195 shares worth $63.9 million as reported in its latest 13F filing. Having traded sideways for the first fourth months, Gartner Inc (NYSE:IT) exploded in May and is up by over 10% year-to-date. The rally was triggered by the company’s first quarter results that beat analysts’ estimates. Gartner posted $557.3 million in revenues, an increase of 18% year-over-year, and adjusted earnings of $0.61 per share.
Fastenal Is Hot Among Hedge Funds
Next up is Fastenal Company (NASDAQ:FAST), a seller of of industrial and construction supplies. Bares Capital reportedly held 1.94 million shares of Fastenal worth $95.3 million at the end of the first quarter. Hedge fund sentiment towards Fastenal improved significantly as the number of long positions rose to 23 at the end of March from 13 positions registered a quarter before. William Duhamel is betting big on Fastenal Company (NASDAQ:FAST), as his fund, Route One Investment Company holds 3.51 million shares worth $172 million as of the end of the quarter. The company has a market cap of $13.4 billion and pays an annual dividend of $1.16 per share, providing a yield of 2.50%. Fastenal Company (NASDAQ:FAST) is currently trading at a trailing Price to Earnings (P/E) ratio of 26, slightly higher than the industry average of 20.5.
Head over to the next page to find out more on Bares Capital’s top three equity positions heading into Q2.