"Tracking Ruane, Cunniff, & Goldfarb – Q3 2015 Update"
"Ruane, Cunniff, & Goldfarb’s 13F portfolio decreased from $20.97B to $19.48B. The number of positions increased from 150 to 151.They added Allergan plc while substantially increasing 58.com, Constellation Software, and Range Resources.The top-three positions are Valeant Pharmaceuticals, Berkshire Hathaway, and TJX Companies and they add up to almost ~50% of the portfolio.This article is first in a series that provides an ongoing analysis of the changes made to Ruane, Cunniff & Goldfarb’s US stock portfolio on a quarterly basis. It is based on their regulatory  filed on 11/16/2015.William J. Ruane founded Ruane, Cunniff, & Goldfarb in 1969. The firm is best known as the investment advisor of the Sequoia Fund (SEQUX). They also have other investments through partnerships and private accounts. Sequoia Fund has a venerable track record: over the 45-year period from 1970 to 2015, the fund generated annualized returns of 14.65% compared to 10.93% for the S&P 500.As a Benjamin Graham pupil, Bill Ruane’s investment philosophy closely matched Graham’s value investment ideas although Ruane’s style was considered closer to Buffett’s than Graham’s - meaning, he preferred great businesses at good prices rather than good businesses at great prices. Other characteristics of his investments included large cash-allocation when markets are high, concentrated positions, and a preference for businesses that did not tap the debt market. The firm continued in the same mold after Ruane’s death in 2005. Recent years have however seen a shift: they established a huge position in Valeant Pharmaceuticals in 2010, a rollup with significant debt. That single holding accounted for the bulk of the outperformance over the last five years. However, the stock is currently experiencing a precipitous drop.Assets Under Management (AUM) is at around $30B with the Sequoia Fund accounting for around a quarter of that. Although the mutual fund is open-ended, it is still hard for retail investors to invest with them - it is currently closed to new investors and historically has spent the vast majority of the time since inception in that status. Recent 13F reports have shown around 150 positions with over 90% of the money invested in around 30 core stakes. The focus of the article is on these core positions.This quarter, Ruane, Cunniff, & Goldfarb’s US long portfolio decreased 7.08% from $20.97B to $19.48B. The number of holdings increased from 150 to 151: The fund added a brand new position in Allergan plc during the quarter. The top three holdings are at almost 50.30% while the top five holdings are close to 60% of the US long assets: Valeant Pharmaceuticals, Berkshire Hathaway, TJX Companies, O'Reilly Automotive, and Fastenal Company.To add from Q4 2015 Update onwards: To learn about Benjamin Graham's teachings on value investing, check out the classics  and .New Stakes:Allergan plc (AGN): AGN is a 1.54% of the US long portfolio stake established this quarter at prices between $252 and $340 and the stock is currently at $321.Stake Decreases:Alphabet Inc. (GOOG) (GOOGL) previously Google: GOOG is a 3.59% of the portfolio position first purchased in 2008. That original stake was almost sold out the following year. In 2010, a much larger position was built in the mid-200s price-range. The position has seen only marginal activity since. Last quarter saw a marginal increase while this quarter saw a minor decrease. The stock is now at $748.TJX Companies (TJX): TJX is a large (top three) 6.53% of the portfolio position.  It is a very long-term stake and the holding period is at just over 15 years. The stock has seen a ~15x return over that timeframe. The position size has wavered over the years. This year saw significant selling: one-third reduction at prices between $64 and $77.Note: Their ownership stake in the business is ~2.6%.American Express (AXP), Danaher Corp. (DHR), International Business Machines (IBM), Praxair (PX), Sirona Dental Systems (SIRO), Tiffany & Co. (TIF), Visa Inc. (V), Wal-Mart Stores (WMT), and Waters Corp. (WAT): These are very small (less than ~1.5% of the portfolio each) stakes that were reduced further during the quarter.Note: They have ~5% ownership stake in SIRO.Stake Increases:Berkshire Hathaway (BRK.A) (BRK.B): BRK.B was the largest position in the portfolio for many years through 2010. The even larger Valeant Pharmaceuticals stake was established that year. Currently, BRK.B is the second-largest position at 12.39% of the portfolio. Last three quarters have seen minor increases. The last significantly large increase happened in 2012 when the position was increased by roughly one-third at prices between $76 and $92. The stock is now at $135.Fastenal Company (FAST): FAST is a fairly large (top five) 4.51% of the portfolio stake. The original position is from 2001 & 2002 at a cost-basis just under $10 per share. The stock saw three 2-for-1 stock-splits during the holding period and the current position is at ~24M shares. The last significant activity was last year when the position was increased by ~20% at a cost-basis in the mid-40s. The stock is currently at $40.07. For investors attempting to follow Ruane, FAST is a good option