"Tracking Ruane, Cunniff, & Goldfarb’s Portfolio – Q3 2017 Update"
"Ruane, Cunniff, & Goldfarb’s 13F portfolio value increased ~6% from $10.81B to $11.42B. The number of positions decreased from 70 to 69.They increased Alphabet, Fiat Chrysler, and Wells Fargo while dropping Danaher and reducing Baidu and Chipotle Mexican Grill during the quarter.The top three positions are Berkshire Hathaway, Alphabet, and CarMax and they add up to almost one-third of the portfolio.This article is part of 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 11/13/2017. Please visit our  article for an idea on their investment philosophy and our  for the moves during Q2 2017.This quarter, Ruane, Cunniff, & Goldfarb’s US long portfolio value increased 5.60% from $10.81B to $11.42B. The number of holdings decreased from 70 to 69. 30 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 31.48% while the top five are at 41.44% of the US long assets: Berkshire Hathaway, Alphabet, CarMax, MasterCard, and Liberty Media Formula One.The firm is best known as the investment advisor of the Sequoia Fund (SEQUX) which has a venerable 47-year track record (July 15, 1970 inception). Their cash-allocation is currently at ~9%. The following top-ten stakes in Sequoia’s portfolio are not in the 13F report as they are not 13F securities: Constellation Software (CNSWF) and Rolls-Royce Holdings plc (RYCEY).Bill Ruane was a Benjamin Graham pupil. To learn about Benjamin Graham's teachings, check out the classics  and .Stake Disposals:Danaher Corp. (DHR): DHR was a small 1.29% portfolio stake disposed this quarter. Their Q3 2017 investor letter indicated that the DHR exit was based on valuation – they believed their exit price fully reflected the value of the business. The stock traded between $79 and $89 during the quarter. It currently trades above that range at $93.33.Stake Decreases:Berkshire Hathaway (BRK.A) (BRK.B): BRK.B is the largest position at 12.57% of the portfolio. The last significant buying happened in 2012 when there was a one-third increase at prices between $76 and $92. The stock is now at $184. Q4 2016 saw a ~10% trimming at prices between $143 and $167 and that was followed with a ~30% selling in the following quarter at prices between $159 and $177. Last quarter also saw a ~20% reduction at prices between $161 and $172. There was a ~5% trimming this quarter.CarMax Inc. (KMX): KMX is a top three stake at 6.39% of the portfolio. 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. The stock is now at $72.35. There was a ~5% trimming this quarter.Note: Their Q4 2016 investor letter revealed KMX cost-basis as $51.10.MasterCard Inc. (MA): MA is a large (top five) ~5% of the portfolio stake established soon after its IPO in 2006 at a split-adjusted cost-basis of $4.50 per share. The original position 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 $147 per share. Last three quarters had seen minor reductions. There was a ~15% selling this quarter at prices between $121 and $143.Note: their Q3 2017 investor letter indicated that the trimming this quarter was in response to the huge short-term price increase: the stock had returned 40% YTD when they trimmed.Liberty Media Formula One (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 compared to the current price of $36.78. There was a 24% stake increase last quarter at prices between $30.50 and $37. The position is now a top five stake at 4.95% of the portfolio. There was marginal trimming this quarter.TJX Companies (TJX): TJX is a fairly large 4.94% of the portfolio position.  It is a very long-term stake and the holding period is over 15 years. The stock has seen a ~15x return over that timeframe. 2015 had seen significant selling: one-third reduction at prices between $64 and $73. The pattern continued last year: ~45% reduction at prices between $67.50 and $83. The stock is now at $70.76. There was a ~17% selling this quarter at prices between $67 and $74. Ruane is continuing to harvest huge long-term gains.O’Reilly Automotive (ORLY): ORLY is a 2.51% of the portfolio stake first purchased in 2004. Around ~1.9M shares (~3.8M shares after accounting for the 2-for-1 stock split in 2005) were acquired at the time at around $20 per share. Q1 2016 saw a ~18% reduction at prices between $232 and $277 and that was followed with another one-third