In this article, we discuss Tom Russo’s hedge fund performance and top stocks. If you want to skip our detailed discussion about the hedge fund manager’s portfolio, head directly to Tom Russo's Top 5 Holdings.
Thomas A. Russo has been a partner at Gardner Russo & Gardner, now Gardner Russo & Quinn, since 1989 and became the managing member in 2014. Russo's stock selection approach considers value and price together, seeking companies with strong cash-flow characteristics and robust balance sheets. His investment philosophy centers on a few industries known for generating sustainable net free cash flow, such as food, beverage, tobacco, and advertising-supported media. He aims for an absolute return of 10% to 20% per year with minimal turnover. In its latest 13F filing for the first quarter of 2023, Russo’s hedge fund disclosed $9.6 billion in managed securities, with the top 10 holdings making up 80.64% of the portfolio.
During a May 2023 interview with Markets Insider, Russo expressed deep concern over the US government's aggressive borrowing and the potential long-term impact on Americans. In January 2023, the US government surpassed its borrowing limit of $31.4 trillion, and if an agreement isn't reached to raise the debt ceiling, it could face a cash shortage by June. However, even if the deadlock is resolved, there will still be a significant amount of debt that future generations will have to deal with, according to Russo. The current banking turmoil is driven, in part, by rate hikes which are negatively affecting bond prices. This situation has elicited fears that nervous lenders might pull back, leading to a credit crunch. Nevertheless, Tom Russo argued that concerns about the economy collapsing and lending drying up might be exaggerated. He pointed out that there is an abundance of cash in the system, which has kept stock prices relatively high despite the prevailing headwinds. Additionally, there are asset-price bubbles in various industries that remain a cause for caution.
As of the first quarter of 2023, Tom Russo's largest holding is Berkshire Hathaway Inc. (NYSE:BRK-A), where he owns 2,579 shares valued at $1.20 billion. At the end of February 2023, Tom Russo joined Yahoo Finance Live to discuss Warren Buffett's letter to shareholders, Berkshire Hathaway's stock portfolio, and the significance of compounding. In 1982, Russo was introduced to Warren Buffett, and at that time, Berkshire Hathaway shares were priced at around $5.00 to $7.00 per share. Since then, the compound return on the investment has been an impressive 19.5%, making it a rewarding wait, as per Russo. He noted that a key principle at Berkshire is to send money to Omaha, where Warren Buffett and other skilled investors can direct its use. Berkshire's subsidiary businesses excel in their respective fields, but they don't always need constant reinvestment. By centralizing the capital in Omaha, the experienced investors can decide how to deploy it best. This approach ensures a steady and strong pace of growth and prevents operating managers from making potential investment mistakes outside their core businesses. In a recent interview, Russo outlined that Warren Buffett's investment of over $11 billion in Occidental Petroleum Corporation (NYSE:OXY) over the past 15 months may be a strategic hedge against rising energy costs. With Berkshire Hathaway holding almost a 24% stake in Occidental, the increase in oil prices would lead to higher profits for Occidental, which could help offset rising fuel costs at Buffett's other major businesses like Berkshire Hathaway Energy and BNSF Railway. Russo commended this approach, calling it a clever and unconventional investment, similar to Buffett's previous strategy of utilizing "float" from his insurance companies.
Similarly, Mastercard Incorporated (NYSE:MA), where Russo owns a $899 million stake, announced on July 18 that it has partnered with payments processing company Geidea, which will utilize Mastercard's latest technology to implement BIN ranges, allowing consumers, merchants, and fintechs in the Kingdom of Saudi Arabia to access advanced payment solutions. Starting from July 21, visitors and tourists also have the option to connect their Mastercard accounts with China's renowned mobile payment platforms. This integration enables them to conveniently book taxis, use the subway, and make purchases at numerous outlets across the cashless nation. This development represents a renewed initiative by Alipay and WeChat Pay to accommodate foreign credit cards, following their earlier limited access attempts in late 2019.
Investors who seek guidance from popular Wall Street hedge fund managers can check out some of the best stocks in Tom Russo’s portfolio as of Q1 2023, which include Alphabet Inc. (NASDAQ:GOOG), JPMorgan Chase & Co. (NYSE:JPM), and Visa Inc. (NYSE:V).
Our Methodology
To compile our list of Tom Russo’s top 10 stocks, we used his hedge fund’s 13F filings for the first quarter of 2023. The following list is ranked according to Gardner Russo & Quinn’s stake value in each company.
Netflix, Inc. (NASDAQ:NFLX) is an entertainment services provider. Securities filings for the first quarter of 2023 reveal that Tom Russo owned 1.06 million shares worth $368 million, representing 3.81%of the total 13F securities. On July 19, Netflix, Inc. (NASDAQ:NFLX) reported a Q2 GAAP EPS of $3.29, beating Wall Street estimates by $0.44. However, the revenue of $8.19 billion fell short of market consensus by $100 million. The growth in revenue was fueled by a 6% rise in average paid membership, and there was an addition of 5.89 million global streaming paid memberships during the quarter, bringing the total to 238.39 million.
According to Insider Monkey’s first quarter database, 108 hedge funds were bullish on Netflix, Inc. (NASDAQ:NFLX), compared to 117 funds in the prior quarter. Boykin Curry’s Eagle Capital Management is a prominent stakeholder of the company, with 4.26 million shares worth approximately $1.5 billion.
