"Tracking Ruane, Cunniff, & Goldfarb’s Portfolio – Q3 2021 Update"
"Ruane, Cunniff, & Goldfarb’s 13F portfolio value decreased from $11.28B to $11.13B this quarter. The number of positions decreased from 35 to 33.They increased Facebook, Taiwan Semi, Wayfair, and CarMax while reducing Credit Acceptance and dropping Arista Networks and Fidelity National Information Services.The top three positions are Alphabet, Facebook, and CarMax and they add up to ~26% of the portfolio.This article is part of a series that provides an ongoing analysis of the changes made to Ruane, Cunniff & Goldfarb’s 13F portfolio on a quarterly basis. It is based on their regulatory  filed on 11/15/2021. Please visit our  article for an idea on their investment philosophy and our  for the moves during Q2 2021.This quarter Ruane, Cunniff, & Goldfarb’s 13F portfolio value decreased marginally from $11.28B to $11.13B. The number of holdings decreased from 35 to 33. 18 of those stakes are significantly large (more than ~0.5% of the portfolio each) and they are the focus of this article. The top three positions are at ~26% while the top five are at ~40% of the 13F assets: Alphabet, Facebook, CarMax, Taiwan Semi, and Credit Acceptance Corp.The firm is best known as the investment advisor of the Sequoia Fund (SEQUX) which has a venerable ~50-year track record (July 15, 1970 inception, 13.91% annualized return compared to 11.33% for the S&P 500 index). After new management took over in Q1 2016, the portfolio has seen a significant shift to information & services businesses from asset-intensive manufacturing & retail. Also, the cash allocation which had averaged ~20% since inception is now ~2%. The following significant stakes in Sequoia’s portfolio are not in the 13F report as they are not 13F securities: Constellation Software (CNSWF), Rolls-Royce Holdings plc (RYCEY), Hiscox Limited (HCXLF), Prosus NV (PROSY), and Universal Music Group (UMGNF). Bill Ruane was a Benjamin Graham pupil. To learn about Benjamin Graham's teachings, check out the classics  and .Stake Disposals:Fidelity National Information Services (FIS): FIS was a 2.38% of the portfolio position established in Q3 2020 at prices between ~$134 and ~$156 and it is now below that range at ~$108. The stake was sold this quarter at prices between ~$121 and ~$151.Arista Networks (ANET): The ~2% ANET stake was primarily built in Q4 2019 at prices between ~$46 and ~$62. Q1 2021 saw a ~25% selling at prices between ~$67 and ~$81. That was followed with a ~55% reduction last quarter at prices between ~$75.50 and ~$92.50. The disposal this quarter was at prices between ~$86 and ~$96. The stock currently trades at ~$135.Note: The prices are adjusted for the 4-for-1 stock-split in November.New Stakes:None.Stake Increases:Meta Platforms (FB) previously Facebook: The FB position saw a whopping ~600% stake increase in Q1 2018 at prices between $152 and $193. The next two quarters had seen another ~27% increase at prices between $155 and $218. Q1 2019 saw an about turn: ~23% reduction at prices between $124 and $173. Q1 2021 saw a ~13% stake increase at prices between ~$246 and ~$299. The stock currently trades at ~$334 and it is now a top-three stake at 8.30% of the portfolio. There was a ~10% stake increase this quarter.CarMax Inc. (KMX): KMX is currently the third-largest stake in the 13F portfolio at 8.23%. It was purchased in Q2 2016 at prices between $46 and $56 and increased by ~70% in Q4 2016 at prices between $48.50 and $66. Q4 2017 saw a ~30% selling at prices between $64 and $77 while next quarter there was a ~80% increase at prices between $59 and $72. The eleven quarters through Q4 2020 had seen a ~45% selling at prices between ~$44 and ~$109. The stock is now at ~$138. There was a minor ~6% stake increase this quarter.Taiwan Semi (TSM): The top-five ~7% of the portfolio TSM stake was purchased in Q4 2019 at prices between $46.50 and $59. There was a ~130% stake increase in Q2 2020 at around the same price range. The stock currently trades at ~$116. Q1 2021 saw a ~12% selling while this quarter saw a ~20% stake increase.Note: their investment thesis is based on the following: fabs are capital intensive (~$10B per facility) and the leader naturally has a strong moat thereby yielding big profit margins. Debatably, they