reduction in the following quarter at prices between $253 and $278. It is now at $214. Last quarter saw a ~9% reduction at prices between $216 and $270 and that was followed with a ~17% selling this quarter at prices between $173 and $220. They are harvesting huge long-term gains. The stock has had a tremendous run (~10 times return) over the holding period.Credit Acceptance Corp. (CACC) and Priceline Group (PCLN): These two positions were purchased in Q1 2017 and increased significantly last quarter. CACC is a ~2.5% stake established at prices between $185 and $221 and increased by ~12% last quarter at prices between $186 and $263. It currently goes for $284. The ~2.8% of the portfolio PCLN position was purchased at prices between $1477 and $1789 and increased by ~40% last quarter at prices between $1738 and $1911. The stock currently trades at $1722. Both positions saw marginal trimming this quarter.Omnicom Group (OMC): The 2.50% OMC position saw a ~80% increase last quarter at prices between $80 and $86. The original position was from 2011 at prices between $36 and $50. The stock is now at $67.92. There was a very minor reduction this quarter. For investors attempting to follow, OMC is a good option to consider for further research.Waters Corp. (WAT): WAT is a long-term 1.80% portfolio stake first purchased in 2011 in the high-70s price-range. The positon was reduced by just over one-third this quarter at prices between $173 and $190 and the stock is now at $195.58.com Inc. (WUBA): WUBA was a minutely small position in Q2 2015. The following quarter saw a ~130% increase at prices between $41 and $65. Q3 2016 also saw a two-thirds increase at prices between $44 and $55. There was an about turn last quarter: ~50% sold at prices between $35 and $46 and that was followed with another ~40% selling this quarter at prices between $43.50 and $68. The stock is currently at $73 and the remaining stake is at ~0.90% of the portfolio.Baidu Inc. (BIDU): BIDU is a now a very small 0.66% of the US long portfolio position. The original position was established in Q2 2016 at prices between $160 and $196. There was a 43% selling last quarter at prices between $172 and $192 and that was followed with a ~80% reduction this quarter at prices between $179 and $248. The stock currently trades at $237.Chipotle Mexican Grill (CMG): CMG stake is now very small at 0.41% of the portfolio. Most of the original ~2% portfolio position was purchased in Q2 2016 at a cost-basis of ~$433 and the stock is now at $278. Last four quarters had seen minor selling. There was a ~70% reduction this quarter at prices between $297 and $417.Goldman Sachs (GS): GS is a very small ~1% portfolio position that saw minor trimming this quarter.Stake Increases:Alphabet Inc. (GOOG) (GOOGL): GOOG is a large (top three) 12.52% of the portfolio position. 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. Q1 2016 saw a ~18% reduction at prices between $678 and $765 and that was followed with another ~10% selling the following quarter at prices between $668 and $767. The stock is now at $1026. Last quarter saw a ~15% increase at prices between $823 and $984 and that was followed with a two-thirds increase this quarter at prices between $899 and $980.Note: Their Q3 2017 letter discussed the huge stake increase this quarter. They believe Alphabet is undervalued as it is a rapidly growing business trading at a slight premium to market-PE.Dentsply Sirona Inc. (XRAY): XRAY is a fairly large 4.66% of the US long portfolio position established in Q1 2016 as a result of the acquisition of Sirona Dental (SIRO) by Dentsply. They had a 2.79M share stake in SIRO (~5% of the business) for which they received ~5M shares (1:1.8142 ratio) of Dentsply Sirona. Q3 2016 saw a ~75% increase at prices between $59 and $65 and that was followed with another ~12% increase the following quarter at prices between $55.50 and $61. The stock is now at $65.80. For investors attempting to follow Ruane, XRAY is a good option to consider for further research. Last two quarters have seen marginal increases.Note: The original position in Sirona Dental was from 2011 and they have large unrealized gains.Fiat Chrysler Auto (FCAU): The ~4% FCAU position was purchased at prices between $9.50 and $11.60 and doubled last quarter at prices between $9.70 and $11.65. There was