"Tracking Jeremy Grantham’s GMO Capital Portfolio – Q4 2020 Update"
"Jeremy Grantham’s 13F portfolio value increased from $14.05B to $16.28B this quarter.GMO Capital increased Wells Fargo, Salesforce.com, and Adobe Systems while dropping Philip Morris and Starbucks.The largest three individual stock positions are Microsoft Corporation, Apple, and UnitedHealth and they add up to ~11% of the portfolio.This article is part of a series that provides an ongoing analysis of the changes made to GMO’s 13F stock portfolio on a quarterly basis. It is based on GMO’s regulatory  filed on 02/12/2021. Jeremy Grantham’s 13F portfolio value increased ~16% from $14.05B to $16.28B this quarter. The portfolio is diversified with recent 13F reports showing well over 500 different positions although most of them are very small. There are 44 securities that are significantly large (more than 0.5% of the portfolio each) and they are the focus of this article. The largest five stakes are Microsoft Corporation, Apple, UnitedHealth, Alphabet, and Coca Cola. They add up to ~17% of the portfolio. Please visit our  series to get an idea of their investment philosophy and our  for the fund’s moves during Q3 2020.As of January 2021, GMO’s 7-year asset class real return forecast is for US Large Cap asset class to have a negative 6.2% annualized return on one end and Emerging Value asset class to have a positive 5% annualized return at the other extreme. The entire bond category is also forecasted to have negative annualized real returns over the next 7 years. The firm currently has ~$65B under management, a far cry from ~$120B that they had at the peak. The assets are distributed among separately managed, institutional, and mutual fund accounts. Their flag ship mutual fund is GMO Benchmark-Free Allocation Fund (GBMFX) which was incepted in 2003.Note 1: It was reported last December that Jeremy Grantham has a ~4.8M share stake in QuantumScape (QS). The ~$12.5M investment was made 7 years ago as part of a series of bets on early-stage “green technology” companies.Note 2: Last June, Jeremy Grantham said the US stock market was in a bubble. In November, he reaffirmed it by saying the market is in a ‘real McCoy bubble’.New Stakes:iShares Core S&P 500 ETF (IVV): IVV is a very small 0.59% of the portfolio stake established this quarter at prices between ~$328 and ~$375 and the stock currently trades at ~$392.Stake Disposals:Philip Morris (PM) and Starbucks Corp (SBUX): The ~1% PM stake was a very long-term position going back to 2008. The elimination this quarter was at prices between ~$70 and ~$86. The stock is now at $85.45. The 0.72% SBUX position was established in Q1 2020 at prices between $56 and $94 and it is now at ~$103. The stake was disposed this quarter at prices between ~$86 and ~$107.Stake Increases:Microsoft Corporation (MSFT): MSFT is currently the top position in the portfolio at 4.19%. It is a very long-term stake. The 2007-2008 period saw the stake built from ~5.6M shares to over 59M shares at prices between $19 and $35. The position size peaked in 2011 at ~68M shares. The next four years saw the stake sold down by ~80% at prices between $28 and $56. Recent activity follows: last three years saw a ~70% selling at prices between ~$88 and ~$232. The stock currently trades at ~$241. This quarter saw a ~4% increase.Coca-Cola (KO): KO is a very long-term top five 3.15% of the portfolio stake. The position was already a large 7M share stake in 2005. That original stake was built to 23.7M shares during the 2007-2008 timeframe at price between $20 and $32. The sizing peaked at almost 39M shares in 2012. The next five years saw the position sold down by ~90% to a ~3.7M share stake at prices between $37 and $47. Since then, the activity had been minor. Q1 2020 saw a ~75% stake increase at prices between $37.50 and $60. That was followed with a ~37% increase last quarter at prices between ~$44 and ~$51. The stock is now at $50.11. This quarter saw a marginal further increase.US Bancorp (USB) and Wells Fargo (WFC): These two positions were built in 2017. The 2.43% USB stake was purchased at prices between $50 and $56 and the stock currently trades at ~$50. Q1 2020 saw a ~50% stake increase at prices between ~$29 and ~$55. That was followed with minor increases over the last three quarters. The bulk of the 2.19% WFC position was purchased in Q3 2017 at prices between $49.50 and $56 and it is now well below that range at $37.83. Q1 2020 saw a ~25% stake increase at prices between ~$25 and ~$49. That was followed with a ~30% stake increase this quarter at prices between ~$21 and ~$30. For investors attempting