• Martin Sosnoff

13F Portfolio Filings: Nobody’s Dealing With Recession

I’ve lived long enough to hate my Microsoft position which is too low-cost to sell out and pay the tax man. But, Microsoft past 12 months has shed nearly 100 points despite solid fundamentals. Tech houses selling north of 30 times earnings proved dangerous properties. The least whiff of fish sends them tumbling down. Normally, I scan a couple of dozen filings of top 20 positions to assess portfolio drift and whether I’m missing the boat. Lemme start with Berkshire Hathaway, with portfolio holdings dating back 50 years or so. I’m talking American Express, Coca-Cola and Bank of America which tot up to nearly 30% of assets. Past couple of years the Apple pick bore fruit, now at 42% of portfolio weight. With 1 stroke of the pen, Warren Buffett more than covered the technology sector which he had ignored much too long. Last time I looked, the technology sector of the market counted up to 22%. So, with Apple, Berkshire is approximately double-weighted in tech, a gutsy call. Other end of the spectrum from Berkshire whose turnover ratio remains perennially very low, stands Renaissance Technologies whose $85 billion asset base turns over 100%, quarterly. Apple here is a 1% position with Tesla nearly 2%. Historically, this is a house run by dozens of mathematicians who day trade for a couple of basis points when they see some misalignment in their algorithms. When I turned to Tiger Global Management, its portfolio reminded me of old gunslinging operators dating back to the sixties and seventies. They day-traded gobs of capital for eighths, quarters and half points. Tiger past 12 months has parted with most of its capital concentrated in the usual suspects - Meta Platforms, Shopify, Amazon and Microsoft. Shopify has shed most of its market value, down from a 52-week high of $1,762 to its recent low of $308. At its peak Shopify sold at some outrageous multiplier of expected earnings, maybe 100 times or so. I spent maybe 15 minutes with this situation and thought of General Motors and its ilk. They may range between 10- and 15-times earnings. Decade-to-decade they’ve gotten into deep financial trouble. Nobody cares. T. Rowe Price Associates is a trillion-dollar asset house around nearly forever. What surprised me is their portfolio turnover is nearly total for the quarter. It’s mainly big cap growth stocks, the usual names, starting with Microsoft at 6% of assets. This is followed up with Apple, Alphabet, Amazon and Meta Platforms comprising 17% of invested assets. Then you go down to a bunch of 1% positions like Tesla and General Electric. Can’t learn much here. No profundity, just a sprinkling of familiar faces. General Electric? Gimme a break! No theme.

When I turned to the Coatue Management portfolio I admired its singular focus. Top 2 positions, over 23% of assets, rest in the electric car sector, namely Tesla and Rivian Automotive. The number 3 name is Moderna, a pure play on Covid-19 pharmacology.

Portfolio theme here is innovation, inclusive of Meta Platforms, Netflix and Amazon. I like Coatue’s full implementation, but note that its static ratio is on the low side at 13%. This is a story-stock theme that could work. Microsoft is at 4.3% position, sandwiched between Snowflake and Netflix.

What I’m not seeing is anyone with concentration in 2 of the hottest market sectors, namely energy and financials. Excepting Buffett’s financials and Carl Icahn with great energy plays like Occidental Petroleum (sold out), most managers are sticking with all-too-familiar tech names.

Soros Fund Management with a very high static ratio of 68% holds Rivian as numero uno at 19% of assets. George is fearless. I see some Amazon and Alphabet, even 1% in Salesforce, but performance stands or falls on Rivian’s future in electric cars and trucks. We’ll see. This electric car maker has swooned down from over par to low as $19, presently $27. I find it impossible to build an earnings model, but stay interested in what could be lightening in a bottle. Rivian takes the cake and holds wherewithal to grow into a major company in electric motive power. It will be losing money the next 3 years or so. Don’t get carried away.

When I looked at Tudor Investment’s portfolio, I scratched my head in disbelief and ignorance. Portfolio turnover is nearly complete for the quarter. I recognized none of their position names like Cerner and Anaplan. What is Zynga and Zoom Video Communications? Looks like they dropped a bit of change past quarter. Finally, I saw a utility holding, namely, PG&E, at a 10% position. But the portfolio lacks a theme. They own more Alcoa than Microsoft. Of late, both very volatile on the downside. Rivian pops up at a 2% position.

For Pershing Square Capital Management, its venture into Netflix now looks shaky on the fundamentals as does its top position, Lowe’s, some 19% of assets. Excepting 2% in Canadian Pacific Railway, Pershing eschews industrials, energy and financials. I wonder why.

Finally, I got to Icahn’s portfolio which exhibits very low turnover, comparable with Buffett’s list. Icahn remains mainly an energy portfolio even after mostly exiting Occidental Petroleum. Likewise, I’m heavy in oils but different names. Heavy in MLPs and in Exxon Mobil which still look buyable. At this point we need to see buoyancy in oil futures. Nothing’s cheap any longer excepting Exxon at under 10 times prospective earnings.

Finally, the market’s dealing with the onset of recession and the contraction in numbers for Walmart, Costco, Lowe’s and other consumer houses. Nobody’s prepared for an earnings recession. Could be just around the corner.

The cost of doing business in the Covid-19 environment is getting to everyone in the heartland, inclusive of Deere and General Motors, not just Amazon and its ilk.

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