another ~25% increase this quarter at prices between $10.50 and $18. The stock is now at $17.31.Amazon.com Inc. (AMZN): AMZN is a 3.40% portfolio stake established in Q4 2016 at prices between $719 and $845. The stock is now at $1129. There was a ~9% trimming last quarter at prices between $885 and $1011. This quarter saw a marginal increase.Wells Fargo (WFC): WFC was a minutely small position as of Q1 2016. Over 5M shares were purchased the following quarter at a cost-basis of ~$51. There was another one-third increase this quarter at prices between $49.50 and $56. The stock currently trades at $53.72 and it is at 3.22% of the portfolio. For investors attempting to follow Ruane, WFC is a good option to consider for further research.Charles Schwab (SCHW): SCHW is a medium sized 3.20% portfolio stake purchased in Q2 2016 at a cost-basis of ~$29. There have only been minor adjustments since. The stock is now at $44.60.Mohawk Industries (MHK): MHK is a very long-term ~3% 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 had remained relatively steady. Q4 2016 saw a ~25% selling at prices between $177 and $205 and that was followed with another ~28% reduction in the following quarter at prices between $201 and $232. The stock is currently at $265. There was a ~5% increase this quarter.Jacobs Engineering Group (JEC): JEC is a 2.91% long-term stake first purchased in 2012. Last major activity was in Q3 2015 when there was a ~50% stake increase at prices between $37 and $44. The stock is now at $59.82. There was a ~9% stake increase this quarter.Visa Inc. (V): The 2.67% Visa stake saw a 53% increase last quarter at prices between $89 and $97 and that was followed with a ~13% increase this quarter. The stock is now at $111. It is a very long-term stake first purchased soon after the IPO in 2008.Capital One Financial (COF): COF is a very small 1.19% position purchased in Q4 2016 at prices between $71 and $91. Q1 2017 saw a one-third increase at prices between $82 and $96. The stock currently trades at $86.95. This quarter saw a marginal increase.Interactive Brokers (IBKR): IBKR is a very small 0.68% of the portfolio stake established last quarter at prices between $33.50 and $38 and increased by ~14% this quarter. The stock currently trades at $53.90.JD.com (JD): The 1.34% JD position was first purchased in Q1 2016 and has wavered. This quarter saw a one-third increase at prices between $38 and $48 and the stock is now at $41.34.Emcor Group (EME): EME is a very small 0.88% portfolio stake that saw a marginal increase this quarter.Kept Steady:Primerica Inc. (PRI): PRI is a 1.43% of the portfolio stake first purchased in Q2 2010. Recent activity follow: Q4 2016 saw a ~25% selling at prices between $53 and $72.50 and that was followed with a ~17% selling in the following quarter at prices between $70 and $83.50. There was another ~20% reduction last quarter at prices between $71.50 and $86. The stock is now at $100.Note: Their ownership stake in PRI is at ~4.5%.Builders FirstSource (BLDR) and IAC Interactive (IAC): These two small (less than ~1% of the portfolio each) stakes were kept steady during the quarter.Note: They have a ~5% ownership stake in BLDR.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.Note: Although the position size is minutely small compared to the size of the portfolio, it is significant that they have a ~6% ownership stake in Trupanion Inc. (TRUP).The spreadsheet below highlights changes to Ruane, Cunniff, & Goldfarb’s US stock holdings in Q3 2017:Regulatory Filings thru 8/23/2017: None.: Performance: YTD Up 9.67% compared to Up 9.34% for the S&P 500 Index. Capital gains realization discussed at investor day – gist – fund is tax-efficient and the large unrealized gains is because of that – for investors with similar orientation, tax efficiency should still favor them as realizations will be more than offset with unrealized profits when they exit. Priceline: Increased slightly in Q2. CACC – This was the new position started in Q1 but was not discussed. It was built to a 2.6% stake (~30% price increase in the quarter). Subprime auto lender – earnings will be hit in a downturn – but it came out with flying colors in the 2008 recession due to good underwriting standards – the business differentiation should help it in the next downturn. Top ten holdings below:"