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.
For months, we have turned up blank when we trolled Dataroma for ideas. To wit, we have not found any managers actively building positions that meet our criteria for inclusion in this screen.
This month, we were pleasantly surprised to find that a few good managers had indeed bought stocks or increased positions in their holdings. We are drawing data from three managers:
- Bill Nasgovitz at Heartland Select Value (AUM = $216mm)
- The Kahn Brothers at Khan Brothers Advisors (AUM = $628mm)
- Thomas Gayner at Markel Asset Management (AUM = $5.3B)
These funds had, between them, ten securities that met both of our criteria for this list:
- Stocks listed represented more than 2% of the portfolio’s value
- Stocks listed had been bought by the fund in the reported quarter
These conditions were 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.
There is one stock that was a new purchase by one of the managers: CVS Corporation. Bill Nasgovitz opened a 2.02% position in CVS at an average reported price of $62.21, just 1% below the market price today.
Another stock that caught my eye was New York Community Bancorp (NYCB), which is a local lender in Manhattan, which I learned about at the time of the financial crisis. NYCB is now trading at a multi-year low, and I may do some work on valuing it with an eye to a larger position.
Figure 1.
May 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!
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