Tom Russo Portfolio Performance Analysis & Current Holdings

HFA Padded
Jacob Wolinsky
Published on

Tom Russo, is another disciple of Warren Buffett and his value investing principles. He is one of the managers of Gardner Russo and Gardner which generated 12% annual returns between 1990 and 2016, beating the S&P 500 which generated 9% annual returns in the same period. Tom Russo’s portfolio analysis combined with dissecting his investment approach can help us to understand his prolonged success.

Tom Russo is managing a $10.3 billion portfolio of 80 holdings. Despite the sheer number of holdings, his top 10 holdings take a massive 82.2% of the entire portfolio. The single biggest holding is his Berkshire Hathaway Class A stocks (BRK.A), followed by Alphabet Class C stocks (GOOG). Other major holdings include Mastercard and Nestle.

To better understand his investment approach we will go through Tom Russo’s sector diversification, and we will analyze key holdings. To comprehend how his investment hunch is operating, we will go through his notable investments and approach. Stay with us.

Tom Russo Portfolio Analysis

Key Sector

Tom Russo’s portfolio is heavily invested in three sectors, with a modest intake of several others. Tom Russo’s current sector allocation is:

  1. Technology with 31% of the portfolio valued at $3.18 billion
  2. Finance with 28.4% of the portfolio valued at $2.91 billion
  3. Consumer Staples with 28.1% of the portfolio valued at $2.89 billion
  4. Consumer Discretionary with 7.4% of the portfolio valued at $759 million
  5. Materials with 5% of the portfolio valued at $518 million
  6. Energy with 0.2% of the portfolio valued at $19.7 million.

Current Holdings

  • Berkshire Hathaway Class A (NYSE:BRK.A) with 14.49% of the portfolio

A 25-year-old holding that brought major returns to Russo and his investors. He’s been slowly offloading stocks since 2016 and he currently owns 2.48 thousand shares. This holding is valued at $1.49 billion, while Russo invested $289 million. The gain from this holding is a whopping 415%.

  • Alphabet Inc Class C (NASDAQ:GOOG) with 11.46% of the portfolio

A decade-old holding that brought a significant return to Russo and associates. During the last two years, he conducted several sales perfectly timed, while the price was at its peak. When the price started to go down, he again piled up Alphabet stocks, and he currently owns 8.09 million. Russo invested in this holding $545 million, and it is now valued at $1.18 billion. For now, this holding generated for Russo 116% gains.

  • Mastercard (NYSE:MA) with 10.72% of the portfolio

Russo surely loves his Mastercard holding. He has been intensively trading it for two decades, and until 2020 he built up a solid stake in the company. Since then he has slowly trimmed this holding, offloading more than 100 thousand stocks just during 2023. In this holding are currently 2.38 million stocks valued at $1.1 billion. Russo invested into Mastercard $565 million, resulting in a 95% gain.

  • Nestle SA (SWX:NESN) with 8.75% of the portfolio

Nestle is one of Russo’s favorite companies to invest in. He has been trading their stocks for more than 25 years with periods of building up and trimming of the position. Since late 2017 he has been slowly selling Nestle stocks with solid success. During 2023 he sold around 400 thousand shares, reducing the stake to 7.9 million. Nestle’s holding is currently valued at $900, while he invested $535 million. Russo netted gains from Nestle at a range of 68%.

  • Richemont (SWX:CFR) with 7.28% of the portfolio

This Swiss-based luxury goods manufacturer is a decade-old Russo’s investment. He now owns 5.05 million shares after the trimming of the holding that he has been conducting since 2018. During 2023 he sold stocks on three occasions reducing the holding for about 600 thousand shares. Now this holding has a reported value of $747 million, while Russo invested $389 million. This has been a lucrative deal so far, producing a gain of 92%.

  • Heineken Holding (AMS:HEIO) with 6.41% of the portfolio

Heineken is one of the busiest Russo holdings, where he conducted 32 buys and sold stocks on 31 occasions. Russo and his partners now own 7.91 million shares, while they sold about 350 thousand in 2023. During two decades Russo invested $408 million, while the holding’s current value is $658 million, netting a gain of 61%.

  • Netflix Inc. (NASDAQ:NFLX) with 6.33% of the portfolio

Netflix, Russo’s relatively new holding, started trading its stocks in 2022. He owns 1.16 million stocks, valued at $650 million. Russo invested $281 million, which resulted in a short-term gain of 131% so far.

