Giverny Capital Reveals Favorite Long-Term Consumer Stocks

Giverny Capital Inc. was founded by Francois Rochon in December 1998 in order to offer investment management services based on his investment philosophy of owning outstanding companies for the long-term. Mr. Rochon’s investment philosophy has some similarities to the philosophies of Warren Buffett, Benjamin Graham, John Templeton, Philip Fisher, and Peter Lynch. He successfully managed a family portfolio based on an investment approach synthesized from the aforementioned well-known money managers for several years, after which he decided to open his own investment management firm for outside investors.

Montreal-based Giverny Capital, named after a small town in France where famous painter Claude Monet lived from 1883 until 1926, predominantly focuses on the long-term ownership of outstanding businesses through common stocks purchased at attractive valuations. The firm’s Global Rochon portfolio has generated a compounded annual return of 16.3% since its inception in July of 1993. The fund gained an impressive 20.2% in 2015, after posting gains of 28.1%, 50.2% and 21.2% in 2014, 2013 and 2012, respectively. Meanwhile, Giverny Capital’s Rochon US Portfolio has returned 2,294%, or 15.2% on an annualized basis, since its inception in 1993 versus the 606%, or 9.1% on an annualized basis, returns delivered by the S&P 500 Index over the same period. Needless to say, its performance has been quite impressive. With that in mind, the following article will list a set of consumer stocks favored by Giverny Capital, which it doubtless believes in the glowing long-term potential of.

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#5. Fortune Brands Home & Security Inc. (NYSE:FBHS)

– Shares Owned by Giverny Capital (as of June 30): 286,788

– Value of Giverny Capital’s Holding (as of June 30): $16.63 Million

Giverny Capital boosted its position in Fortune Brands Home & Security Inc. (NYSE:FBHS) by 55% during the second quarter of 2016, to 286,788 shares. The upped position was worth $16.63 million on June 30 and accounted for 3.2% of the value of the hedge fund’s portfolio. The shares of the home and security products company are trading near their 52-week high, after having gained 15% year-to-date. In May, the designer and manufacturer of kitchen and bath cabinetry, plumbing and accessories, entry door systems, and security products acquired an unnamed plumbing company that specializes in bath and shower fittings for $88.4 million in cash. In early-July, analysts at Jefferies started coverage on Fortune Brands with a ‘Buy’ rating and a price target of $67, saying that FBHS could see a further $7-to-$14 upside to their price target as a result of the company’s “proven track record in deploying capital.” Connecticut-based Columbus Circle Investors owns 656,088 shares of Fortune Brands Home & Security Inc. (NYSE:FBHS) as of the end of the second quarter.

#4. Mohawk Industries Inc. (NYSE:MHK)

– Shares Owned by Giverny Capital (as of June 30): 95,267

– Value of Giverny Capital’s Holding (as of June 30): $18.08 Million

The Montreal-based asset manager owned 95,267 shares of Mohawk Industries Inc. (NYSE:MHK) at the end of the second quarter, 2,491 shares more than it did at the end of the first quarter. The slightly-increased stake was valued at $18.08 million at the end of June. The flooring manufacturing company reported net sales of $2.31 billion for the three-month period ended July 2, an increase of 13.2% year-over-year. The company posted the highest sales for any quarter in its history, while its earnings per share set an all-time record for the company as well. Mohawk Industries posted second quarter net earnings of $255 million and diluted earnings per share of $3.42, up by 35% year-over-year. The company’s top-line growth was mainly attributable to higher sales volume from acquisitions, as well as higher legacy sales. Mohawk shares are 11% in the green year-to-date. John Armitage’s Egerton Capital Limited reported owning 1.41 million shares of Mohawk Industries Inc. (NYSE:MHK) through the current round of 13F filings.

The second page of the article will reveal three other consumer stocks favored by Giverny Capital.

#3. O’Reilly Automotive Inc. (NASDAQ:ORLY)

– Shares Owned by Giverny Capital (as of June 30): 79,560

– Value of Giverny Capital’s Holding (as of June 30): $21.57 Million

The investment firm that employs a Buffett-style investment approach increased its exposure to O’Reilly Automotive Inc. (NASDAQ:ORLY) by a mere 1,310 shares during the three months ended June 30, to 79,560 shares. The enlarged stake, worth around $21.57 million on June 30, constituted 4.2% of the value of the firm’s portfolio at that time. The shares of the U.S. automotive aftermarket specialty retailer are 13% in the green thus far in 2016. O’Reilly Automotive reported sales of $4.27 billion for the first-half of 2016, an increase of 9% year-over-year. Meanwhile, the company’s comparable-store sales jumped by 5.1% year-over-year, after rising by 7.2% for the first six months of 2015. Although the current population of better engineered and more technically-advanced vehicles require less frequent repairs, the cost of replacement parts for these vehicles is greater on average. There were 42 hedge funds followed by Insider Monkey with positions in O’Reilly at the end of the March quarter, amassing around 4% of the company’s outstanding shares. Louis Navellier’s Navellier & Associates trimmed its stake in O’Reilly Automotive Inc. (NASDAQ:ORLY) by 29% during the June quarter, to 29,570 shares.

#2. Walt Disney Co (NYSE:DIS)

– Shares Owned by Giverny Capital (as of June 30): 406,183

– Value of Giverny Capital’s Holding (as of June 30): $39.73 Million

The investment management firm founded by Francois Rochon upped its position in Walt Disney Co (NYSE:DIS) by 6% during the April-to-June period, having finished the second quarter with 406,183 shares valued at $39.73 million. The shares of the media giant are 7% in the red year-to-date due to growing worries about the impact of cord-cutting, the biggest challenge the company has been facing as of late. The company’s television and cable business, in particular its ESPN sports network, has suffered lately as consumers choose cheaper bundles or sacrifice cable altogether. Disney recently announced the purchase of a 33% stake in BAMTech, one of the leading online live-streaming companies, for $1 billion. As part of the deal, ESPN will launch a new digital service this year that will include games the sports network does not air on its linear channels. Ken Fisher’s Fisher Asset Management reported ownership of 8.67 million shares of Walt Disney Co (NYSE:DIS) in its 13F for the June quarter.

#1. CarMax Inc. (NYSE:KMX)

– Shares Owned by Giverny Capital (as of June 30): 838,884

– Value of Giverny Capital’s Holding (as of June 30): $41.13 Million

CarMax Inc. (NYSE:KMX) was the third-largest overall position in Giverny Capital’s portfolio at the end of June, accounting for around 8.0% of its value. The Canadian asset manager upped its CarMax position by approximately 1% during the second quarter, to 838,884 shares valued at $41.13 million on June 30. The nation’s largest retailer of used vehicles has seen its market cap increase by 9% since the start of the year. CarMax operates 160 used car stores in 80 U.S. markets, including 51 mid-sized markets, 23 large markets and six small markets. The sales growth at the well-known used-car dealer have been slowing lately due to temporary weakness in used-car pricing, reflecting lower gas prices and a constantly tightening labor market that led to higher sales of new cars. The number of money managers in our system with stakes in CarMax fell to 17 from 24 during the first quarter. Tom Gayner’s Markel Gayner Asset Management owned 4.91 million shares of CarMax Inc. (NYSE:KMX) at the end of June.

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