to follow, these two are good options to consider for further research.Alibaba Group Holdings (BABA): BABA is a 2.13% of the portfolio stake established during Q2 & Q3 2016 at prices between $76 and $108. Q1 2017 also saw a two-thirds increase at prices between $94 and $108. Recent activity follows. Q1 2020 saw a ~8% selling while next quarter there was a ~25% stake increase at prices between $187 and $229. Last quarter saw a similar reduction at prices between ~$216 and ~$298. The stock currently trades at ~$264. This quarter saw a marginal increase.3M Company (MMM): The bulk of the original ~4.5M share stake was purchased in 2007 at prices between $74 and $94. The period thru 2014 saw minor adjustments most quarters but the sizing remained remarkably steady. 2017 saw a ~80% selling at prices between $175 and $241. It was rebuilt next year at prices between $184 and $259. Last two years have seen only minor adjustments. The stock is currently at ~$177 and the stake is at 1.77% of the portfolio. For investors attempting to follow, 3M is a good option to consider for further research.Cisco Systems (CSCO): CSCO is a 1.64% of the portfolio very long-term stake. The position size peaked at around 37M shares in 2009. Since then, most years saw reductions and by 2019 the share count was down to 4.2M shares. Q1 2020 saw a ~35% stake increase at prices between ~$33 and ~$50. The stock currently trades at $45.68. Last three quarters have seen minor increases. For investors attempting to follow, CSCO is a good option to consider for further research.Merck & Co. (MRK): MRK is a very long-term stake. In 2014, it was sold down to a very small position at prices between $50 and $62. It was rebuilt in H1 2018 at prices between $53 and $63. Q1 2020 saw a ~20% selling at prices between ~$66 and ~$92. The stock currently trades at $74.31 and the stake is at 1.52% of the portfolio. Last three quarters have seen only minor adjustments.Raytheon Technologies (RTX): The position came about due to the merger of United Technologies with Raytheon and the separation from Carrier (CARR) & Otis (OTIS) that closed in April. Terms called for United Technologies to be renamed Raytheon Technologies and for United Technologies shareholders to receive one share of CARR and 0.5 shares of OTIS for each share held. GMO had a 1.23M share position in United Technologies. They also increased the resultant stake substantially since. RTX currently trades at $74.26. This quarter also saw a ~8% stake increase.Quest Diagnostics (DGX): DGX is a 1.14% of the portfolio stake purchased in Q1 2020 at prices between ~$73 and ~$116 and the stock currently trades at ~$119. Last quarter saw a ~22% stake increase at prices between ~$73 and ~$123. There was a marginal further increase this quarter.Salesforce.com (CRM): CRM is a ~1% of the portfolio stake established last quarter at prices between ~$186 and ~$281 and the stock currently trades at ~$247. There was a ~87% stake increase this quarter at prices between ~$220 and ~$267.Adobe Systems (ADBE), Discovery Inc. (DISCA), iShares Core MSCI Emerging Market ETF (IEMG), Maxim Integrated (MXIM), TJX Companies (TJX), and Willis Towers Watson (WLTW): These small (less than ~2% of the portfolio each) stakes were increased this quarter.Stake Decreases:Apple Inc. (AAPL): AAPL is a top three 3.55% long-term stake. It was a large stake in 2005 but was sold down next year. The position was rebuilt in 2007 but was again sold down next year. Similar trading pattern continued over the next several years. The four years through 2019 saw a ~75% reduction at prices between ~$23 and ~$82. Last quarter saw another ~30% selling at prices between ~$91 and ~$134. The stock is now at ~$130. This quarter also saw a ~9% trimming.Note: The prices quoted above are adjusted for the 4-for-1 stock split last month.UnitedHealth Group (UNH): The top three 3.37% of the portfolio stake in UNH was already a very large ~18M share position in 2005. The position size peaked in 2007 at over 20.5M shares. The five years through 2019 had seen a ~75% selling at prices between $102 and $296. Last two quarters had seen minor increases while this quarter saw a marginal reduction. The stock is now at ~$325.Alphabet Inc. (GOOGL): GOOG is a top five 3.18% position. The long-term stake was built during the 2007-2014 timeframe at low prices. The position size peaked at ~2.6M shares in 2014. Since then, the stake was reduced to ~296K shares at prices between ~$510 and ~$1827. The stock currently trades at ~$2101.Accenture plc (ACN): ACN became a significant part of the portfolio during the 2013-2014 timeframe when around 3.8M