In this article, we are going to discuss Aquamarine Capital’s top 10 stock picks. If you want to skip our detailed analysis of Aquamarine and its founder, Guy Spier‘s, history, investment philosophy performance, you can go directly to Aquamarine Capital’s Top 5 Stock Picks.
Zurich-based investor, Guy Spier, emulates Warren Buffett‘s strategy on value investing and capital allocation, which helped him generate massive returns over the years. After attaining his MBA degree from Harvard Business School, Guy Spier worked as an investment banker in New York and a management consultant in Paris and London. Spier also studied at Oxford University where he got a first-class degree in philosophy, politics, and economics. Aside from his role as the managing partner and principal of the fund, Spier is also the author of the best-selling book entitled The Education of a Value Investor.
In 1997, inspired by Warren Buffett’s investment principles, and with capital support from his family and friends, Guy Spier founded Aquamarine Capital, which eventually expanded to accommodate third-party investors. With its primarily global, long-term, and value-focused investment philosophy, Aquamarine Capital achieved discretionary assets under management of nearly $273 million. Unsurprisingly, the fund’s largest holding is represented by Berkshire Hathaway Inc. (NASDAQ: BRK.B), in which it holds 140,600 shares worth $35.92 million. Aquamarine also owns 30 class A shares of Berkshire Hathaway.
Overall, Spier holds a relatively small 13F portfolio, which contained only 12 positions at the end of March. Most holdings are long-term positions that his fund has held for more than five years.
Aquamarine Capital is one of more than 850 hedge funds that Insider Monkey follows and whose 13F filings we analyze every quarter as part of our investment strategy. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017. Between March 2017 and February 2021 our monthly newsletter’s stock picks returned 197.2%, vs. 72.4% for the SPY. Our stock picks outperformed the market by more than 124 percentage points (see the details here). We were also able to identify in advance a select group of hedge fund holdings that significantly underperformed the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 2020. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
With this context in mind, let’s now start reviewing Aquamarine Capital’s top 10 stock picks as disclosed by the fund in its latest 13F filing. Additionally, we’re going to take a look what is the overall sentiment towards these stocks among the hedge funds tracked by Insider Monkey.
10. Wells Fargo & Company (NYSE:WFC)
Aquamarine’s Stake Value: $9.18 million
Number of Shares: 151,741
Number of Hedge Fund Holders: 96
Wells Fargo & Company (NYSE:WFC) has been a part of Aquamarine Capital’s 13F portfolio since the fourth quarter of 2014, having remained unchanged during the first quarter of 2021. As of the end of the first quarter, 96 hedge funds in Insider Monkey’s database of 887 funds held stakes in Wells Fargo & Company (NYSE:WFC), compared to 99 funds in the fourth quarter. Boykin Curry’s Eagle Capital Management is the biggest stakeholder in the company, with 43 million shares, worth $1.7 billion.
Wells Fargo & Company (NYSE:WFC) currently offers a dividend yield of 0.96% per share and its stock has surged by 48% since the beginning of the year.
Davis Global Fund, in its investor letter for the fourth quarter of 2020, mentioned Wells Fargo & Company (NYSE:WFC). Here is what the fund said:
“Detractors to performance relative to the index include financial services holdings such as Wells Fargo. While banks, in general, have suffered due to the recession and experienced credit losses, Wells Fargo also suffered from operational missteps. It is our expectation, however, that our bank holdings, in general, will benefit from stronger economic growth as the pandemic recedes; and we believe Wells Fargo in particular, will, over time, lower their costs and successfully grow their businesses.”
9. Moody’s Corporation (NYSE:MCO)
Aquamarine’s Stake Value: $8.06 million
Number of shares: 27,000
Number of Hedge Fund Holders: 55
For the past five years Moody’s Corporation (NYSE:MCO) has been in Aquamarine Capital’s portfolio. At the end of March, there were 55 funds holding shares of the credit rating company, down by four over the quarter. One of the largest shareholders of Moody’s Corporation (NYSE:MCO) is none other than Warren Buffett’s Berkshire Hathaway, which owns 24.7 million shares worth $7.4 billion as of the end of March.
Guy Spier’s stock-picking skills paid big time as Moody’s Corporation (NYSE:MCO). delivered a 28% return year-to-date, extending its 12-month gains to 31%.
8. Seritage Growth Properties (NYSE:SRG)
Aquamarine’s Stake Value: $9.18 million
Number of shares: 500,000
Number of Hedge Fund Holders: 10
The real estate investment trust (REIT) Seritage Growth Properties (NYSE:SRG) has been among Aquamarine Capital’s top 10 stock picks since 2016. The management firm held 500,000 shares of Seritage Growth Properties (NYSE:SRG) at the end of the first quarter of 2021.
