Altarock Partners was founded by Mark Massey in 2002 and managed to return 12% per year since its inception until 2015, according to BeyondProxy, which conducted an interview with Massey. Massey and his partner Scott Bradford are proponents of value investing, more specifically targeting wide moat companies – those that have and can maintain a sustained competitive advantage. In his interview with BeyondProxy, Massey said that they are looking to acquire great businesses at rational prices betting that their earnings are most probably be much higher in one or two decades.
Massey and Bradford’s fund seeks out investment opportunities through qualitative analysis, focusing, among other things, on buybacks. They believe that companies that buy back high amounts of their own stocks may indicate that the management is well-aligned and is convinced in “the durability of its competitive moat.” In a letter to investors, AltaRock outlined some of its other principles, such as strong profitability, global diversity, strong free cash flow, cheap valuation, and historical context, among others.
AltaRock holds a very concentrated portfolio, which usually contains between five and ten holdings at a time. It prefers to treat its positions as actual ownership stakes in businesses and even refer to them as a “conglomerate” drawing inspiration from Warren Buffett and Ben Graham. Massey said that a lot of its investment philosophy was inspired by Warren Buffett and Charlie Munger’s Berkshire Hathaway.
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AltaRock also has a fundamental approach to holding cash. While many investors don’t like to hold large amounts of cash because it does not earn them anything, AltaRock prefers to hold cash, because it can always be used to snap up a potential investment at a bargain prices. “We find ourselves equally convinced to hold more or less cash as we focus alternatively on the potentially poor macroeconomic environment on the one hand, and the cheap prices of the very high quality companies we currently own on the other hand,” AltaRock said in its 2011 mid-year letter to investors.
In its latest 13F filing, the Beverly, Massachusetts-based fund disclosed an equity portfolio worth $710.06 million held as of the end of June, up from $674.24 million a quarter earlier. As stated earlier, AltaRock prefers to hold a concentrated portfolio and currently has only seven holdings, after having closed its stake in Liberty Global plc – Class C Ordinary Shares (NASDAQ:LBTYK) between April and June. The largest chunk of AltaRock’s portfolio is amassed by its top four holdings, which collectively represent 75% of its 13F value.
Following market-beating funds like AltaRock can allow smaller investors to save some time on research and not only outperform the market but even the funds they are replicating due to the lack of fees. Another way to generate solid returns over the long run is to follow the collective stock-picking skills of smart money investors. That’s what we do at Insider Monkey. We analyze 13F portfolios of over 600 hedge funds and other large institutional investors and identify the best picks to replicate. Our strategy, the picks from which we share with subscribers to our premium newsletters (see more details), has returned 45% since February 2016.
With this in mind, let’s take a closer look at the top five holdings from AltaRock Partners’ latest 13F filing.
