A review of Grantham Mayo Van Otterloo's stock portfolio whose largest holdings include Microsoft Corporation (Nasdaq: MSFT), Apple Inc. (Nasdaq: AAPL), and Oracle Corporation (NYSE: ORCL).
Reversion To The Mean
Jeremy Grantham is the co-founder and chief investment strategist of Grantham, Mayo, & van Otterloo, more commonly known as GMO. He is best known for his quarterly newsletters and for popularizing the ‘reversion to the mean’ concept in investing. He has also predicted key turning points in market indices and was listed by Bloomberg Magazine as one of the 50 most influential people in global finance.
Mean reversion, as employed by GMO, is similar to value investing. The difference is that where conventional value investors use company-specific fundamental data to assess valuations, GMO uses history as a guide.
Grantham and the GMO team spend a lot of time analyzing stock market valuations and bubbles throughout history. They use long-term valuation trends to calculate what they believe to be the fair value of an asset. They then invest in assets that have moved a long way below fair value.
Grantham believes strongly that history repeats itself and that every bubble eventually bursts. He used his knowledge of bubbles to predict the dotcom bubble in 2000 and the housing bubble in 2007. He also managed to get his clients out of Japanese equities when they peaked in the late 1980s.
The nature of Grantham’s approach is that GMO tends to underperform during bull markets and then outperform when markets correct. Unsurprisingly, over the past few years, the firm’s funds have underperformed many of their peers. As a result, the firm’s clients have reportedly withdrawn $40 billion since 2014.
Grantham Mayo Van Otterloo's Latest Form 13F Filing
On February 14th, Jeremy Grantham's firm Grantham Mayo Van Otterloo filed its quarterly Form 13F regulatory filing. I reviewed the filing to gain a glimpse into the firm's large portfolio.
Grantham Mayo Van Otterloo's stock portfolio totals $17.0 billion according to the latest filing. The list value of stock holdings is down -0.9% when compared to the last quarter. As a benchmark, the S&P 500 was up 6.1% over the same period.
Quarter-over-Quarter Turnover (QoQ Turnover) measures the level of trading activity in a portfolio. Grantham Mayo Van Otterloo's QoQ Turnover for the latest quarter was 13.7%, so the firm appears to trade a significant percent of its portfolio each quarter.
Grantham Mayo Van Otterloo's Largest Holdings
The Ideas section of finbox.io tracks top investors and trending investment themes. You can get the latest data on the holdings discussed below at the Grantham Mayo Van Otterloo page. The following table summarizes the firm's largest holdings reported in the last filing:
| Ticker | Name | Holding ($mil) | % Of Portfolio |
|---|---|---|---|
| MSFT | MICROSOFT CORP | $840.1 | 5.0% |
| AAPL | APPLE INC | $730.5 | 4.3% |
| ORCL | ORACLE CORP | $698.7 | 4.1% |
| JNJ | JOHNSON & JOHNSON | $603.5 | 3.6% |
| UNH | UNITEDHEALTH GROUP INC | $586.4 | 3.5% |
| GOOG | ALPHABET INC | $461.7 | 2.7% |
| QCOM | QUALCOMM INC | $386.2 | 2.3% |
The seven positions above represent 25.4% of the fund's total portfolio. Microsoft Corporation (Nasdaq: MSFT) is its largest holding with a long position in the company worth $840.1 million.
Apple Inc. (Nasdaq: AAPL) is Jeremy Grantham's second largest position and represents 4.3% of his firm's total portfolio.
Grantham Mayo Van Otterloo's 7 Largest Purchases
I also used finbox.io to find Grantham Mayo Van Otterloo's largest buys last quarter. Here's the list of the biggest stock purchases determined by comparing the last two filings:
| Ticker | Name | Purchased ($mil) | % Of Portfolio |
|---|---|---|---|
| EWY | ISHARES INC | $187.0 | 1.1% |
| TJX | TJX COS INC NEW | $179.0 | 1.4% |
| TWX | TIME WARNER INC | $168.8 | 1.8% |
| CTL | CENTURYLINK INC | $65.5 | 0.8% |
| AET | AETNA INC NEW | $55.7 | 0.3% |
| WB | WEIBO CORP | $50.3 | 0.4% |
| ORCL | ORACLE CORP | $45.0 | 4.1% |
The largest purchase for the quarter was iShares MSCI South Korea ETF (ARCX: EWY). Grantham Mayo Van Otterloo purchased a new $187 million position in the ETF and now represents 1.1% of the firm's portfolio.
The largest stock purchase was TJX Companies, Inc. (NYSE: TJX). The investment manager increased its position in the company by $179.0 million with the stock now representing 1.4% of the firm's portfolio.
