David Winters´ Wintergreen Advisers: More Focused on Consumer Goods and Financial Companies; Cuts Exposure to Tobacco

Last Friday, David Winters’ Wintergreen Advisers filed its 13F form at the U.S. Securities and Exchange Commission, disclosing its long equity positions as of the end of the fourth quarter of 2013.

We have found that the most popular small cap stocks among hedge funds outperformed the market by 18 percentage points even though we started measuring the returns a couple of weeks after 13Fs have been made public. It can also be productive to treat individual 13Fs as free recommendations from fund managers- not necessarily to be followed, but to be considered briefly and then researched further if they seem appealing.

David Winters

In this article I will analyze the fund´s most interesting moves reported for Q4. This fundamentally-oriented fund holds market value of $904 million. Its investments are principally focused on the consumer goods and financial sectors.

Over Q4, the fund did not acquire any new stocks, but it increased its stakes in four of its preexisting holdings. It also reduced its position in four other companies and sold out three of them.

The fund´s largest position remained the same, although slightly reduced. I´m talking about Berkshire Hathaway Inc. (NYSE:BRK.B), which saw Wintergreen lessen its participation by 1%, to 1.22 million shares. This position, worth almost $140 million, comprises 16% of the fund’s fourth quarter equity portfolio. Warren Buffett’s famed conglomerate holding company has a market cap of $267 billion and boasts margins and returns way above its industry’s averages. Analysts expect the company to grow at industry average rates over the next five years, but still recommend buying its stock, mainly in account of its below-average valuation at 14 times the firm’s earnings. However, Warren Buffett’s ultimate departure is expected to put a cap on Berkshire’s returns longer term. One way or another, it looks to me like Mr. Winter sold some of this stock to make some cash, taking advantage of the slight price increase that the stock experienced over Q4.

Another interesting case is that of The Coca-Cola Company (NYSE:KO), the beverages king. By the end of Dec. 2013, the fund declared owning 2.48 million shares of the company, up 18% in relation to the previous quarter. This holding worth roughly $92 million comprises about 11% of the fund’s Q4 equity portfolio. Understanding this investment is not at all complicate: The Coca-Cola Company (NYSE:KO)’s global brands and distribution network will remain unrivaled for several years still. Although analysts expect it to deliver below-average long-term EPS growth rates, these are, for sure, sustainable and could be easily beat. Fundamentally, The Coca-Cola Company (NYSE:KO) also looks good: it boasts above-average margins and returns and pays out 3% of the current stock price in the form of quarterly dividends, making the wait for an upside worthwhile.

Back to sales, Wintergreen decided to substantially cut its exposure to tobacco over the fourth quarter of 2013. The fund sold out its stakes in two of the world-leading tobacco companies: Philip Morris International Inc. (NYSE:PM) and Lorillard Inc. (NYSE:LO). However, it maintained its stakes Reynolds American, Inc. (NYSE:RAI), which looks to me as the least attractive option of them all. However, these sales can be comprehended in terms of value: while Reynolds American, Inc. (NYSE:RAI)´s stock price was quite flat over the past year, Lorillard Inc. (NYSE:LO)´s price rose substantially, opening an alluring opportunity for sellers. On the other hand, Philip Morris International Inc. (NYSE:PM)´s price fell considerably, and the fund seems to have decided to sell its participation in the company before in continued to plunge; limited growth prospects and thin margins make it an unattractive pick from the fundamental point of view. In addition, the wider tobacco industry, as all of you already know, is experiencing a marked decline around the world, as people become conscious of the adverse effects of smoking.

Disclosure: Javier Hasse holds no position in any stocks mentioned

blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

10 Best States To Practice Medicine

The 10 Best States to Have a Business

The 12 Most Expensive Apple (AAPL) Apps in the Market

The 10 Richest Billionaires in the World

10 Biggest Kickstarter Failures

The 10 Best Places to Work At

The Top 10 of Google Inc (GOOGL)’s Most Expensive Acquisitions

13 Best Cities to Visit in South America

10 Most Expensive Works of Art of All Time

The 10 Richest Banks in the World

The 10 Best-Paying Jobs in America (2014)

7 Most Expensive Foods in the World

The World’s Top 10 Earning Authors

Five Wicked and Very Expensive Items (and Other “Stuff”) Sold on eBay

10 Biggest Celebrity Bankruptcies

The Top 10 Highest Paid CEOs in 2014

The 10 Most Expensive Real Estate Cities in America

10 Most Expensive States To Live In America

The 10 Best Airlines in the World

The 10 Best-Selling Cars in 2014

The 10 Best Industries to Invest In

The 10 Most Expensive States to Own a Car In

Top 10 Business Schools in US: 2014 Rankings

Top 20 Female Billionaires in 2014

6 Movies That You Should Watch to Better Understand The Cold War

Top 15 Best Paying Jobs for Women in 2014

Top 6 Things Rich People Do Differently Every Day

5 Retirement Mistakes To Avoid (and Einstein’s Famous Quote)

11 Smartest People in the World

6 Films About the Financial World You Need To Watch (While “The Wolf” is Not Around)

Warren Buffett and Billionaires Are Crazy About These 7 Stocks

The Top 10 States With Fastest Internet Speeds

10 Best Places to Visit in USA in August

Top 10 Cities to Visit Before You Die

Top 10 Genetically Modified Food In the US

15 Highest Grossing Movies Opening Weekend

5 Best Poker Books For Beginners

10 Strategies Hedge Funds Use to Make Huge Returns

Top 10 Fast Food Franchises to Buy

10 Best Places to Visit in Canada

Best Summer Jobs for Teachers

10 Youngest Hedge Fund Billionaires

Top 10 One Hit Wonders of the 90s

Fastest Growing Cities In America

Top 10 U.S. Cities for Freelancers

Top 9 Most Popular Free iPhone Apps

Top 10 Least Expensive Private Business Schools in the US

Top 15 Most Expensive Countries in the World – 2014

Top 6 Tax Scams and How to Protect Yourself

Top Businesses to Invest In

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!