Up to date on Could sixth, 2021 by Nikolaos Sismanis
Burgundy Asset Administration was based in 1990 and started investing for purchasers in 1991. The Burgundy area of France impressed the identify “Burgundy”. This space of France is understood for producing high-quality wines on the planet. Burgundy at the moment has workplaces in Toronto, Montreal, and Vancouver, Canada.
Tony Arrell co-founded the agency. He acknowledged the agency’s give attention to quality-value investing and long-term pondering. He joined Burgundy as Chairman and CEO in 1993.
Tony Arrell holds a Bachelor of Science diploma from the College of Guelph. He additionally holds a Grasp’s diploma in Enterprise Administration from York College. Mr. Arrell has greater than 50 years {of professional} expertise, which incorporates Gardiner Watson Ltd, Wooden Gundy, and Midland Walwyn.
The Fund at the moment administers over $22.3 billion in Belongings Underneath Administration (AUM).
Following the corporate’s 13F filings during the last three years (from mid-February, 2018, by mid-February 2021), buyers would have generated a complete return of round 11.70%. For comparability, the S&P 500 ETF (SPY) generated annualized complete returns of 12.50% over the identical time interval
Observe: 13F submitting efficiency is completely different than fund efficiency. See how we calculate 13F submitting efficiency right here.
You’ll be able to obtain an Excel spreadsheet with metrics that matter of Burgundy Asset Administration’s present 13F fairness holdings under:
Desk Of Contents
Burgundy’s Investing Technique
The fund’s aim is to protect and develop its consumer’s capital over the long run. It focuses on shopping for undervalued high-quality corporations to carry for the long run. Burgundy’s funding method has three core parts.
- Give attention to analysis
- Stay affected person
- Make investments globally
Burgundy narrows down international funding choices and solely focuses on corporations that match its “circle of competence.” The Fund makes use of a qualitative and quantitative analysis methodology. Among the qualitative analysis methods embody interviewing the administration groups, website visits, and speaking to prospects and trade specialists.
The fund analyzes monetary statements, checks steadiness sheet power, and identifies and forecasts key working metrics for quantitative analysis.
Burgundy makes use of these identical methods and applies them globally. This helps the agency to acquire the mandatory expertise and perception to permit Burgundy’s staff to create a world perspective.
As soon as each qualitative and quantitative analyses have been accomplished, the agency focuses on the valuation evaluation and determines the investments’ intrinsic worth. Burgundy prefers to have concentrated funding portfolios with roughly 25-40 holding per regional geography.
The agency has developed its abilities progressively since its inception. It initially began with a Canadian fairness technique and at last constructed a coverage within the rising markets.
Burgundy’s Portfolio & 10 Largest Fairness Holdings
As of February 2021’s 13F submitting, Burgundy’s portfolio comprised 105 equities, with a complete market worth of $9.5 billion.
In the course of the interval protecting Burgundy’s newest 13F submitting, the fund initiated and exited the next shares:
New Buys:
- Equifax Inc. (EFX)
- Synnex Corp (SNX)
- EMCOR Group, Inc. (EME)
- CRA Worldwide Inc. (CRAI)
- Factors Worldwide Ltd (PCOM)
- Brookfield Infrastructure Companions L.P. Subordinate Shares (BIPC)
- Gartner, Inc. (IT)
- Thomson Reuters Corp. (TRI)
New Sells:
- Brookfield Property Companions L.P. (BPY)
- United Fireplace Group, Inc. (UFCS)
The agency’s prime 10 holdings represent the next shares, with no single funding accounting for greater than 4.8% of the entire portfolio’s weight.
Supply: 13F filings, Creator
The portfolio is just not solely well-diversified when it comes to the load of every capital allocation, but in addition from a sector angle as effectively. No sector accounts for greater than 22% of the entire holdings, with probably the most capital allotted in corporations working in finance.
Supply: 13F filings, Creator
The corporate’s 10 largest particular person holdings are the next:
Alphabet Inc. (GOOGL) (GOOG):
Alphabet is Burgundy’s largest holding, accounting for round 4.8% of its portfolio. The mother or father firm of Google is among the extra cheap development equities. Alphabet has been increasing its prime and backside line with nice consistency, but solely trades at round 30 instances its subsequent 12 months’s web earnings.