produce the most important manufactured component in the modern economy. Main concern is geopolitical risks.Wayfair Inc. (W): W is a 5.47% of the 13F portfolio stake purchased in Q3 2019 at prices between $106 and $152. Next quarter saw a ~40% stake increase at prices between $80 and $118. That was followed with another ~30% increase in Q1 2020 at prices between ~$24 and ~$110. The four quarters through Q1 2021 saw a ~75% reduction at prices between ~$47 and ~$346. This quarter saw a ~80% stake increase at prices between ~$239 and ~$317. The stock currently trades at ~$202.Note: Wayfair has seen a previous roundtrip. It was a very small 0.76% of the portfolio position purchased in Q1 2019 at prices between $85 and $172 and disposed next quarter at prices between $138 and $164.Formula One Group (FWONA) (FWONK): Sequoia’s Q4 2016 letter disclosed a new stake in Liberty Media Formula One. They participated in Liberty’s acquisition of Formula One and acquired the shares at a discounted price of $25. There was a 24% stake increase in Q2 2017 at prices between $30.50 and $37. The stock is now at $59.42 and the stake is at 4.52% of the portfolio. The six quarters thru Q3 2019 had seen a ~18% selling at prices between $28.50 and $43 and that was followed with similar selling next quarter at prices between $40 and $46. Last seven quarters have seen only minor adjustments.Note: their ownership stake in Formula One Group is ~5%.Walt Disney (DIS): DIS is a fairly large 5.47% of the portfolio position established in Q2 2020 at prices between $94 and $127 and the stock currently trades at ~$149. This quarter saw a minor ~5% stake increase.Intercontinental Exchange (ICE): The 3.64% ICE stake was purchased in Q3 2020 at prices between ~$92 and ~$107 and the stock currently trades at ~$133. There was a minor ~4% stake increase this quarter.Stake Decreases:Alphabet Inc. (GOOG) (GOOGL): GOOG is the largest 13F stake at 9.64% of the portfolio. It was first purchased in 2008 and that original stake was almost sold out the following year. In 2010, a much larger position was built in the mid-200s price-range. Recent activity follows: Q2 2019 saw a one-third reduction at prices between $1036 and $1288. That was followed with a ~60% reduction over the six quarters through Q4 2020 at prices between ~$1057 and ~$2138. The stock currently trades at ~$2856. Last three quarters have also seen minor trimming.Credit Acceptance Corp. (CACC): CACC is a large (top five) 6.94% stake established in Q1 2017 at prices between $185 and $221. There was a ~25% stake increase in Q4 2020 at prices between $288 and $356. This quarter saw a ~18% selling at prices between ~$438 and ~$670. The stock is now at ~$658.Note: They have a ~10.5% ownership stake in Credit Acceptance Corp.UnitedHealth (UNH): The large 6.68% UNH position was established in Q4 2019 at prices between $215 and $296 and increased by ~300% next quarter at prices between ~$195 and ~$305. Q3 2020 saw a ~30% stake increase at prices between ~$291 and ~$324. The stock currently trades at ~$487. Last four quarters have seen only minor adjustments.Micron Technology (MU) and Anthem Inc. (ANTM): MU is a 5.13% of the portfolio position built over the last two quarters at prices between ~$74 and ~$96 and the stock currently trades at ~$83. The 6.10% ANTM stake was established this year at prices between ~$288 and ~$402 and it is now at ~$445. Both positions saw minor trimming this quarter.Charles Schwab (SCHW): SCHW is a 5.67% portfolio stake purchased in Q2 2016 at a cost-basis of ~$29. Q1 2020 saw a ~40% stake increase at prices between $28.50 and $49. The stock is now at ~$83. There was a ~17% selling in Q2 2020 at prices between $32.50 and $43. Last five quarters also saw minor trimming.Liberty Broadband (LBRDK): LBRDK is a 5.66% of the portfolio position purchased in Q1 2018 at prices between $86 and $97 and increased by ~20% next quarter at prices between $69 and $85. Q1 2020 saw a ~18% reduction at prices between ~$91 and ~$139. There was a ~23% stake increase in Q1 2021 at prices between ~$143 and ~$157. The stock currently trades at ~$156. Last two quarters saw minor trimming.Netflix Inc. (NFLX): NFLX is a 4.35% of the portfolio position purchased in Q4 2020 at prices between ~$471 and ~$554 and the stock currently trades