Monday, October 1, 2012

Barron's Talks With David Winters

David Winters, founder of the Wintergreen Fund (WGRNX), was highlighted in a Barron's article this past weekend. From the article:

If you want to know what stocks David J. Winters likes, you can pore over his 13F filings or just look at his miniature train set.

It turns out Winters has a train set that has stops along the way to "honor" some of the positions he owns. For example there is:

...a chocolate factory whose smokestacks spew a sweet smell to reflect his Nestlé stake.

I suppose what makes this easier to do is the relatively low turnover of the fund.
(Otherwise, Winters would constantly be modifying that train set. Then again, all the tearing down/re-building is probably good fun if miniature trains happens to be your hobby.)

Nestlé is highlighted as the kind of stock that "epitomizes" what David Winters likes to own.

Top Ten Positions*
Jardine Matheson
British American Tobacco
Altria
Berkshire Hathaway
Swatch Group AG
Imperial Tobacco
Franklin Resources
Philp Morris Intl
Genting Malaysia
MasterCard
Source: Morningstar

These positions make up roughly 49 percent of the portfolio.

Nearly 20 percent of the portfolio is in shares of tobacco-related businesses. Tobacco businesses, at least those with strong brands and distribution, tend to produce above average returns. Understandably, not everyone likes to invest in an enterprise that has anything to do with selling tobacco products.

The low turnover approach and the many high quality businesses in the portfolio is impressive but it's worth noting that the expense ratio of the fund currently stands at 1.86 percent. Morningstar, not surprisingly, considers the fee level of this fund to be high.

The fees matter but it's good to see someone that primarily emphasizes producing returns via the partial ownership of great businesses (as their intrinsic value increases over time).

An emphasis on long-term effects (and the magic of compounding) not price action.

In my book his style of investing has real advantages. Well, especially when put up against the varied attempts by some market participants to consistently try to jump into and out of the "right" stocks and/or sectors (while somehow not making material mistakes and racking up huge transaction costs) at just the correct time.

Adam

* A number of the international stocks held in this fund have their primary listing on a stock exchange outside the United States. Some of these can be purchased via American Depository Receipts (ADR) on a U.S. exchange or the over-the-counter (OTC) market. The purchase of foreign ordinaries OTC and, of course, directly on a foreign exchange are also options. Some of these options create varying degrees of liquidity, informational, currency exposure, and many other challenges for the investor to say the least.
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