Auxier Asset Management leader Jeff Auxier (Trades, Portfolio) released his first-quarter portfolio last week.
The guru’s Oregon-based firm seeks to invest in “compelling, undervalued” companies that have, among other attributes, strong or improving fundamentals, consistent operating results, a significant competitive advantage, understandable products and a demonstrated ability to earn a high return on capital.
Keeping these criteria in mind, Auxier’s top trades for the three months ended March 31 included a new position in Ingersoll Rand Inc. (IR, Financial), large reductions in his holdings of Oracle Corp. (ORCL, Financial) and America Movil SAB de CV (AMX, Financial) as well as a complete sale of J.M. Smucker Co. (SJM, Financial).
Ingersoll Rand
The guru invested in 9,163 shares of Ingersoll Rand, allocating 0.06% of the equity portfolio to the position. The stock traded for an average price of $31.97 per share during the quarter.
Originally part of Ingersoll-Rand PLC, the Irish diversified industrial manufacturing company was spun off and merged with Gardner Denver earlier this year. While the newly formed entity became Ingersoll Rand Inc., the original company was renamed Trane Technologies PLC (TT, Financial). Ingersoll Rand has an $11.98 billion market cap; its shares were trading around $28.86 on Thursday with a price-earnings ratio of 71.88, a price-book ratio of 0.91 and a price-sales ratio of 2.47.
The Peter Lynch chart shows the stock is trading above its fair value, suggesting it is overpriced.
GuruFocus rated Ingersoll Rand’s financial strength 4 out of 10 on the back of poor interest coverage and a low Altman Z-Score of 1.4, which indicates the company could be at risk of going bankrupt since it has recorded a decline in revenue per share over the past 12 months.
The company’s profitability scored a 5 out of 10 rating, driven by an expanding operating margin. Its returns, however, underperform over half of its competitors. Ingersoll Rand also has a moderate Piotroski F-Score of 4, which implies business conditions are stable.
Of the gurus invested in Ingersoll Rand, Andreas Halvorsen (Trades, Portfolio) has the largest stake with 2.88% of outstanding shares. Other top guru shareholders are Pioneer Investments (Trades, Portfolio), Mario Gabelli (Trades, Portfolio), NWQ Managers (Trades, Portfolio), Wallace Weitz (Trades, Portfolio), Joel Greenblatt (Trades, Portfolio), Robert Olstein (Trades, Portfolio) and Ken Fisher (Trades, Portfolio).
Oracle
With an impact of -1.01% on the equity portfolio, Auxier trimmed his position in Oracle by selling 102,209 shares. He now holds 15,153 shares total, which represent 0.18% of the total assets managed. Shares traded for an average price of $51.75 each during the quarter.
GuruFocus data shows the guru has gained an estimated 52.58% on the investment since the third quarter of 2012.
The California-based software company has a market cap of $116.13 billion; its shares were trading around $52.43 on Thursday with a price-earnings ratio of 16.56, a price-book ratio of 12.11 and a price-sales ratio of 4.47.
According to the Peter Lynch chart, the stock is trading near its fair value. The GuruFocus valuation rank of 5 out of 10 supports this assessment.
Oracle’s financial strength was rated 4 out of 10 by GuruFocus. While the company has adequate interest coverage, the Altman Z-Score of 2.18 suggests it is under some pressure since the Sloan ratio indicates it has poor earnings quality and assets are building up more quickly than revenue. The company also appears to have good profitability as its return on invested capital is almost triple the weighted average cost of capital.
The company’s profitability scored a 9 out of 10 rating. Even though the operating margin is in decline, it still outperforms a majority of industry peers. Oracle also has strong returns, a high Piotroski F-Score of 7, which means operations are healthy, and consistent earnings and revenue growth. It also has a business predictability rank of 2.5 out of five stars. GuruFocus says companies with this rank typically return an average of 7.3% per annum over a 10-year period.
With a 0.96% stake, First Eagle Investment (Trades, Portfolio) is the company’s largest guru shareholder. Fisher, Barrow, Hanley, Mewhinney & Strauss, Hotchkis & Wiley, PRIMECAP, Jeremy Grantham (Trades, Portfolio), Yacktman Asset Management (Trades, Portfolio), Richard Pzena (Trades, Portfolio), Sarah Ketterer (Trades, Portfolio), Pioneer, Chris Davis (Trades, Portfolio) and NWQ also have large positions in the stock.
