"Tracking Jeremy Grantham’s GMO Capital Portfolio – Q2 2020 Update"
"Jeremy Grantham’s 13F portfolio value increased from $11.99B to $13.47B this quarter.GMO Capital increased Alibaba Group Holdings while dropping Cognizant Technology during the quarter.The largest three individual stock positions are Microsoft Corporation, Apple, and Alphabet and they add up to ~14% 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 08/13/2020. Jeremy Grantham’s 13F portfolio value increased ~12% from $11.99B to $13.47B 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 45 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, Alphabet, Alibaba Group Holdings, and UnitedHealth. They add up to ~21% of the portfolio. Please visit our  series to get an idea of their investment philosophy and our  for the fund’s moves during Q1 2020.As of July 2020, GMO’s 7-year asset class real return forecast is for US Large Cap asset class to have a negative 5.6% annualized return on one end and Emerging Value asset class to have a positive 9.2% 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.New Stakes:Raytheon Technologies (RTX) and Otis Worldwide (OTIS): These two positions 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 RTX stake by ~80% and OTIS stake by ~170%. RTX currently trades at $61.44 and OTIS at $60.30.Stake Disposals:Allergan plc (AGN), Cognizant Technology (CTSH), and United Technologies (UTX): These small (less than ~1.25% of the portfolio each) positions are no longer in the 13F portfolio. Allergan plc got acquired by AbbVie (ABBV) and United Technologies was renamed as Raytheon Technologies after the spin-merger. Cognizant Technology was a very long-term stake established before the financial crisis. It was disposed this quarter at prices between ~$43 and ~$59 and it currently trades at $70.13.Stake Increases:Alibaba Group Holdings (BABA): BABA is a top five 3.37% 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. Last quarter saw a ~8% selling while this quarter there was a ~25% stake increase at prices between $187 and $229. The stock currently trades at ~$278.Medtronic Inc. (MDT) and UnitedHealth Group (UNH): The very long-term 2.21% 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 ~$108. The 3.32% 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. Last five years had seen a ~75% selling at prices between $102 and $296. This quarter saw a minor increase. The stock is now at ~$307.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 ~$240 and the stake is at 2.67% of the portfolio. Last quarter saw a ~7% stake increase and that was followed with a marginal further increase this quarter.US Bancorp (USB) and Wells Fargo (WFC): These two positions were built in 2017. The 2.38% USB stake was purchased at prices between $50 and $56 and the stock currently trades well below that range at $37.32. Last quarter saw a ~50% stake increase at prices between ~$29 and ~$55. That was followed with a ~10% increase this quarter. The bulk of the 1.62% WFC position was purchased in Q3 2017 at prices between $49.50 and $56 and it is now well below that range at $24.88. Last quarter saw a ~25% stake increase at prices between ~$25 and ~$49. That was followed with a ~8% stake increase this quarter. For investors attempting to follow, these two stocks are good options to consider for further research.Facebook Inc. (FB): FB is a 2.21% of the portfolio position purchased in 	Q1 2018 at prices between ~$160 and ~$190. The stake has seen incremental buying since. This quarter saw a minor increase. The stock is now at $272.Coca-Cola (KO): KO is a very long-term 2.20% 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. Last quarter saw a ~75% stake increase at prices between $37.50 and $60. The stock is now at $51.05. There was a minor increase this quarter.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 ~$260. Last two quarters have seen minor increases.Cisco Systems (CSCO): CSCO is a ~2% of the portfolio very long-term stake. The position size peaked at around 37M shares in 2009. Most years saw reductions since and by 2019 the share count was down to 4.2M shares. Last quarter saw a ~35% stake increase at prices between ~$33 and ~$50. The stock currently trades at $40.60. There was a marginal increase this quarter. For investors attempting to follow, CSCO is a good option to consider for further research.Texas Instruments (TXN): TXN is a 1.89% 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 ~$141. Q4 2019 saw a ~10% stake increase while last quarter there was similar trimming. 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 six quarters have seen only minor adjustments. The stock is currently at ~$168 and the stake is at 1.87% of the portfolio.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 ~$107 and the stake is at 1.87% of the portfolio.Quest Diagnostics (DGX) and Starbucks Corp (SBUX): These were small new positions established last quarter. DGX is a 1.41% of the portfolio stake purchased at prices between ~$73 and ~$116 and the stock currently trades at ~$114. This quarter saw a ~22% stake increase at prices between ~$73 and ~$123. The 0.70% SBUX position was established at prices between $56 and $94 and it is now at $87.71. This quarter saw a marginal increase.Charles Schwab (SCHW), Honeywell International (HON), iShares iBoxx Investment Grade Corporate Bond ETF (LQD), Lyft Inc. (LYFT), NetEase Inc. (NTES), Philip Morris (PM), Royal Dutch Shell plc (RDS.B), TJX Companies (TJX), and Visa Inc. (V): These small (less than ~2% of the portfolio each) positions saw increases this quarter.Stake Decreases:Microsoft Corporation (MSFT): MSFT is currently the top position in the portfolio at 5.12%. 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 ten quarters saw a ~37% selling at prices between ~$88 and ~$205. The stock currently trades at ~$209. GMO is harvesting huge long-term gains.Apple Inc. (AAPL): AAPL is a top three 4.57% 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. 2014 saw a ~60% stake increase at prices between ~$18 and ~$30 while the following year saw a ~45% selling at prices between ~$27 and ~$33. The next four years had seen another ~75% reduction at prices between ~$23 and ~$82. The stock is now at ~$116. Last two quarters have seen minor trimming.Note: The prices quoted above are adjusted for the 4-for-1 stock split last month.Alphabet Inc. (GOOGL): GOOG is a top three 3.69% 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. Last five years have seen the stake reduced to ~351K shares at prices between ~$510 and ~$1525. The stock currently trades at ~$1535.Oracle Corporation (ORCL): The 2.65% 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. Last quarter also saw a ~18% reduction at prices between ~$40 and ~$56. The stock is currently at $61. There was a ~7% trimming this quarter.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 over the next two quarters at prices between $127 and $146. The stock currently trades at ~$149. Last two quarters saw a ~15% trimming.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. Last quarter saw a ~20% selling at prices between ~$66 and ~$92. The stock currently trades at $84.21 and the stake is at 1.70% of the portfolio. There was a ~3% trimming this quarter.Eli Lilly (LLY): LLY is a very long-term 1.62% 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. Last quarter saw a ~25% reduction at prices between ~$119 and ~$147. It currently trades at ~$150. This quarter saw marginal trimming.Abbott Labs (ABT), Advanced Disposal Services (ADSW), Becton Dickinson (BDX), British American Tobacco (BTI), Carvana Inc. (CVNA), iShares Core MSCI Emerging Market ETF (IEMG), Nike Inc. (NKE), Royal Bank Canada Montreal (RBKDF), STMicroelectronics (STM), Taiwan Semi (TSM), and Wayfair Inc. (W): These small (less than ~1% of the portfolio each) stakes were reduced this quarter.Kept Steady:None.Below is a spreadsheet that shows the changes to Jeremy Grantham's GMO Capital 13F portfolio holdings as of Q2 2020:Regulatory filings thru 3/11/2020: 13G – 2/13 – Eventbrite – EB – 890K shares – 1.55% of business, CYOU - ~120K shares – 0.66% of business."