at ~$587. There was a ~15% stake increase last quarter at prices between ~$485 and ~$555. This quarter saw marginal trimming.Note: the Netflix investment thesis is based around the idea that as the global trend toward subscription-based streaming video consumption accelerates, the leaders will be more profitable than the leaders of the cable era.Jacobs Engineering Group (J): J is a 3.58% long-term stake first purchased in 2012. Recent activity follows: Q2 2018 saw a ~20% increase at prices between $56.50 and $67 while the next six quarters saw minor trimming. There was a ~25% selling in Q1 2020 at prices between ~$63 and ~$104. That was followed with a similar reduction last quarter at prices between ~$129 and ~$143. The stock currently trades at ~$136. This quarter saw minor trimming.Berkshire Hathaway (BRK.A) (BRK.B): Berkshire stake is now at ~4% of the portfolio. It is a very long-term position that was the largest stake in their first 13F filing in 1999. Recent activity follows:  Q1 2018 saw a one-third selling at prices between ~$191 and ~$217. Last two years have seen another ~70% reduction at prices between ~$169 and ~$292. The stock is now at ~$294.Kept Steady:None.The spreadsheet below highlights changes to Ruane, Cunniff, & Goldfarb’s 13F stock holdings in Q3 2021:Source: John Vincent. Data constructed from Ruane, Cunniff, & Goldfarb's 13F filings for Q2 2021 and Q3 2021.Quarterly Factsheet, Q2 2021 Letter, commentary video, and Annual/Semi-Annual Reports: Performance: 16.05% thru YTD Q2 2021 vs 15.25% for the S&P 500 index. 13.96% vs 11.38% since 1970 inception. Cash: ~2%. Increased: Anthem, Micron, Netflix, and UnitedHealth . Trimmed: Arista Networks, Eurofins Scientific, and Jacobs. Sold: a2 Milk (changed facts was the reason) and MasterCard (unattractive valuation relative to alternatives given the huge pace of innovation). New: Anthem and Micron. Commentary: More exposure to tech – a reflection of the world. CarMax is an example. Google, Facebook – Google’s advertising revenue grew 33% in Q1 (easy comp due to covid) compared to 11% last year – 40% bigger than 2019 and Youtube twice the size of 2019. Facebook 21% last year vs 40+% this year. GROWTH AT SCALE NOT EXPECTED. Regulatory risk & engagement sustainability are the concerns. FB is at mid-20s multiple while GOOG is at high 20s multiple. Semi disruption (chip shortage) – TSMC & MU, KMX & CACC – long-term impact is what we focus on and it doesn’t look like it. TSMC may not be impacted by chip shortage – primarily older technology which is limited impact – long term agreements. MU DRAM demand is high and there is no shortage – other chips that go with it have a problem – reduced net result – it is cyclical. Bet is very much thru-cycle earnings power – may not have long-term impact. KMX net impact is not clear – decreased availability of new cars but harder to source – omnichannel execution is the real story. CACC sub-prime loans to car buyers. More of a problem – dealer has less incentive to sell to subprime as those are less profitable. This dynamic is affecting CACC. The volume pressure will persist as long as user-car inventory is low. MasterCard & a2 Milk sold – a2 disrupted as it is reliant on Chinese business in Australia – it was more about original thesis – thought pioneering to become a huge business – but aggressive growth was not coming. MA was by far the best investment – 15-year hold. Fully valued is the reason. Threats are looming on the horizon – fintech innovation. Healthcare excitement why? – Price is part of it. Anthem & UnitedHealth. Managed care is a big boy’s game. Huge scale & expertise is required. Innovation on benefit design, geographies, etc. Increasingly using scale to manage care in a proactive fashion – highly entrenched. RISK – policy risk – not entirely sound business plan as cost cannot go at this rate but they may be part of the solution rather than part of the problem. Medicare Advantage – fixed cost will eventually takeover. UNH is the best execution wise – assembled provider assets if value-base tend continue. Anthem – undermanaged until last year – largest blue cross/blue shield – market built over decades with provider contracts best in the business. Gayle new CEO now executing.Regulatory filings from 6/20/2021 thru 9/28/2021: None."