  • Berkshire Hathaway Class B (NYSE:BRK.B) with 6.2% of the portfolio

Russo has also traded Buffett’s Class B stocks for more than 15 years. He owns 1.62 million Class B stocks valued at $643 million. The value of this holding dropped over the years and when compared to Russo’s investing in these stocks, they brought him a loss of 11%.

  • Philip Morris International (NYSE:PM) with 5.53% of the portfolio

Russo bought the majority of Philip Morris stocks almost 20 years ago when their value didn’t go above $35. In the last 2 years, he has been offloading their stocks at prices between $85 and $100. Now he owns 6.24 million stocks valued at $571 million. His total investment into the company is at an estimated $363 million resulting in a gain of 57% so far.

Notable Investments

Due to Russo’s nature of long-term investment horizon some of his notable investments are still part of the company’s portfolio.

  • Berkshire Hathaway (BRK.A; BRK.B). Russo is a long-time admirer of Warren Buffett, and he was one of the gurus that shaped his investment career. Russo has had a solid hold on both Class A and Class B of Buffett-managed funds for decades, and they have brought him significant returns.
  • Heineken (HEIO). This Dutch multinational beer corporation has been a part of Russo’s portfolio since 1988. He was impressed by their global brand and influence and wanted to be a part of their success story.
  • PepsiCo (PEP). Like Heineken, PepsiCo’s holding points to Russo’s strategy to invest in companies that have constant demand for their products. He invested in PepsiCo in 2002 and he kept it as a part of the portfolio ever since. Russo sold most of his PepsiCo share, but he already trimmed down this holding several times as a part of his strategy.

Tom Russo: The Investor

Background and Career

Tom Russo is another notable investor influenced by Warren Buffett and his value investing principles. Russo acquired a business degree from Stanford in 1984, but he had a crucial conversation with Buffett in 1982 which impact followed him through his career.

One of his first jobs in the investment business was in the Sequoia Fund, where he worked with Ruane, Cuniff, and Goldfarb. After this short stint, he moved to Gardner Investment in 1989. He became a managing partner in 2014.

Investment Principles and Strategies

At the core of Russo’s investment principles is identifying companies that have a “capacity to suffer” and the “capacity to reinvest”.

By having the capacity to suffer it means that the company can spend the right amount of money in the long-term to generate competitive advantage.

Regarding the second principle, the capacity to reinvest Russo knows that there are a very limited number of those companies. But, if the company has the opportunity to reinvest their gains they should do it, and if they do not, their competitors will.

Another crucial element of Russo’s strategy is focusing on sectors that have a wide demand for their products and services from a wide population. Those industries offer significant net free cash flow. His favorite industries are food, beverage, tobacco, and advertising-supported media.

Other, also important pillars of Russo’s strategy are his long-term investment focus, search for undervalued companies with potential, and global outreach. He pointed out that 95% of the people live outside the United States. That was one of the reasons why he didn’t want to geographically limit his investments.

From Warren Buffett and Charlie Munger, he learned all the ins and outs of value investing. He invests when he knows that the investment will last. Also, he likes to keep his portfolio concentrated on a smaller number of companies that produce products that everyone wants.

Gardner Russo & Quinn

Understanding Gardner Russo & Quinn as an Investment Firm

Gardner, Russo & Quinn is a financial advisor firm based in Lancaster, Pennsylvania. Their clients are both individual and institutional investors.

They prefer working with a smaller base of high-net-worth investors and getting a chance to invest with them demands a solid base investment. They are a fee-only financial company so they receive compensation only from clients.

The minimum amount needed for investment depends on the type of account you are looking to open. When opening a separately managed account, the minimum base investment is $1 million. There are several other Gardner Russo private funds to choose from, and their base investment varies between $500 thousand and $5 million.

The best-known funds that are operated by Gardner and Russo are Semper Vic Partners LP, Semper Vic Partners QP, and Semper VIc Partners Offshore Inc. The first two are designated for United States citizens, while the third is referred for business with non-United States citizens and residents.

When opening an account with an investment company, an important question is the cost of managing the account. Gardner, Russo & Quinn charge a 1% annual performance fee on profits, and 1% of their total AUM. The company has a clean record and it is safe to invest in it.

Collaboration with Tom Russo

Gardner, Russo & Quinn was founded as Gardner Investments back in 1968 by Eugene H Gardner. In 1989 Russo joined the company as a partner. In 1998 Gardner’s son Eugene Jr. joined the company which was then renamed Gardner, Russo, and Gardner.

