Glenn Greenberg (Trades, Portfolio)’s Brave Warrior Advisors recently disclosed its 13F portfolio updates for the fourth quarter of 2022, which ended on Dec. 31.
The firm was originally founded as Chieftain Capital Management in 1984, and when the partners split the firm up into two separate companies in 2010, Greenberg’s firm was renamed Brave Warrior Investors. Greenberg likes to run a highly concentrated portfolio, which he considers to be a “defense against ignorance,” since the more companies you own, the less you know about each. He prefers to invest in companies that have little competition, high return on invested capital, good balance sheet strength and attractive valuations.
As per its latest 13F filing, the top fourth-quarter trades of Brave Warrior Advisors included new positions in F&G Annuities & Life Inc. (FG, Financial) and AutoNation Inc. (AN, Financial), a reduction to Elevance Health Inc. (ELV, Financial) and the sale of its entire stake in Valvoline Inc. (VVV, Financial).
Investors should be aware 13F reports do not provide a complete picture of a guru’s holdings. They include only a snapshot of long equity positions in U.S.-listed stocks and American depository receipts as of the quarter’s end. They do not include short positions, non-ADR international holdings or other types of securities. However, even this limited filing can provide valuable information.
F&G Annuities & Life
Brave Warrior Advisors initiated a new stake in F&G Annuities & Life (FG, Financial) worth 6,032,140 shares, giving the holding a weight of 3.80% in the equity portfolio based on the quarter’s average share price of $20.38.
Previously known as Fidelity and Guaranty Life Insurance Company, F&G is an insurance company that provides annuities and life insurance. Based in Des Moines, Iowa, the company has approximately 800,000 customers.
F&G was just recently spun off from its parent company, Fidelity National Financial (FNF, Financial), on Dec. 1, 2022. Since Greenberg’s firm owned shares of the parent company, it received the F&G position as a special dividend. Thus, we do not have much information yet on the company as an independent entity. It does seem cheap on paper with a forward price-earnings ratio of 5.95 and a price-sales ratio of 0.27.
AutoNation
The firm also bought 230,468 shares of AutoNation (AN, Financial), giving the new holding an equity portfolio weight of 0.78%. During the quarter, shares traded for an average price of $110.58.
AutoNation is an American car dealership chain that provides new and used vehicles and related services, both through its physical dealership locations and via its website.
While the automotive industry is anticipating a potential slowdown due to the weakening economy, AutoNation spent its windfall profits from the recent car sales boom wisely by aggressively buying back shares, showing its commitment to increasing value for shareholders. The three-year share buyback ratio is an incredible 11.4%. The GF Value chart rates the stock as fairly valued.
Elevance Health
The firm slashed its investment in Elevance Health (ELV, Financial) by 26.68% for a remaining stake of 872,415 shares, shaving 4.98% off the equity portfolio. Shares traded for an average price of $507.74 during the quarter.
Elevance is primarily in the business of health insurance. It offers medical, pharmaceutical, dental, behavioral health, long-term care and disability insurance plans. The company is aiming to transform itself from a traditional health benefits organization to what it calls a “lifetime trusted health partner,” integrating not just physical health but also behavioral health, social health and long-term care.
The company's industry prospects may seem generally positive due to the aging population, but the company recently released weak guidance alongside its fourth-quarter 2022 earnings report in light of the fact that most of its recent growth came from Medicaid, which is expected to fall off when pandemic-era protections end and millions of Americans lose coverage. Once the disenrollment process is completed around the end of 2023, we can likely expect a sharper fall-off in the earnings of Elevance and other Medicaid partners.
Valvoline
Greenberg’s firm exited its 5,451,901-share stake in Valvoline (VVV, Financial), which previously took up 4.78% of the equity portfolio. Shares averaged $30.25 apiece during the quarter.
Valvoline manufactures and distributes its brand of automotive oil, additives and lubricants, and it also owns the Valvoline Instant Oil Change and Valvoline Express Care automotive service chains. The 150-year-old company has also been a leader in fluids for electric vehicles for two decades.
Despite historical prosperity, the company’s top and bottom lines have been in decline in recent years. Analysts are estimating a recovery in earnings while revenue remains mostly flat. Valvoline plans to sell its global products business to Saudi Aramco (SAU:2222, Financial) for $2.65 billion in cash and turn itself into a pure-play retail company with cash to invest in growth, though the possibility that the company’s brand value has eroded is worrying.
See also
Greenberg’s other notable trades for the quarter included additions to Asbury Automotive Group Inc. (ABG, Financial) and Apollo Global Management (APO, Financial) and reductions to Lithia Motors Inc. (LAD, Financial) and Fidelity National Financial. You can view the firm’s full trades here.
As of its latest 13F, the firm held shares of 26 common stocks in an equity portfolio valued at $3.17 billion. The top holding was Apollo Global Management with 15.96% of the equity portfolio, followed by Elevance Health with 14.10% and Fidelity National Financial with 10.94%.
In terms of sector allocation, the firm has by far the highest weighting in financial services, followed by health care and consumer cyclical.
