When two successful value investors own a company’s stock, it’s worth investigating what the company could be doing right. Last year, GuruFocus looked at the stocks Warren Buffett and George Soros have in common. This time, we’ll compare Arnold Van Den Berg (Trades, Portfolio) and Bill Nygren (Trades, Portfolio).
Van Den Berg founded the Austin-based Century Management in 1974, a value investing firm that oversees $2 billion in assets. What’s notable about Van Den Berg is that he has no formal college education, but more than 45 years of investment experience is a sign of his success.
In an interview with Money Manager Review, Van Den Berg explained that he adopted value investing techniques after losing a substantial amount of money during the bear market of the early 1970s.
“What I discovered was that value managers, such as Benjamin Graham and particularly his disciples, both protected their clients' capital better and provided more consistent investment results than managers using other investment strategies,” Van Den Berg said. “In addition, value investing resonated with me on a personal level as it was, and still is, consistent with how I live my personal life.”
In an interview with GuruFocus last year, Nygren said that apart from the usual characteristics many long-term investors look at in regards to company, he also considers two other questions: Does forecasted growth require capital investment or will excess cash be generated? And how does management evaluate how to raise needed capital or invest excess capital?
Nygren has managed three different funds at Oakmark Funds since 1996; most recently, he’s served as the manager of the Oakmark Global Select Fund since 2006. In 2001, he was named Morningstar’s Domestic Stock Manager of the Year.
Both investors share an interest in energy companies, though the industry plays a larger role in Van Den Berg’s portfolio, comprising 15.3% of his assets. And indeed, two of the three companies the investors have in common deal in natural gas and oil.
Using GuruFocus’ Aggregated Portfolio page, I selected both Van Den Berg and Nygren, and organized the results to display companies owned by two gurus. The following three companies are held by both Van Den Berg and Nygren.
Wells Fargo comprises 6.1% of Van Den Berg and Nygren’s combined portfolio. Nygren has held stocks in Wells Fargo since the fourth quarter of 2009 and has never sold any of his stocks. Van Den Berg, on the other hand, has taken advantage of the company’s rising price and has sold his shares for an average price of $31.09 per share, compared to the average price of $26.76 per purchased share. The following charts show Nygren and Van Den Berg’s holding history.
The company’s operating margin is expanding and recorded at 38.95% in FY 2013, higher than the bank industry average of 26.25%.
Diluted EPS for the trailing 12 months is 4.05, and has been steadily increasing since FY 2008.
Warren Buffett (Trades, Portfolio) holds the largest stake in Wells Fargo out of the investors that GuruFocus follows, at 8.8%. The next largest holders are Dodge & Cox and Chris Davis (Trades, Portfolio).
Apache Corporation (APA, Financial)
Apache is an energy company that explores, develops and produces natural gas and crude oil. Its seven operating regions are the U.S., Canada, Egypt, Australia, the U.K. in the North Sea and Argentina. The company comprises 5.1% of Van Den Berg and Nygren’s portfolio. Combined, the two investors hold 0.98% of Apache’s shares outstanding.
Nygren has held shares in Apache since the second quarter of 2013, while Van Den Berg has held shares since the first quarter of 2014.
Gross profit has been declining since FY 2011, and recorded at $12,701 million in FY 2013. Gross profit only marginally declined and is still a comfortable 79.11%.
Apache paid off 15% of its long-term debt from FY 2013 to FY 2013. Its cash and cash equivalents jumped almost 92% over the same time period.
Its current P/E ratio is 27.8.
Dodge & Cox owns the largest percentage of shares outstanding at 4.4%. Brian Rogers (Trades, Portfolio), Manning & Napier Advisors, and NWQ Managers (Trades, Portfolio) also hold Apache stock.
Halliburton provides services and products to the energy industry related to the exploration and production of oil and natural gas. The company opened a second headquarters location in Dubai in order to strengthen their presence in the eastern hemisphere.
Halliburton accounts for 3.9% of the combined portfolio. Nygren has held shares since the fourth quarter of 2012, and sold shares on one occasion for $46.84 per share. Van Der Berg has held shares since the same quarter as Nygren, but sold shares for an average price of $51.74 per share, compared to $33.14 for his purchased shares.
The P/S ratio is currently 1.76, and has been relatively steady since FY 2011.
Gross profits decreased slightly from FY 2012 to 2013. Gross margin for the trailing 12 months is 79.11%.
GuruFocus ranks Apache’s financial strength as 6/10 and its profitability and growth as 9/10.
To compare the portfolios of two or more gurus, use the Aggregated Portfolios tool.
