"Tracking Jeremy Grantham’s GMO Capital Portfolio – Q3 2021 Update"
"Jeremy Grantham’s 13F portfolio value increased from $20.05B to $20.22B this quarter.GMO Capital increased Cigna and Constellation Brands while reducing Accenture plc, American Express, Alibaba Group Holdings, and Baidu.The largest three individual stock positions are Microsoft Corporation, Alphabet, and Apple and they add up to ~12% 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 11/12/2021. Jeremy Grantham’s 13F portfolio value increased marginally from $20.05B to $20.22B 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 42 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, Alphabet, Apple, UnitedHealth, and Oracle. They add up to ~18% of the portfolio. Please visit our  series to get an idea of their investment philosophy and our  for the fund’s moves during Q2 2021.As of June 30, 2021, GMO’s 7-year asset class real return forecast is for US Large Cap asset class to have a negative 7.5% 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’. Their Q3 2021 letter had the following on how to invest in this environment: “1) exploit the bubble with a long cheap-value/short expensive-growth equity strategy, 2) avoid the bubble by investing in liquid alternatives, and 3) concentrate assets away from the bubble by investing in EM value, Japan small value (which is benefitting from historically cheap valuations and improving fundamentals), quality cyclicals, and quality, and 4) for fixed income portfolios, keep duration shorter than normal and use active management in credit, where there remains pockets of dislocated pricing and a rich alpha opportunity set.”New Stakes:None.Stake Disposals:Alexion Pharmaceuticals and Slack Technologies: These two very small (less than ~0.6% of the portfolio each) stakes were eliminated this quarter. AstraZeneca (AZN) acquired Alexion and Salesforce.com (CRM) acquired Slack in transactions that closed in July.Stake Increases:Microsoft Corporation (MSFT): MSFT is currently the top position in the portfolio at 4.68%. 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: the three years through Q3 2020 saw a ~70% selling at prices between ~$88 and ~$232. The stock currently trades at ~$338. Last four quarters have seen only minor adjustments.Alphabet Inc. (GOOGL): GOOG is a top three 3.86% 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 ~292K shares at prices between ~$510 and ~$2545. The stock currently trades at ~$2934. There was a ~7% increase this quarter.Apple Inc. (AAPL): AAPL is a top three 3.13% 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. Q3 2020 saw another ~30% selling at prices between ~$91 and ~$134. The stock is now at ~$162. Last three quarters saw a ~11% trimming while this quarter there was a ~5% increase.Note: The prices quoted above are adjusted for the 4-for-1 stock split last month.UnitedHealth Group (UNH): The top five ~3% 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. The stock is now at ~$450. Last seven quarters have seen only minor adjustments.Oracle Corporation (ORCL): The 2.94% 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 $93.58. Last six quarters have seen only minor adjustments.US Bancorp (USB): The 2.89% USB stake was purchased in 2017 at prices between $50 and $56 and the stock currently trades at $59.84. Q1 2020 saw a ~50% stake increase at prices between ~$29 and ~$55. That was followed with minor increases over the next four quarters. Last two quarters have seen only minor adjustments.Coca-Cola (KO): KO is a 2.51% 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. Recent activity follows. Q1 2020 saw a ~75% stake increase at prices between $37.50 and $60. That was followed with a ~37% increase in Q3 2020 at prices between ~$44 and ~$51. The stock is now at $55.43. Last four quarters have seen only minor adjustments.Wells Fargo (WFC): WFC position was purchased in Q3 2017 at prices between $49.50 and $56. Q1 2020 saw a ~25% stake increase at prices between ~$25 and ~$49. That was followed with a ~30% stake increase in Q1 2021 at prices between ~$21 and ~$30. There was a ~18% selling over the last two quarters at prices between ~$30 and ~$48 while this quarter saw a ~10% increase. The stock is now at $51.31.Facebook Inc. (FB): FB is a 2.25% 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 ~$341.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 ~$425. Last several 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 ~$160. H1 2020 saw a ~15% trimming while the last five quarters have seen only minor adjustments.Lam Research (LRCX): The ~2% LRCX stake was built in Q3 2020 at prices between ~$294 and ~$385 and the stock is now well above that range at ~$661. There were minor increases in the last few quarters.Medtronic Inc. (MDT): The very long-term 1.94% 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 ~$114.Texas Instruments (TXN): TXN is a 1.90% 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 ~$194. Last several quarters have seen only minor adjustments.Cisco Systems (CSCO): CSCO is a 1.70% 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 $55.54. Last six quarters have seen only minor adjustments.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 ~$82 and the stake is at 1.38% of the portfolio. Last five quarters have seen a ~25% stake increase at prices between ~$69 and ~$82.Quest Diagnostics (DGX): DGX is a 1.27% of the portfolio stake purchased in Q1 2020 at prices between ~$73 and ~$116 and the stock currently trades at ~$150. Q3 2020 saw a ~22% stake increase at prices between ~$73 and ~$123. Last two quarters saw another ~15% stake increase at prices between ~$127 and ~$158.Eli Lilly (LLY): LLY is a very long-term 1.15% 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. Q4 2020 also saw a ~15% trimming. It currently trades at ~$262. There was a ~16% selling last quarter at prices between ~$180 and ~$234. This quarter saw a marginal increase.3M Company (MMM), Adobe Systems (ADBE), Abbott Labs (ABT), Athene Holding (ATH), Change Healthcare (CHNG), Cigna (CI), Constellation Brands (STZ), Global Payments (GPN), KLA Corp (KLAC), Lyft Inc. (LYFT), Nuance Communications (NUAN), Salesforce.com (CRM), TJX Companies (TJX), Vereit (VER), Willis Towers Watson (WLTW), and Xilinx Inc. (XLNX): These very small (less than ~1.2% of the portfolio each) stakes were increased this quarter.Stake Decreases: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 through minor selling most quarters. This quarter saw another ~17% reduction at prices between ~$300 and ~$345. The stock currently trades at ~$362 and the stake is at 2.27% 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. There was a ~15% selling Q1 2021 at prices between ~$114 and ~$150. This quarter saw another similar reduction at prices between ~$159 and ~$178. The stock currently trades at ~$172 and the stake is at 1.48% of the portfolio.Alibaba Group Holdings (BABA): BABA stake is now at 0.48% of the portfolio. It was 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. Q3 2020 saw a similar reduction at prices between ~$216 and ~$298. That was followed with a ~25% selling in Q1 2021 at prices between ~$223 and ~$271. This quarter saw a ~35% reduction at prices between ~$140 and ~$229. The stock currently trades at ~$137.Baidu Inc. (BIDU): The 0.23% BIDU stake was built in Q1 2021 at prices between ~$204 and ~$340 and the stock currently trades below that range at ~$151. There was a ~70% selling over the last two quarters at prices between ~$137 and ~$227.IHS Markit (INFO), Kansas City Southern (KSU), Otis Worldwide (OTIS), and Visa Inc. (V): These very small (less than ~1% of the portfolio each) positions were reduced 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: Kosmos Energy (KOS) and Gyrodyne (GYRO).Below is a spreadsheet that shows the changes to Jeremy Grantham's GMO Capital 13F portfolio holdings as of Q3 2021:Source: John Vincent. Data constructed from GMO Capital's 13F filings for Q2 2021 and Q3 2021.Regulatory filings from  6/24/2021 to 8/15/2021: None.Note for Q1 2021: note that the QuantumScape investment was a personal bet by Jeremy Grantham, not GMO."