In addition to Alphabet Inc. (NASDAQ:GOOG), JPMorgan Chase & Co. (NYSE:JPM), and Visa Inc. (NYSE:V), Netflix, Inc. (NASDAQ:NFLX) is one of the top stock picks of Tom Russo.
ClearBridge Large Cap Growth Strategy made the following comment about Netflix, Inc. (NASDAQ:NFLX) in its second quarter 2023 investor letter:
“Delivering performance through fundamental, bottom-up stock selection has been a constant over our tenure managing the Strategy. We underperformed in the first half of 2022 from being too early in entering several stocks going through negative earnings revisions and have seen relative results rebound over the last 12 months due to better stock picking, especially among earnings reset names such as Netflix, Inc. (NASDAQ:NFLX) and Meta Platforms.”
Berkshire Hathaway Inc. (NYSE:BRK-B) is involved in businesses such as insurance, freight rail transportation, and utilities worldwide. It is one of Tom Russo’s top stock picks. In the first quarter of 2023, Russo’s hedge fund owned 1.64 million shares worth $506.8 million, representing 5.25% of the total holdings.
On July 10, Berkshire Hathaway Energy reached an agreement to purchase Dominion Energy's 50% ownership in the Cove Point LNG plant in Maryland for a total of $3.3 billion. After the deal is finalized, Berkshire Hathaway Energy will hold a 75% stake in the facility, while Brookfield Infrastructure Partners will retain a 25% interest.
According to Insider Monkey’s first quarter database, 108 hedge funds were bullish on Berkshire Hathaway Inc. (NYSE:BRK-B), compared to 110 funds in the last quarter. Bill & Melinda Gates Foundation Trust is the leading stakeholder of the company, with approximately 20 million shares worth $6 billion.
Here is what Vltava Fund has to say about Berkshire Hathaway Inc. (NYSE:BRK-B) in its Q3 2022 investor letter:
“Berkshire Hathaway is our oldest position. We have held it for almost 11 years, and it has been our largest position for most of that time. We have told you so much about Berkshire through the years that it is difficult not to repeat ourselves.
Philip Morris International Inc. (NYSE:PM) is a tobacco company that focuses on selling cigarettes and smoke-free products, which includes heat-not-burn, vapor, and oral nicotine products. Gardner Russo & Gardner had 6.4 million shares of Philip Morris International Inc. (NYSE:PM) worth $625.3 million in the first quarter of 2023, representing 6.48% of the total 13F portfolio.
On July 20, Philip Morris International Inc. (NYSE:PM) reported a Q2 non-GAAP EPS of $1.60 and a revenue of $9 billion, outperforming Wall Street estimates by $0.12 and $290 million, respectively.
According to Insider Monkey’s first quarter database, 55 hedge funds were long Philip Morris International Inc. (NYSE:PM), compared to 47 funds in the earlier quarter. Rajiv Jain’s GQG Partners is the largest stakeholder of the company, with 21.5 million shares worth $2 billion.
Ariel International Fund made the following comment about Philip Morris International Inc. (NYSE:PM) in its Q1 2023 investor letter:
“Finally, tobacco maker, Philip Morris International Inc. (NYSE:PM) declined in the period on concerns related to supply-chain disruptions resulting from the war in Ukraine, which we view as temporary. We believe the favorable economics and margin expansion associated with market share gains from the IQOS brand and Reduced Risk Products should yield value creation opportunities in the years ahead. Furthermore, at current trading levels, we think the company’s operating leverage, pricing power, and free cash flow profile offer a margin of safety.”
7. Pernod Ricard SA (OTC:PDRDY)
Number of Hedge Fund Holders: 1
Gardner Russo & Quinn’s Stake Value: $663,341,993
Pernod Ricard SA (OTC:PDRDY) is a global producer and distributor of wines and spirits. Their product range includes whiskey, vodka, gin, rum, liqueur and bitters, champagne, tequila and mezcal, and aperitifs. Securities filings for Q1 2023 reveal that Tom Russo held 2.92 million shares of Pernod Ricard SA (OTC:PDRDY) worth $663.3 million, representing 6.88% of the total 13F holdings. According to Insider Monkey’s database, Gardner Russo & Gardner is the largest stakeholder of the company as of the first quarter of 2023.
6. Heineken N.V. (OTC:HEINY)
Number of Hedge Fund Holders: N/A
Gardner Russo & Quinn’s Stake Value: $752,797,641
Heineken N.V. (OTC:HEINY) is a beer and cider brewing company that operates across Europe, the Americas, Africa, the Middle East, Eastern Europe, and the Asia Pacific. The company also offers soft drinks and water. Established in 1864, Heineken N.V. (OTC:HEINY) has its headquarters in Amsterdam, the Netherlands. Securities filings for the first quarter of 2023 reveal that Tom Russo held 8.19 million shares worth $752.8 million, representing 7.81% of the total portfolio.
Like Alphabet Inc. (NASDAQ:GOOG), JPMorgan Chase & Co. (NYSE:JPM), and Visa Inc. (NYSE:V), Heineken N.V. (OTC:HEINY) is one of Tom Russo's top stock holdings as of the first quarter of 2023.
