September 2018 Covered Call Candidates

Each month, we screen for attractive “bond replacement” investment candidates by looking up the reports of investments purchased by “Superinvestors” covered by the Dataroma site. Dataroma follows 64 managers that are all using value-based strategies.

This month, we are pulling new positions and large additions from four portfolios run by some very influential and famous investors.

1. Bruce Berkowitz’s Fairholm Fund (AUM = $750mm)
2. Steven Mandel’s Lone Pine Capital (AUM = $19B)
3. Howard Marks’ Oak Tree Capital (AUM = $3.9B)
4. Lee Ainslie’s Maverick Capital (AUM = $8.5B)

We looked for any transactions that met the following criteria:

1. Stocks listed represented more than 2% of the portfolio’s value
2. Stocks listed were a new purchase for the fund OR the position was increased by a material amount (+20% or more)

You will see a column on the sheet labeled “Transaction”. “Buy” means a new position and “+29%” means an increase in an existing position of 29%. We believe the willingness to take a new large position or to significantly increase one’s position size has greater information content than simple “bookkeeping” transactions.

These conditions were designed to screen for the stocks in which the managers had demonstrated the most confidence (by portfolio weight) and about which they had made an active decision to invest. As we explain in our video introduction to “Bond Replacement” investments, we are using these portfolio managers’ actions as an indication of undervaluation.

I want to publish this before market close today, so will keep my comments brief:

• I heard Howard Marks speak about business cycles at the Latticework Conference in NYC this week and will receive his latest book soon as well. I’ll be happy to talk about my take-aways from the Latticework Conference during Office Hours.
• Disney is on this list and we have published quite a bit about that company.
• Another company on the list, Vista Outdoor VSTO, is an idea that I originally heard about at the Grant’s Conference. I published a Five-Minute Valuation video about it, and may take a look at the valuation again now.

 

You can find the spreadsheet here:

September 2018 Covered Call Corner Spreadsheet 

 

A PDF copy of the spreadsheet is embedded below. Please reach out if you have any questions about these materials!