Admittedly, Alphabet’s efficiency faltered briefly within the very first months following the pandemic’s outbreak. Nonetheless, the corporate returned fairly quickly again to its development trajectory, with each revenues and web earnings hitting new all-time highs of $56.9 billion and $15.26 billion, respectively in its This fall outcomes. The corporate showcases web margins north of 20% persistently, which interprets into an incredible margin of security towards short-term hurdles in terms of retaining profitability.
As a result of its sturdy profitability, Alphabet has amassed a money and money equivalents place of $136 billion. Subsequently, the corporate can simply afford to fritter away money for its long-term bets, equivalent to Waymo, and within the meantime reward its shareholders with robust capital returns. Alphabet has repurchased practically $32 billion price of inventory over the previous 12 months, retiring shares at an all-time excessive fee.
Burgundy Capital has been holding shares since 2018, including to its place often. It trimmed its stake by 34% final quarter, doubtless for diversification causes, being its largest holding.
Microsoft Company (MSFT)
Microsoft will be discovered among the many prime holdings of a number of funds we’ve coated over time. It’s Burgundy’s second-largest place, accounting for 4.8% of its portfolio. The corporate has been proliferating throughout each route of the tech sector, with main web infrastructure and its quite a few workplace functions and numerous different SaaS.
Its newest quarter registered one other profitability document, producing a web earnings of $15.46 billion. The fund has been holding shares from as early as 2004, which implies that it has loved the whole lot of the inventory’s extended rally.
Fb is Burgundy Capital’s third-largest holding, with its ~$354 million-worth place accounting for 3.8% of the entire portfolio. Whereas the corporate has been distinctive in its capability to attract an adversarial repute, its financials are world-class, with lush margins and assured catalysts forward. The corporate has no long-term debt on its steadiness sheet and $62 billion of money to gas its forthcoming ventures.
The pandemic has boosted Fb’s engagement metrics, which has attracted extra advertisers, increasing Fb’s turnover. The corporate delivered an all-time excessive income and web earnings of $28.07 billion and $11.2 billion, respectively. Fb stays probably the most cheaply valued development shares on the market, nonetheless retaining 20%+ income development, however buying and selling at a ahead P/E of simply 25.
Fb has been part of Burgundy Capital’s portfolio since This fall-2018. The place was trimmed by 25% quarter-over-quarter, much like most of Burgundy’s positions throughout this era.
Johnson & Johnson (JNJ):
The corporate’s largest, and solely vital pure healthcare play, is the trade big Johnson & Johnson, which the corporate additionally trimmed fairly significantly, by round 32%, with a purpose to rebalance its portfolio. Counting 58 years of consecutive dividend will increase, the corporate is a Dividend Aristocrat and in addition a Dividend King.
J&J has displayed monetary resilience all through a number of a long time and quite a few recessions. Because of this, the inventory supplies a powerful mixture of earnings and development and is universally thought-about fairly a stable funding within the sector.
The corporate not too long ago posted its Q1-2021 outcomes, reaching a brand new all-time excessive income of $22.48B. Regardless of the continuing pandemic, the corporate as soon as once more displayed its functionality to provide resilient (and rising) financials. The inventory at the moment yields round 2.5%, barely decrease than its historic common.
SS&C Applied sciences Holdings (SSNC):
SS&C Applied sciences is just not that well-known amongst buyers, however its software-enabled options will be discovered built-in with numerous monetary and healthcare establishments. The corporate has not too long ago been quickly increasing its revenues whereas additionally specializing in rising its distributions resulting from greater profitability ranges.
Dividends have grown at a 5-year CAGR (compound annual development fee) of 17.7%, whereas the payout ratio at the moment stands at a snug 14% of the corporate’s underlying web earnings era.
The fund held its place in SS&C fairly regular, solely marginally including 15.5K shares through the quarter.
Truist Monetary Corp (TFC):
Truist Monetary is Burgundy’s largest monetary holding, making up round 3% of its complete holdings. Regardless of the challenges of COVID-19, which barely compressed the corporate’s EPS, Truist continued rising its dividend payouts. Dividends per share have grown by a 5-year CAGR of 10.76%. Contemplating the juicy yield of three%, double-digit dividend development, and its comfy payout ratio of 43%, the inventory presents qualities that dividend development buyers might discover fairly engaging.