With an $86.9 million stake containing 4.7 million shares, Mohnish Pabrai is one of the top shareholders of Seritage Growth Properties (NYSE:SRG). Our database shows that 10 hedge funds held stakes in Seritage Growth Properties (NYSE:SRG) at the end of the first quarter, versus 14 funds in the fourth quarter 0f 2020.
7. Berkshire Hathaway Inc. (NYSE:BRK.A)
Aquamarine’s Stake Value: $11.57 million
Number of shares: 30
Number of Hedge Fund Holders: 111
Berkshire Hathaway;s class A stock ranks seventh in Aquamarine Capital’s top 10 stock picks. Guy Spier looks optimistic at Warren Buffett’s company as he holds an $11.6 million stake in BRK-A, which contains just 30 shares. With a 23% return year-to-date, Berkshire Hathaway Inc. (NYSE:BRK.A) is proving to be a great pick for Spier.
Black Bear Value Partners, in its first-quarter investor letter, mentioned Berkshire Hathaway Inc. (NYSE: BRK-A):
“Below is an updated snapshot of our “Berkshire on a Napkin” valuation. This is by no means perfect but provides a very rough idea of how things look at a 10,000-foot view.
While Berkshire’s operating businesses saw their profits decline by ~10% in 2020, their long-term positioning at the cross-section of American business remains intact if not stronger.
Berkshire bought back $9B of stock in the 4th quarter and $25BB during 2020 shrinking the share count and increasing our ownership by 5%.
- Cash of ~$104,000 per class A Share
- o Down/Base/Up marks cash at book value to a 10% premium
- Investments of based on December prices ~$194,000 per class A share
- o Presume a range of stock prices that result in:
- Down = $116,000 per class A share (-40%)
- Base = $165,000 per class A share (-15% – assumes portfolio is overpriced)
- Up = $223,000 per class A share (+15%)
- Operating businesses that should generate ~$15,000 of pre-tax income per Class A share per year
- Down = 9x = $135,000 per share – equates to ~8% FCF yield
- Base = 12x = $180,000 – equates to ~6% FCF yield
- Up = 12x = $180,000 – equates to ~6% FCF yield
- Overall
- o Down = $355,000
- o Base = $454,000
- o Up = $465,000
Berkshire is very cheap for owning such high-quality businesses and will continue to grind higher and compound value for us.”
As mentioned earlier, Aquamarine also holds class B stock of Berkshire Hathaway, Inc. (NYSE:BRK.B), which we will mention in the second part of our list of Aquamarine Capital’s top 10 stock picks.
6. Ferrari N.V. (NYSE:RACE)
Aquamarine’s Stake Value: $16.74 million
Number of shares: 80,000
Number of Hedge Fund Holders: 26
Aquamarine Capital acquired shares of Ferrari N.V. (NYSE:RACE) in the first quarter of 2016 and currently owns 80,000 shares of the company, amounting to $16.7 million. A total of 26 hedge funds tracked by Insider Monkey were bullish on Ferrari N.V. (NYSE: RACE) at the end of the first quarter, down from 29 funds a quarter earlier. Additionally, the total value of these funds holdings declined to $1.26 billion from $1.53 billion during the January-March period.
One of the funds that is betting on Ferrari N.V. (NYSE:RACE) is Ensemble Capital. In its most recent investor letter the fund mentioned Ferrari N.V. (NYSE:RACE), saying that the impact of COVID on production is behind and the company will manage to achieve its targets for 2022.
“Notable detractors to the Fund’s returns this quarter (included) Ferrari. Ferrari (4.8% weight in the Fund) continues to look for a CEO to replace Louis Camilleri who resigned in December after suffering from COVID. The incoming CEO would be Ferrari’s third in recent years, following the untimely death of Sergio Marchionne in 2018. Nevertheless, Ferrari is in good hands with Chairman John Elkann, whose family are major investors in Ferrari and are well acquainted with the brand. Full-year results were impacted by the 7-week COVID-related production suspension, which resulted in deliveries being down 10% compared with the prior year. Investors were concerned about 2021 guidance given continued worries about COVID impacts in the US and Europe and whether Ferrari will be able to hit its stated 2022 targets. But Ferrari did an amazing job maintaining production in the midst of a pandemic and we remain confident in Ferrari’s potential well beyond 2022.”
Click to continue reading and see Aquamarine Capital’s Top 5 Stock Picks.
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Disclosure: None. Aquamarine Capital’s Top 10 Stock Picks is originally published on Insider Monkey.
