The Only 4 Stocks That Matter to Longview Asset Management

Longview Asset Management is a leading Chicago-based private asset management firm that manages accounts for charities, high net-worth individuals and trusts. The asset manager, run by current President and CEO James A. Star, employs a long-term-oriented investing approach, as the fund’s name suggests, and makes investment decisions based on deep research.

Mr. Star also founded and operated a successful hedge fund firm, called Star Partners, for five years before being appointed President of Longview Asset Management in 2003. Interestingly enough, Mr. Star left the legal profession to build a career in investing because he desired to have a job where his decisions had real consequences. The Chicago-based asset manager oversees an extremely concentrated equity portfolio worth a massive $5.24 billion as of the end of the second quarter, with the fund’s equity portfolio being comprised of only four positions. Without further delay, let’s have a look the four stocks favored by Longview Asset Management, as well as discuss the performance of those stocks year-to-date.

Through extensive research, we determined that imitating some of the picks of hedge funds and other institutional investors can help generate market-beating returns over the long run. The key is to focus on the small-cap picks of these investors, since they are usually less followed by the broader market and are less price-efficient. Our backtests that covered the period between 1999 and 2012, showed that following the 15 most popular small-caps among hedge funds can help a retail investor beat the market by an average of 95 basis points per month (see more details here).

#4. Alamo Group Inc. (NYSE:ALG)

– Shares Owned by Longview Asset Management (as of June 30): 1.70 Million
– Value of Longview Asset Management’s Holding (as of June 30): $112.26 Million

Longview Asset Management did not adjust its 1.70 million-share position in Alamo Group Inc. (NYSE:ALG) during the second quarter of 2016, which was valued at $112.16 million on June 30 and accounted for 2.1% of the value of the asset manager’s equity portfolio. The designer and manufacturer of equipment for infrastructure maintenance, agriculture and other applications has seen its market value jump by 24% since the beginning of the year. The company’s net sales for the second quarter decreased by $4.25 million year-over-year to $211.49 million, reflecting continued weakness in the European economy, soft agricultural markets and currency headwinds. In the company’s industrial division, sales of sweepers, mowing equipment and snow removal equipment increased relative to the same period a year ago, whereas sales of vacuum trucks were lower due to soft non-governmental demand. The number of hedge funds followed by Insider Monkey with long positions in the market leader in agricultural and industry machinery rose to 13 from nine during the first quarter, with the 13 asset managers amassing 26% of the company’s outstanding shares. Royce & Associates, founded by Chuck Royce, trimmed its stake in Alamo Group Inc. (NYSE:ALG) by 39% during the June quarter to 586,346 shares.

#3. Univar Inc. (NYSE:UNVR)

– Shares Owned by Longview Asset Management (as of June 30): 12.05 Million
– Value of Longview Asset Management’s Holding (as of June 30): $227.84 Million

The leading Chicago-based private asset management firm acquired a new stake of 12.05 million shares of Univar Inc. (NYSE:UNVR) during the April-to-June period, worth $227.84 million at the end of June. The shares of the global distributor of commodity and specialty chemicals have gained 14% thus far in 2016. In early-March, Univar completed the acquisition of Bodine Services of the Midwest, a regional provider of environmental and facilities maintenance services. The deal was intended to expand the acquirer’s footprint with additional service centers in important geographic markets. Later that month, tUnivar also agreed to acquire Nexus Ag Business Inc., a wholesale fertilizer distributor to the Western Canada agriculture market. The freshly-acquired company provides a wide array of products such as micronutrients, specialty fertilizers, potash, and liquid and soluble nutrients from North American producers. Univar’s net sales for the three months ended June 30 decreased by 9.9% year-over-year to $2.26 billion, partially reflecting a drop in sales of upstream oil and gas products due to reduced market demand. Iridian Asset Management, founded by David Cohen and Harold Levy, added a 53,115-share position in Univar Inc. (NYSE:UNVR) to its portfolio during the second quarter.

Let’s head to the second page of the article, where we’ll reveal the two stocks most favored by Longview Asset Management.

#2. Allison Transmission Holdings Inc. (NYSE:ALSN)

– Shares Owned by Longview Asset Management (as of June 30): 9.26 Million
– Value of Longview Asset Management’s Holding (as of June 30): $261.45 Million

The asset manager run by current President and CEO James A. Star owned 9.26 million shares of Allison Transmission Holdings Inc. (NYSE:ALSN) both at the end of the first and second quarters of 2016. The untouched position was worth $261.45 million at the end of June. The designer and manufacturer of commercial and defense fully-automatic transmissions has seen its market cap increase by 9% since the start of the year. Earlier this year, Allison adopted a set of corporate governance enhancements after facing pressure from shareholders. The set of governance proposals included the declassification of its Board, which means that the entire Board will be elected annually beginning at the 2017 meeting of stockholders; as well as the adoption of a majority voting standard for the election of Directors in uncontested elections. The number of money managers in our system that were invested in the company rose to 38 from 27 during the first three months of 2016. Wallace Weitz’s Wallace R. Weitz & Co. owns 1.12 million shares of Allison Transmission Holdings Inc. (NYSE:ALSN) as of the end of the second quarter.

#1. General Dynamics Corporation (NYSE:GD)

– Shares Owned by Longview Asset Management (as of June 30): 33.33 Million
– Value of Longview Asset Management’s Holding (as of June 30): $4.64 Billion

General Dynamics Corporation (NYSE:GD) was by far the largest position in Longview Asset Management’s concentrated portfolio at the end of the second quarter, accounting for a whopping 88.5% of the portfolio’s value. The Chicago-based asset manager did not adjust its 33.33 million-share position in GD during the three-month period ended June 30, which was valued at $4.64 billion on the last day of June. The global aerospace and defense company that makes Gulfstream jets, tanks and U.S. Navy ships has seen the value of its stock balloon by 10% since the beginning of 2016. General Dynamics shares could go even higher should top- and bottom-line trends in the company’s aerospace unit, which produces Gulfstream business jets, show signs of stabilization after experiencing several weak quarters. The company’s defense business is anticipated to grow as well. The U.S. defense budget, which totals $523.9 billion for the fiscal year ending September 30, will increase to $582.7 billion for the next fiscal year. Moreover, the U.S. government has also lifted some restrictions on international sales of military technology and equipment, which could serve as an additional boost to GD’s future top-line growth. Tom Gayner’s Markel Gayner Asset Management has 387,000 shares of General Dynamics Corporation (NYSE:GD) among its holdings as of the end of the second quarter.

Disclosure: None