Grantham Mayo Van Otterloo's Best 1-Month Performance Stocks
To find stocks in the firm's portfolio that may be popular at the moment or have tailwinds moving forward, I ranked the firm's holdings by price appreciation. The ranking table below lists the stocks in Grantham Mayo Van Otterloo’s portfolio by stock price performance over the last 30 days.
| Ticker | Name | Price 1-mo Ago | Current Price | % Change 1-mo |
|---|---|---|---|---|
| SEDG | SOLAREDGE TECHNOLOGIES INC | $32.20 | $52.08 | 61.7% |
| MU | MICRON TECHNOLOGY INC | $40.41 | $55.22 | 36.6% |
| CHUBK | COMMERCEHUB INC | $17.39 | $22.39 | 28.8% |
| LRCX | LAM RESEARCH CORP | $165.47 | $212.74 | 28.6% |
| AMAT | APPLIED MATLS INC | $48.00 | $59.37 | 23.7% |
| CHUBA | COMMERCEHUB INC | $18.13 | $22.40 | 23.6% |
| TAL | TAL ED GROUP | $30.46 | $37.44 | 22.9% |
Shares of SolarEdge Technologies, Inc. (Nasdaq: SEDG) have increased by 61.7% over the last month. Investors may want to take a closer look at the stock, especially with 'smart money' backing it.
Grantham Mayo Van Otterloo's Recent Price Pull-Back Stocks
To find stocks in the firm's portfolio that may be unpopular at the moment and trading at cheap valuations, I ranked the firm's holdings by price pullbacks. The ranking table below lists the stocks in Grantham Mayo Van Otterloo’s portfolio by stock price performance over the last 30 days.
| Ticker | Name | Price 1-mo Ago | Current Price | % Change 1-mo |
|---|---|---|---|---|
| WMT | WAL-MART STORES INC | $99.37 | $87.92 | -11.5% |
| GM | GENERAL MTRS CO | $41.46 | $37.84 | -8.7% |
| VFC | V F CORP | $79.32 | $72.80 | -8.2% |
| SQM | SOCIEDAD QUIMICA MINERA DE C | $54.16 | $50.26 | -7.2% |
| W | WAYFAIR INC | $90.68 | $85.37 | -5.9% |
| HRG | HRG GROUP INC | $16.29 | $15.51 | -4.8% |
| CHL | CHINA MOBILE LIMITED | $47.99 | $46.01 | -4.1% |
Wal-Mart Stores, Inc. (NYSE: WMT) stock price has fallen by -11.5% over the last month. It may be worth taking a closer look at the stock, especially after this recent decline.
Grantham Mayo Van Otterloo's 7 Best Piotroski Score Stocks
The Piotroski Score is a stock score developed by Stanford accounting professor Joseph Piotroski. He developed a set of rules to find companies with strong liquid balance sheets, increasing profitability, and operating efficiency. He proposed screening for stocks based on a checklist that awards one point for each matched criterion. The strategy generated 23% annual return between 1976 and 1996, 7.5% higher than what the S&P 500 posted over the same period.
The stocks listed in the table below have the best Piotroski Scores. When two stocks have the same score, the larger holding is ranked higher.
| Ticker | Name | Piotroski Score | % Of Portfolio |
|---|---|---|---|
| TXN | TEXAS INSTRS INC | 9 | 1.3% |
| SQM | SOCIEDAD QUIMICA MINERA DE C | 9 | 0.1% |
| ANTM | ANTHEM INC | 8 | 1.3% |
| MBT | MOBILE TELESYSTEMS PJSC | 8 | 0.9% |
| MU | MICRON TECHNOLOGY INC | 8 | 0.2% |
| AMAT | APPLIED MATLS INC | 8 | 0.2% |
| VALE | VALE S A | 8 | 0.1% |
Investors interested in learning more about the Piotroski Screen should read how the strategy returned +90% in 2017.
Managers with more than $100 million in qualifying assets under management are required to disclose their holdings to the SEC each quarter via 13F filings. Qualifying assets include long positions in U.S. equities and ADRs, call/put options, and convertible debt securities. Shorts, cash positions, foreign investments and other assets are not included. It is important to note that these filings are due 45 days after the quarter end date. Therefore, Grantham Mayo Van Otterloo's holdings above represent positions held as of December 31st and not necessarily reflective of the fund's current stock holdings.
However, most can agree that with thousands of stocks traded on U.S. exchanges, doing thorough research on each one is nearly impossible for smaller investors. Leveraging the resources of the largest hedge funds on Wall Street can be a powerful way to narrow down the list.
Author: Brian Dentino
Expertise: financial technology, analyzing market trends
Brian is a founder at finbox.io, where he's focused on building tools that make it faster and easier for investors to research stock fundamentals. Brian's background is in physics & computer science and previously worked as a software engineer at GE Healthcare. He enjoys applying his expertise in technology to help find market trends that impact investors.
Brian can be reached at [email protected].
As of this writing, Brian did not hold a position in any of the aforementioned securities and this is not a buy or sell recommendation on any security mentioned.
