Whole Foods-Amazon deal — which funds have the biggest stakes in the merger

Some of the funds with the biggest shares in Whole Foods as a percentage of assets aren't household names

Jun 16, 2017 @ 1:41 pm

By John Waggoner

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(Bloomberg)

Shares of Whole Foods Markets (WFM) soared 29% Friday on the news that Amazon (AMZN) would buy the company for $13.7 billion, but some of the funds — other than Vanguard — with the biggest stakes in the merger aren't exactly household names.

Vanguard Midcap Index (VMCIX) had the most Whole Foods shares, according to Mornignstar: The fund held 7,784,409 shares. The runner-up was Vanguard Total Stock Market Index (VTSMX), with 7,121,514. But those stakes won't move the funds' needle very far. Whole Foods was just 0.32% of the Vanguard Midcap Index funds' portfolio, and 0.05% of the Vanguard Total Stock Market Index fund's portfolio.

But a few small funds took big stakes in Whole Foods, most notably the $75 million Tarkio fund (TARKX), whose 169,325 shares accounted for 8.5% of the fund's assets. The fund looks for stocks of companies with "Integrity, long-term focus, purpose and passion, teamwork, co-operation, disciplined capital allocation," said Russ Piazza, the fund's portfolio manager. "Whole Foods is a perfect match."

The fund, named after a canyon in the Clark Fork River in Missoula, Mont., was started in 2011, although Mr. Piazza had been buying Whole Foods stock since 2006. "We rarely sell, but we buy only during times of stress." And, while he's happy about the Amazon purchase, the all-cash deal does mean a tax hit for shareholders, he said. The mid-cap growth fund carries a five-star rating from Morningstar.

The second-largest holder was the Deep Value ETF (DVP), which had 8.45% of its assets in Whole Foods. The $93 million ETF looks at companies in the Standard & Poor's 500 stock index that have positive earnings and returns on invested capital, generate free cash flow, and currently pay a dividend. The remaining companies are then evaluated based on valuation metrics. The fund jumped 1.42% at midday Friday.

A few larger funds also had significant stakes in Whole Foods. Parnassus Endeavor Investor (PARWX), which also looks carefully at how companies treat employees, had 2.9 million shares, or 2.46% of its portfolio, in Whole Foods. Parnassus Mid-Cap (PARMX) had nearly 1.2 million shares, or 1.7% of its portfolio, in the grocer. And Neuberger Berman Long Short (NLSAX) had 2.4 million shares, or 4.4% of its portfolio, in Whole Foods.

Amazon's purchase of Whole Foods is its biggest yet, and overshadowed the announcement of WalMart's (WMT) purchase of privately owned Bonobo for $310 million. Amazon's stock rose more than 3% on the news.

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