The fund additionally trimmed its place by 27% on this one.
Allison Transmission Holdings (ALSN)
Allison Transmission primarily manufactures tactical U.S. protection autos worldwide. Because of this, its revenues are comparatively secured and predictable. The corporate managed to stay worthwhile all through 2020, regardless of its capital-intensive enterprise. The dividend was elevated by 13.3% throughout 2020, whereas the corporate introduced one other 12% dividend improve in February to a quarterly dividend fee of $0.19 for this 12 months. The inventory at the moment yields round 1.8%.
Burgundy held its place regular all through the quarter, promoting just below 24K shares, or lower than 1% of its complete publicity.
AutoZone Inc. (AZO):
AutoZone is Burgundy’s eighth-largest holding, accounting for round 2.7% of its portfolio. The corporate distributes automotive substitute elements and equipment, which have seen elevated demand amid the continuing pandemic lowering customers’ curiosity in buying new autos.
AutoZone has been increasing its retail community regularly, rising its revenues fairly steadily over time. Administration applies a capital return coverage consisting of large inventory buybacks, ignoring dividends utterly.
To focus on the magnitude of its buybacks, AutoZone has repurchased and retired 85% of its shares excellent over the previous 2 a long time, which is completely spectacular. Consequently, the corporate has delivered large worth to its shareholders over time.
Burgundy has been an AutoZone shareholder since 2015. The fund elevated its stake by 11% through the earlier quarter.
Greenback Tree (DLTR)
Greenback Tree operates greater than 7800 low cost selection retail shops, providing a lot of its merchandise on the established value of $1.00. Greenback Tree’s revenues have been rising steadily over time. They may be thought-about recession-proof because of the firm’s low cost costs attracting extra customers throughout antagonistic financial instances.
That being stated, nonetheless, its margins are extraordinarily skinny with a purpose to maintain this mannequin. Greenback Tree chooses to not pay any dividends. As a substitute, like AutoZone, it repurchases shares within the open market when it finds itself with extra money.
Burgundy held its place regular all through the quarter, including just below 14K shares, or lower than 1% of its complete publicity, in its current place.
Service International Company (CARR):
Service International is Burgundy’s tenth-largest holding. The fund purchased round 9.4 million shares throughout Q2-2020, simply after the corporate accomplished its IPO. For the reason that firm’s preliminary providing, the inventory has greater than tripled, at the moment buying and selling close to all-time highs. Because of this, CARR is considered one of Burgundy’s most profitable purchases as of not too long ago.
The corporate is kind of worthwhile in its refrigeration, fireplace, safety, and constructing automation applied sciences, which is kind of uncommon for an IPO throughout this era. The corporate has initiated a dividend as effectively, rapidly returning money again to shareholders. Service International is predicted to generate EPS of $1.92 subsequent 12 months, implying a ahead P/E of round 22 at its present value ranges. Therefore, shares should be fairly moderately valued regardless of their prolonged rally.
Burgundy trimmed its place by 27% through the earlier quarter, prone to ebook some earnings off of the inventory’s extended rally.
Last Ideas
Burgundy’s portfolio is well-diversified, holding 105 particular person holdings. The previous 3-year efficiency has been fairly satisfactory, whereas its newest strikes ought to reward its purchasers fairly properly sooner or later. The truth that the agency doesn’t have one funding that’s over 10% of the entire portfolio shows passable ranges of diversification, with cautious threat administration.
Buyers in search of capital preservation and excessive resilient high quality corporations, investing in or following Burgundy strikes may very well be rewarding.
Extra Sources:
Slate Path Capital’s 20 Inventory Portfolio: Prime 10 Holdings Analyzed
Akre Capital’s 26 Inventory Portfolio: Prime 10 Holdings Analyzed
Appaloosa Administration’s 35 Inventory Portfolio: Prime 10 Holdings Analyzed
Viking International’s 75 Inventory Portfolio: Prime 10 Holdings Analyzed
Lone Pine Capital’s 37 Inventory Portfolio: Prime 10 Holdings Analyzed
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