Pacifica Capital Investments LLC is a California-based hedge fund led by its founder Steve Leonard since its start in 1998. Leonard, who spent 20 years in the commercial real estate industry prior to founding Pacifica returned on average 12.2% annually to his investors during the period of 1998 to 2010, which was well above the 1.8% average annual return for the S&P 500 during the same time. The fund, which holds public equities with a value of $154.57 million as of March 31, keeps 75% of its holdings in finance and 24% in consumer discretionary. Let’s take a look at the three major positions Pacifica keeps, namely Berkshire Hathaway Inc. (NYSE:BRK.B), Goldman Sachs Group Inc (NYSE:GS) and Starbucks Corporation (NASDAQ:SBUX), which together represent 62.49% of its public equity portfolio.
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In Berkshire Hathaway Inc. (NYSE:BRK.B) Pacifica decreased its stake by 1% during the first quarter, leaving it with 265,558 shares with a value of $38.33 million, making it the largest holding in Pacifica Capital’s public equity portfolio. Berkshire Hathaway, led by its legendary founder Warren Buffett, has been having an uncharacteristically poor first half of the year, dropping by nearly 7% year-to-date, and dragging its yearly returns down to just 11.7%, well beneath its historical returns. During the last week it was announced that Berkshire Hathaway had exercised a warrant giving it control of 52.5% of the shares in ketchup producer H.J. Heinz Company (NYSE:HNZ). This is notable for the fact that H.J. Heinz shareholders are scheduled to vote July 1 on the company’s proposed purchase of and merger with Kraft Foods Group Inc (NASDAQ:KRFT), a deal executed by Buffett and 3G Capital, the duo who purchased Heinz itself back in 2013 for $23 billion. Following the merger, Berkshire Hathaway will control about 27.0% of the newly-created food giant, which will be named Kraft Heinz Co. Gifford Combs representing Dalton Investments also decreased his stake in Berkshire Hathaway Inc. (NYSE:BRK.B) during the first quarter, by 20%, leaving him with 400,766 shares.
Steve Leonard’s stake in investment bank giant Goldman Sachs Group Inc (NYSE:GS) was decreased by 2% during the first quarter, leaving him with 163,927 shares with a value of $30.81 million, representing 19.93% of his public equity portfolio. The New York-based investment bank has returned a solid 11.6% year-to-date and is up by 27.4% during the last year. Goldman Sachs reported in May that it was interested in entering into consumer loans and it seems like the ball is now beginning to roll on that endeavor. Last Monday, it was announced that Goldman Sachs had hired a former credit card executive, who is assumed to be the one that will lead the new market niche. Goldman Sachs will also launch an online lending model that is similar to the model used by LendingClub Corp (NYSE:LC). Crispin Odey‘s Odey Asset Management Group also decreased its stake in the investment bank by 2%, leaving him with 853,507 shares.
The last major holding of Steve Leonard to be discussed here is the 580,374 shares he holds in iconic coffee shop Starbucks Corporation (NASDAQ:SBUX), a position Leonard decreased by 5% during the quarter, and having a value of $27.48 million. The Seattle, Washington-based coffee seller has experienced a strong year, with returns of 31.4% year-to-date and 40.7% during the last year. Starbucks, founded in 1971, is now trying to expand its Teavana business in order to get a larger share of the $45 billion tea market. Teavana, which was acquired in 2012, was planned to have 500 stores by this year but operates only 360 at the moment. A part of the new strategy that Starbucks is about to implement is the promotion of the Teavana brand, not only in the Teavana stores but also in its Starbucks stores in order to increase the availability of the tea. John Kim‘s Night Owl Capital Management also decreased its stake by 5% during the first quarter, leaving him with 75,872 shares.
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