's stock picks of the last year are an unsung success of 2012's
challenging investing environment. Though official return numbers
have not appeared yet, Blum's positioning achieved the highest
average return numbers in the last 12 months, at 40.33 percent,
according to GuruFocus'
Score Board of Gurus
Blum's firm, San Francisco-based Blum Capital Partners, was
founded in 1975 and manages approximately $1.6 billion. Blum's
strategy is to identify attractive businesses and invest in them
through the most effective means. Often, the firm will take large
positions in good, small- and mid-cap undervalued companies and
increase value through actively engaging with management teams.
He only considers companies with a 10% cash-on-cash yield and
projected 10% free cash flow growth rate. As a value investor,
the typical holding period for a stock is three to five years.
Since his firm's inception through the first quarter of 2011,
Blum produced a time-weighted return of 17.1%. Performance has
not always been as good as recently, particularly due to a foray
into a troubled sector.
Though heavy concentration in sunken for-profit education stocks
has weighed on Blum's overall returns, his picks over the past 12
months have excelled. Most of the underperforming stocks were
purchased before the arrival of new portfolio managers and
partners to join the company in August 2009. The declining sector
caused a significant amount of company to leave the company. From
2008 to May 2012, the firm's assets under management have
declined from $2.7 billion to $1.7 billion.
The new stocks added to the portfolio within the past 12 months
(third quarter of 2011) are: CareFusion Corp. (
), Newell Rubbermaid Inc. (
), Marriott Vacations Worldwide (
), Advance Auto Parts Inc. (
). These positions occupy smaller portions of his portfolio,
ranging from 2 percent to 2.7 percent.
The biggest gain of the four was seen at Marriott Vacations
Worldwide, which increased 132 percent in the past 52 weeks.
Blum purchased 274,496 shares of Marriott Vacations when he
opened the position for $23 per share on average in the first
quarter of 2012. He added 250,000 shares the next quarter when
the price rose to $29 on average. He reduced a modest 1,530
shares in the third quarter at an average price of $32 each.
Marriot opened for $40.71 per share on Wednesday.
The company is a spin-off from Marriott International as a
pure-play vacation ownership company with exclusive rights to the
Marriott and Ritz-Carlton brands beginning in late 2011. It
derives revenue primarily from selling vacation ownership
products, managing its resorts, financing consumer purchase of
vacation ownership products and renting vacation ownership
The company owns 64 properties as of Sept. 7, 2012, with 43 in
the U.S., 3 in non-U.S. North America, 5 in Europe and 3 in the
Asia Pacific. It has significantly cut back on developing new
Luxury vacation ownership products and is not currently working
on any. It is also evaluating opportunities to sell excess luxury
inventory. It also has no plans to build anymore in Europe. In
Asia Pacific, however, it is identifying
In the third quarter, it reported net income of $6 million, up
from a net loss of $221 million a year previously, which
reflected pre-tax non-cash impairment charges and reversals of
$320 million. Revenue was $383 million, increased from $378
million a year previously, due to higher revenues from rentals,
report management and other services, as well as cost
reimbursements. The company expects to save $15 million to $20
million annually as a result of the organizational and separation
plan following the spinoff.
After three consecutive quarters of strong performance and
positive fourth-quarter expectations, the company raised its
adjusted EBITDA guidance for the full year to $130 million to
$140 million, from $115 million to $125 million.
See its 10-year financial page here
Blum's second best stock of the year was Newell Rubbermaid, whose
price gained 42 percent. Newell Rubbermand is a consumer products
marketer that owns brands such as Rubbermaid, Sharpie, Graco and
Calphalon, to name a few.
Early this year, the company implemented a growth strategy that
emphasized growth in emerging markets, simplifying the business,
innovating, and many other facets. In October, it announced the
assembly of a new leadership team to accelerate the growth plan.
After years of declines and stagnation, Rubbermaid's revenue
began to increase for the past two years. It has also remained
free cash flow positive for the past decade, which will help it
fund its growth initiatives.
See its 10-year financial page here
Blum's high concentration in the for-profit education sector has
dragged on performance. For instance, ITT Educational Services (
), which he bought in the first quarter of 2008 and added to in
2010 at some of its peak prices in recent years, has lost 62% of
its market cap in the past year. Blum's holding of the company
currently stands at 16.8%, and occupies 14.5% of his portfolio,
as his second largest holding. See its 10-year financial page
His seventh largest holding, at 5.8% of his portfolio, is Career
Education Corp. (
). He currently owns 20.07% of the company. This holding predates
2007, but the company's stock has been mostly declining for most
of the decade and is down 88% in the last five years. See its
10-year financial page here.
As a value-oriented, long-term investor, Blum's for-profit
education investments still have time to rebound should the
regulatory overhang clear, though the future for them remains
See Richard Blum's portfolio here. Also check out the undervalued
stocks, top growth companies, and high yield stocks of Richard
See how other Gurus performed this year on GuruFocus' Score Board
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