shares were purchased at prices between $69 and $85. The next five years had seen a combined ~50% reduction thru minor selling most quarters. The stock currently trades at ~$254 and the stake is at 2.71% of the portfolio. Last three quarters had seen minor increases while this quarter saw marginal trimming.Oracle Corporation (ORCL): The 2.60% ORCL position is a very long-term stake. The position was already at around 14M shares in 2007. The next two years saw the stake built to a much larger 62M share position at prices between $15.50 and $24.50. Next few years saw selling at higher prices and by 2017 the stake was back at 14M shares. The five quarters thru Q2 2019 saw another ~45% selling at prices between $44 and $57. Q1 2020 also saw a ~18% reduction at prices between ~$40 and ~$56. The stock is currently at $61.13. Last three quarters have seen only minor adjustments.Johnson & Johnson (JNJ): JNJ is a very long-term stake.  In their first 13F filing in 2005, the position was at ~170K shares. The sizing peaked at around 26M shares in 2009. The stake was sold down by ~40% in 2014 at prices between $88 and $109. 2016 saw another ~50% selling at prices between $97 and $125. The ten quarters thru Q2 2019 also saw minor selling almost every quarter. The pattern reversed in Q3 2019: 23% stake increase in H2 2019 at prices between $127 and $146. The stock currently trades at ~$163. H1 2020 saw a ~15% trimming while the last two quarters have seen only minor adjustments.Medtronic Inc. (MDT): The very long-term 2.17% MDT stake was sold down in 2014 at prices between $56 and $76. It was built back up next year at prices between $66.50 and $80. Last five years have seen minor adjustments every quarter. The stock currently trades at ~$113.Facebook Inc. (FB): FB is a ~2% of the portfolio position purchased in Q1 2018 at prices between ~$160 and ~$190. The stake has seen incremental buying since. The stock is now at ~$262. Last two quarters saw a ~10% trimming.Anthem Inc. (ANTM): ANTM position was first purchased in 2014. The bulk of the current ~2% portfolio stake was established in 2017 at prices between $144 and $232. The stock currently trades at ~$295. Last four quarters have seen only minor adjustments.Lam Research (LRCX): The 1.96% LRCX stake was built last quarter at prices between ~$294 and ~$385 and the stock is now well above that range at ~$598.Texas Instruments (TXN): TXN is a ~2% of the portfolio position. The majority of the stake was purchased in Q3 & Q4 2016 at prices between $63 and $75. The stock currently trades at ~$178. Last few quarters have seen only minor adjustments.American Express (AXP): AXP became a significant part of the portfolio during the three quarters thru Q2 2016 when around 6.5M shares were purchased at prices between $59.50 and $66. Next year saw a ~50% selling at prices between $52.50 and $75. Since then, there has only been minor adjustments. The stock currently trades at ~$132 and the stake is at 1.92% of the portfolio.Eli Lilly (LLY): LLY is a very long-term 1.20% of the portfolio position. The stake was minutely small till 2008. The following year saw a ~3.5M share purchase at prices between $30.50 and $38. The position has wavered. Recent activity follows: Q1 2019 saw the position almost sold out at prices between $107 and $116. The stake was rebuilt next quarter at prices between $111 and $129. Q1 2020 saw a ~25% reduction at prices between ~$119 and ~$147. This quarter also saw a ~15% trimming. It currently trades at ~$201.Abbott Labs (ABT), British American Tobacco (BTI), Charles Schwab (SCHW), iShares iBoxx Investment Grade Corporate Bond ETF (LQD), Liberty Broadband (LBRDK), Lyft Inc. (LYFT), NetEase Inc. (NTES), Otis Worldwide (OTIS), Royal Bank Canada Montreal (RBKDF), Royal Dutch Shell plc (RDS.B), STMicroelectronics (STM), Vipshop Holdings (VIPS), and Visa Inc. (V): These small (less than ~2% of the portfolio each) stakes saw reductions this quarter.Kept Steady:None.Note: Although the positions sizes relative to the overall portfolio is very small, it is significant that GMO has sizable ownership stakes in the following businesses: 5% of Kosmos Energy (KOS) and ~10% of Gyrodyne (GYRO).Below is a spreadsheet that shows the changes to Jeremy Grantham's GMO Capital 13F portfolio holdings as of Q4 2020:12/8/2020: : Jeremy Grantham has a personal investment of ~4.8M shares for ~$12.5M in Quantumscape (made 7 years ago) as part of a series of bets on early-stage “green technology”11/13/2020: : Jeremy Grantham called the market is in a ‘real McCoy bubble’ after previously calling it a bubble in June.Regulatory filings thru 12/17/2020: None."