to consider for further research.Note: Their ownership stake in the business is ~8.1%.Idexx Laboratories (IDXX): IDXX is a medium-sized 3.11% of the portfolio stake. The original position is from 2003 when ~1.6M shares (~6.4M shares after accounting for the two 2-for-1 stock splits sine) were acquired at a cost-basis of around $11. The position size has wavered over the years and the current stake is at ~8.2M shares. Last two quarters saw minor reductions while this quarter saw a marginal increase. The stock currently trades at $70.24.Note: Their ownership stake in the business is ~9%.Mastercard Inc. (MA): MA is a 2.52% of the portfolio stake established soon after its IPO in 2006 at a split-adjusted cost-basis of $4.50 per share. The original stake was huge at ~2.4M shares (24M shares after accounting for the 10-for-1 stock-split in 2014). It was sold down by ~72% over the next two years. Since then, the stake was kept relatively steady as the stock marched higher to the current price of ~$98.16 per share. This quarter saw a marginal increase.Note: During Investor Day 2015, management admitted not holding on to the originally huge position in Mastercard as an investment mistake.Mohawk Industries (MHK): MHK is a very long-term 2.60% of the portfolio position first purchased in 2001. The position became a significantly large stake in Q3 2002 when close to 10M shares were purchased at a cost-basis of around $50. The position size was reduced by around two-thirds in the 2012-13 timeframe at progressively higher prices. Since then, the sizing has remained relatively steady. Last two quarters had seen marginal selling while this quarter saw a very minor increase. The stock is currently at $193.Note: Their ownership stake in the business is ~3.8%.O’Reilly Automotive (ORLY): ORLY is a large (top five) 4.60% of the portfolio stake first purchased in 2004 when around ~1.9M shares (~3.8M shares after accounting for the 2-for-1 stock split in 2005) at around $20 per share. The position size has remained remarkably steady over the years and the current stake is at ~3.6M shares. The stock has had a tremendous run (~14x return) over the holding period. It is now at $268.Note: Their ownership stake in the business is ~3.6%.Perrigo Company plc (PRGO): PRGO is a small 1.19% of the portfolio position first purchased in Q3 2010 at prices between $56 and $66. The position was kept almost steady since. Last quarter saw a ~14% reduction at prices between $163 and $204. The stock currently trades at $151. This quarter saw a marginal increase.Note: Mylan NV (MYL) made a hostile takeover bid for PRGO but the tender offer lapsed earlier this month.Precision Castparts (PCP): PCP. The stake was acquired during the market lows in Q2 2009 at a cost-basis around the low-70s. The original position was kept almost steady until Q1 2015 when it was increased by ~15% at prices between $200 and $241. Last quarter saw a marginal decrease while this quarter saw a minor increase. The stock is now at $231.Note: In August, Berkshire Hathaway (BRK.A) (BRK.B) agreed to buy PCP for $235 per share cash.Valeant Pharmaceuticals (VRX): VRX is Ruane, Cunniff, & Goldfarb’s largest stock position at 31.06% of the 13F portfolio. The original position was acquired in Q2 & Q3 2010 at a cost-basis in the low-20s. Around 34M shares were acquired over those two quarters. Although minor adjustments were made every quarter, the current stake is very close to that original position at 33.9M shares. Last quarter saw a marginal reduction while this quarter saw a minor increase. The stock is currently at $87.Note 1: A 13G/A regulatory filing on 11/12/2015 shows Ruane, Cunniff, & Goldfarb owning 35.9M shares (10.52% of business) of VRX. This is compared 33.9M shares in the 13F.Note 2: As Valeant tumbled over the last month, two directors resigned, hinting at a lack of consensus over the unusually large VRX stake.58.com Inc. (WUBA), Cabelas Inc. (CAB), Constellation Software (CNSWF), Costco Wholesale (COST), Goldman Sachs (GS), Jacobs Engineering (JEC), Omnicom Group (OMC), and Range Resources (RRC): These are very small (less than ~1% of the portfolio each) stakes that were increased this quarter. The position sizes are still too small to indicate a clear bias.Kept Steady:Primerica Inc. (PRI): PRI is a very small 0.63% of the portfolio stake first purchased in Q2 2010. The position was kept relatively steady since. Last quarter saw a ~20% reduction at prices between $44 and $51. The stock currently trades at $51.08.Note: Their ownership stake in the business is ~6%.As a percentage of the portfolio, the remaining positions are all below 0.5% of the portfolio each and so have limited portfolio performance impact. Below is a list of stakes that are between 0.1% and 0.5% of the portfolio each: Athenahealth Inc. (ATHN), Brown & Brown Inc. (BRO), Coca-Cola Co. (KO), Emcor Group Inc. (EME), Hexcel Corp. (HXL), IAC Interactive (IACI), Interactive Brokers Group (IBKR), Makemytrip (MMYT), Monsanto Co. (MON), Third Point Reinsurance (TPRE), Time Warner Cable (TWC), Trimble Navigation (TRMB), West Pharmaceutical Svcs. (WST), and Yandex NV (YNDX).The spreadsheet below highlights changes to Ruane, Cunniff, & Goldfarb’s US stock holdings in Q3 2015:"