Thomas Bancroft’s Makaira Partners has filed its latest 13F with the Securities and Exchange Commission, detailing its long equity positions at the end of the year. There has been relatively little turnover in the fund’s positions over the past quarter, so let’s take a look at the past performance and future prospects of its top picks, of which Wesco Aircraft Holdings Inc (NYSE:WAIR) leads the pack for the second straight quarter.
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Makaira Partners was founded in 2006 by Bancroft, a former portfolio manager and Senior Managing Director at Plaza Investment Managers. Bancroft, who graduated from the University of Colorado with a B.S in political science, was listed by Berkshire Hathaway’s Tom Combs as one of the three people he would hire. The small fund invests in a handful of long-term positions, with a focus on growing but stable companies. Companies in the consumer discretionary (discretionary spending) sector accounted for 42.7% of the fund`s holdings at the end of 2014, as it appears to be betting on burgeoning consumer confidence and disposable income in the coming years.
Wesco Aircraft Holdings Inc (NYSE:WAIR) is not one of those companies, though it was Makaira`s largest holding at the end of 2014 with 7.31 million shares. That was a 27% increase thanks to the purchase of 1.56 million shares during the quarter. Wesco is not actually an airline, but rather an industrial producer of airline parts and services, such as electronics, bearings, and fluid system products, as well as custom-designed products. The company also offers inventory management services to the aerospace industry.
Despite the vastly increased position, and the fact that Makaira’s equity portfolio decreased slightly in overall value, Wesco Aircraft Holdings Inc (NYSE:WAIR)’s percentage of the fund’s portfolio only increased from 17.43% to 18.02%. That was the result of the poor fourth quarter the stock suffered, as it slid 19.66%, the majority of that coming on November 20, when it announced guidance for fiscal year 2015 that was below expectations. It’s possible the newest batch of shares were purchased after that dip, when Makaira saw a good opportunity to build on their position at a reduced rate.
Wesco has since rebounded slightly, up 9.65% over the past six trading days following the release of its latest earnings on February 5 that showed the company posting net sales of $373.3 million, a 66% increase against the year-ago period.
Liberty Interactive Group (NASDAQ:QVCA) remains Makaira’s second most valuable position for the second straight quarter, and unchanged from the previous quarter at 2.88 million shares. Nor is Makaira the only fund high on Liberty Interactive, which owns a number of properties in the digital commerce industry, including subsidiaries backcountry.com and bodybuilding.com; the company was also one of Park Presidio Capital’s top picks heading into 2015.
Liberty Interactive Group (NASDAQ:QVCA) had a mixed year, finishing up 1.2%, as the company’s structure underwent turbulence, including the spinoff of Liberty Tripadvisor Holdings Inc (NASDAQ:LTRPA) in August. It’s been more of the same so far in 2015, with shares up very slightly, and a great deal of turbulence in the stock, which has a beta of 1.7. Liberty Interactive will accounce its fourth quarter, 2014 results on February 25. Analysts are expecting an earnings loss of nearly $1.00 per share for the quarter.
Next is Verisign, Inc. (NASDAQ:VRSN), another stock that remained unchanged in the quarter with 1.36 million shares, and is also a long-time pick of Makaira’s, dating back to early 2013. Verisign is well-known for its infrastructure assurance business which protects websites from DDoS attacks, and provides other security services, in addition to its domain name registry and DNS resolution services.
Verisign, Inc. (NASDAQ:VRSN) was and still is a prominent part of Warren Buffett’s portfolio, and shares have risen 160% since the beginning of 2010, though they have failed to come close to the heights achieved during the .com bubble. Most recently, shares rebounded strongly from a downswing at the start of 2014, and are up 9.04% in 2015. Verisign reported revenue of $256 million for the fourth quarter of 2014, a 4.2% increase from the same year-ago period, and repurchased 16.3 million shares, and approved a plan to repurchase an additonal $453 million in shares.
Lastly is Covanta Holding Corp (NYSE:CVA), a holding that dates back to Makaira’s first 13F filing at the end of 2011. Makaira now owns 3.01 million shares after trimming its position slightly during the fourth quarter, by 150,000 shares. Covanta has enjoyed a steady run since the beginning of 2012, gaining 56.68% in that time. However shares have slipped 14.54% since November 28, and were preceded by a large volume of insider sales, perhaps indicating shares had peaked. Martin Whitman‘s Third Avenue Management also trimmed its exposure to the stock, slashing nearly 2.5 million shares.
Covanta Holding Corp (NYSE:CVA) missed earnings expectations during their most recently quarterly results, announced on February 11, with earnings of $0.06 per share. Analysts had estimated earnings for the waste combustion company of $0.14 per share. The earnings miss was due to increased expenses, as revenue did exceed expectations at $435 million for the fourth quarter of 2014.
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