America Movil
The investor sold 116,875 shares of America Movil, impacting the position by -37.03% and the portfolio by -0.35%. He now holds 198,744 shares, which represent 0.58% of the equity portfolio. The stock traded for an average per-share price of $15.67 during the quarter.
According to GuruFocus, Auxier has lost an estimated 32.06% on the investment since the fourth quarter of 2011.
The Mexican telecommunications company has a $42.32 billion market cap; its shares were trading around $12.85 on Thursday with a price-earnings ratio of 51.78, a price-book ratio of 4.16 and a price-sales ratio of 0.96.
Based on the Peter Lynch chart, the stock appears to be overvalued.
GuruFocus rated America Movil’s financial strength 3 out of 10. In addition to low interest coverage, the company is being weighed down by a weak Altman Z-Score of 1.07 that warns of the potential for bankruptcy. It also has poor profitability based on the ROIC being eclipsed by the WACC.
The company’s profitability scored an 8 out of 10 rating. Even though the operating margin is in decline, it outperforms a majority of competitors. America Movil also has strong margins and a moderate Piotroski F-Score of 4. Despite the fact it has recorded a slowdown in revenue per share growth over the past year, the company has a three-star business predictability rank. According to GuruFocus, companies with this rank typically return 8.2% per year on average.
Fisher is the company’s largest guru shareholder with 0.16% of its outstanding shares. Jim Simons (Trades, Portfolio)’ Renaissance Technologies, Charles Brandes (Trades, Portfolio), Pioneer and Dodge & Cox also own the stock.
J.M. Smucker
With am impact of -0.24% on the equity portfolio, Auxier sold his 12,233 remaining shares of J.M. Smucker. The stock traded for an average price of $106.89 per share during the quarter.
GuruFocus says he made an estimated gain of 3.58% on the investment.
The Orville, Ohio-based company, which makes a variety of jams, jellies and other food products, has a market cap of $12.26 billion; its shares were trading around $107.73 on Thursday with a price-earnings ratio of 19.63, a price-book ratio of 1.49 and a price-sales ratio of 1.59.
The Peter Lynch chart suggests the stock is overvalued. The GuruFocus valuation rank of 5 out of 10 leans more toward fairly valued.
J.M. Smucker’s financial strength was rated 4 out of 10 by GuruFocus. Although it has sufficient interest coverage, the Altman Z-Score of 1.74 warns it could be in danger of going bankrupt since its assets are building up at a faster rate than revenue is growing.
The company’s profitability scored an 8 out of 10 rating, driven by an expanding operating margin as well as strong returns that outperform over half of its competitors. Smucker also has a moderate Piotroski F-Score of 5 and a three-star business predictability rank, which is on watch as a result of slowing revenue growth.
John Rogers (Trades, Portfolio) is Smucker’s largest guru shareholder with a 0.97% stake. Other top gurus invested in the stock are Simons’ firm, Pioneer, Gabelli, Bernard Horn (Trades, Portfolio), Greenblatt, John Hussman (Trades, Portfolio), Ray Dalio (Trades, Portfolio), Paul Tudor Jones (Trades, Portfolio) and Ron Baron (Trades, Portfolio).
Additional trades and portfolio performance
During the quarter, Auxier also sold out of 15 other holdings and reduced or added to his positions in many more stocks, including Mastercard Inc. (MA, Financial), Becton, Dickinson and Co. (BDX), Lamb Weston Holdings Inc. (LW, Financial), The Kroger Co. (KR, Financial) and 58.com Inc. (WUBA, Financial).
About half of the guru’s $401 million equity portfolio, which is composed of 150 stocks, is invested in the health care and consumer defensive sectors, followed by a 17.59% holding in the financial services space.
GuruFocus data shows the Auxier Focus Fund returned 20.2% in 2019, underperforming the S&P 500’s 31.48% return.
Disclosure: No positions.
Read more here:
- Bill Ackman Adds 2 Stocks to Portfolio, Expands Agilent and Howard Hughes Stakes​
- David Rolfe Curbs Fastenal Holding, Buys 3 Stocks in 1st Quarter​
- Causeway's Sarah Ketterer Slashes Holdings of Oil Stocks, Buys Bottling Company
Not a Premium Member of GuruFocus? Sign up for a free 7-day trial here.