In 2014 the company registered as a limited liability company. In 2021 the company again changed its name to Gardner, Russ & Quinn, to add the company’s director of research Timothy C. Quinn.

Eugene Senior passed away in 2016 leaving Eugene Jr. and Tom Russo to manage the company. Russo owns the majority stake in the company and is the principal owner of the business.

Investment Approach

Deep Value Investing Approach

Russo from the beginning of his career tapped into Buffett’s knowledge, and he found his value investing approach as something that could align with his personal beliefs. Like Buffett, he avoids short-term speculative investments aiming to gain from market discrepancies.

He is primarily looking for companies with strong fundamentals, and from industries that can generate a stable and massive cash flow. When conducting company research he always looks out for the potential for advancement in daily operations. He wants to make the company to accomplish its full potential.

Long-term Perspective on Investment

Long-term perspective goes hand in hand with his aim on value investing principles. He doesn’t buy and expects the company to be an instant success. He buys intending to earn in the long term. The company grows, and he oversees this process. Most of his holdings are at least a decade old, and some of the best deals, like Heineken, have been a part of his portfolio since the 80s.

Take a Look at What Do I Look for In a Business – Thomas Russo: 

Success Stories

  • Weetabix. One of Russo’s first major successes. He acquired almost 20% of the company during the 90s when the stock price was below 6 pounds. In 2003 he sold his entire stake for 54 pounds per stake.
  • Heineken. When he started investing in Heineken in 1986 they were still a family company. After Russo’s investment, they decided to conquer the whole world. They started mass exporting beer to Brazil, India, China, and the United States.

Challenges Faced

One of the biggest challenges and subsequent failures of Russo’s career was the investment in Alibaba. In 2021 he bought roughly 1.6 million Alibaba shares for an average price of $216. Before the trade took place, Russo praised the crackdown of China’s President Xi on their tech companies, including Alibaba. He pointed out that it will bring more benefits in the long term.

But since the time of his investment in Q1 2021, the price continued to plummet during 2022, and he sold the entire holding at $95.27. Time has shown that it is the best thing to do in a bad situation. Today Alibaba stocks are valued at just $70 so Russo managed to minimize his losses.

Influence and Legacy

Russo’s influence cannot be denied, just for his sheer longevity and success in the investment business. Funds that he managed consistently outperformed the benchmarks. His keen sense for finding companies from the right sectors that have a potential for long-term success has put him as one of the frontrunners in the value investing world.

His influence is amplified by his accessible nature. Unlike many other investors, he is open for interviews and discussions. That way he influenced and still influences a new breed of investors that are searching for a way to conduct ethical investment practices with an emphasis on value investing.

He still has a long way to go career-wise, and we are sure that we still haven’t seen the best of him. But from the look of things Russo will be one of the investment gurus that investors will look upon in the future.

FAQ

What Is Thomas Russo Investor Net Worth?

Determining Thomas Russo’s net worth can be a tricky task because not all information is available to the public. He currently owns 10% of the Mativ Holding which translates into about a million stocks. His share is valued at $12 million.

Final Thoughts

Another successful story of Warren Buffett’s disciple is the story of Tom Russo. He came under his influence even before he started his investment journey. Before he joined Gardner Investments he honed his skills through several short investment stints. But, the potential was there. He understood what values he was looking for when investing.

His focus on investing in the long term in fundamentally good companies that generate constant cash flow brought him exceptional results. His strong belief in the companies he invests in is seen in his current portfolio. Most of the major holdings are older investments that go back decades.

When we look at the performance of his 20 biggest holdings we see a 25% cumulative return in the last three years. When we look at all the biggest holdings, like Berkshire Hathaway, Mastercard, and Alphabet they are all performing well. Heineken and Richemont are going through a rough patch, but we will see how that will play out in that perspective.

Related Content

HFA Padded

Jacob Wolinsky is the founder of HedgeFundAlpha (formerly ValueWalk Premium), a popular value investing and hedge fund focused intelligence service. Prior to founding the company, Jacob worked as an equity analyst focused on small caps. Jacob lives with his wife and five kids in Passaic NJ. - Email: jacob(at)hedgefundalpha.com FD: I do not purchase any equities to avoid conflict of interest and any insider information. I only purchase broad-based ETFs and mutual funds.