Michael Dell, founder of Dell Computers (DELL, Financial) and one of the top 50 wealthiest people in the world, manages his portfolio through his MSD Capital fund. The investment firm focuses on publicly-traded securities, traditional private equity activities, real estate and other assets in order to create long-term capital appreciation. On the public equity side, MSD Capital searches for businesses that have sustainable long-term competitive advantages with competent management teams. It places a high emphasis on a company's net free cash flow as well as a business's absolute value, ignoring relative comparisons to competitors or general stock market indices. This past week, MSD Capital sold out its Class A shares of Journal Communications Inc. (JRN) and increased its holdings of Energy XXI Ltd. (EXXI) by 113.14%.
Journal Communications Inc. (JRN)
MSD Capital added Journal Communications Class A to its portfolio as recently as the fourth quarter of 2010, when they bought 3,771,609 shares of the company for an average price of $4.76. The fund added 157,800 more shares in the first quarter of 2011 at an average price of $5.35. Recently, MSD Capital sold out all 3,929,409 of its shares of Journal Communications for a price of $4.95, yielding a 3.5% return on its total investment.
Journal Communications Inc. is a diversified media and communications company with operations in newspaper publishing, radio and television broadcasting, telecommunications and printing services. In addition, they operate a label printing business and a direct marketing services business.
According to their first quarter results for 2011, Journal Communications had a 6.2% decrease in revenue year-over-year down to $83.9 million. Operating earnings decreased by 35.8% to $6 million and net earnings decreased by 36.4% to $3.4 million. Earnings per share both basic and diluted have decreased from $.09 to $.05. These decreases have been a result of a number of factors, including a decrease in retail and classified advertising revenue as well as an increase in the price per ton of newsprint. For the second quarter, the company expects publishing revenues to continue to lag behind previous years' numbers due to continued declines in publishing advertising revenues.
Currently the stock is trading at a P/E ratio of 9.49 and a P/S ratio of .7. Quarterly sales per share has steadily decreased over the past six years and now stands at a near-historic low of 1.52.
On 7/12/2011, Journal Communications announced a share repurchase program of up to $45 million of its outstanding Class A common stock and/or class B common stock until the end of 2013 through the open market and/or in private transactions based on market conditions and other factors. According to Executive Vice President and CFO Andre Fernandez, "While debt reduction remains our primary use of cash, this share repurchase authorization provides us with the flexibility both to offset the dilutive impact of employee incentive compensation plans and to repurchase shares opportunistically." As of 6/30/2011, there were 44.7 million shares of class A and 7.3 million shares of class B common stock outstanding.
Energy XXI Ltd. (EXXI)
Energy XXI paid off extremely well for Dell's portfolio. His fund first purchased over 10 million shares when the stock traded for an average price of $0.61 in the second quarter of 2009. He later bought another 12 million shares in the fourth quarter of 2009 when the stock rose to an average of $2.05. When EXXI prices shot up in the start of 2010, Dell sold nearly 19 million shares of the company at a price of $17.19, netting him a whopping return upwards of 2700% on his initial purchase. As the company's stock continued to increase, Dell bought another 2.5 million shares at an average price of $24.84 and then sold them at an average price of $30.83 last quarter, earning another 24% return. Recently, he again increased his holdings in the company by 113.14% for $33.32 per share, giving him a total now of 4,583,528 shares in the company.
Energy XXI is an independent oil & natural gas exploration and production company whose growth strategy emphasizes acquisitions, enhanced by its value-added organic drilling program. The company targets mature oil-producing assets on the Gulf of Mexico shelf and then develops the acquired properties through production optimization and low-risk drilling. It also pursues a complementary exploration program designed to provide organic growth for the future.
According their latest quarterly results, revenues for Energy XXI Limited grew 72% from $150 million to $258.6 million, spurred in large part by strong growth in oil sales. Net income grew 66% from $11 million to $18 million. Free cash flow stands at $84.75 million, improving on last year's $67.3 million gain as well as last quarter's $65.6 million loss. According to Chairman and CEO John Schiller, "Energy XXI clearly is benefiting from the transformational acquisition of ExxonMobil Gulf of Mexico (XOM, Financial) shelf assets in December 2010. Increased production and cash flow drove continued balance sheet strengthening, with an $80 million reduction in debt during the quarter." Long-term debt less current maturities on the balance sheet represents $1.23 billion of a total $2.05 billion in liabilities.
Currently the stock trades at a P/E ratio of 52.34, a number that has been climbing since October of 2008 and is at a near peak. The same holds true for the stock's P/S ratio, which at 2.93 also represents a near historic high.
As alluded to earlier, towards the end of 2010, Energy XXI purchased $1 billion of declining oil and gas properties from ExxonMobil in the Gulf of Mexico that doubled the size of the company. On 6/16/2011, Energy XXI announced that it has been granted operatorship of two oil fields obtained in the Exxon Mobil acquisition. According to Schiller, "Gaining control of these fields allows us to move forward with our production optimization and capital programs."
On 5/12/2011, Energy XXI announced that it has agreed to sell a number of non-core, mostly non-operated onshore natural gas assets to a private buyer for $41 million in cash.
This is part of GuruFocus Real Time Picks report, which reports the stock trades of Gurus within the last few days. For more information, go to Real Time Picks.
Journal Communications Inc. (JRN)
MSD Capital added Journal Communications Class A to its portfolio as recently as the fourth quarter of 2010, when they bought 3,771,609 shares of the company for an average price of $4.76. The fund added 157,800 more shares in the first quarter of 2011 at an average price of $5.35. Recently, MSD Capital sold out all 3,929,409 of its shares of Journal Communications for a price of $4.95, yielding a 3.5% return on its total investment.
Journal Communications Inc. is a diversified media and communications company with operations in newspaper publishing, radio and television broadcasting, telecommunications and printing services. In addition, they operate a label printing business and a direct marketing services business.
According to their first quarter results for 2011, Journal Communications had a 6.2% decrease in revenue year-over-year down to $83.9 million. Operating earnings decreased by 35.8% to $6 million and net earnings decreased by 36.4% to $3.4 million. Earnings per share both basic and diluted have decreased from $.09 to $.05. These decreases have been a result of a number of factors, including a decrease in retail and classified advertising revenue as well as an increase in the price per ton of newsprint. For the second quarter, the company expects publishing revenues to continue to lag behind previous years' numbers due to continued declines in publishing advertising revenues.
Currently the stock is trading at a P/E ratio of 9.49 and a P/S ratio of .7. Quarterly sales per share has steadily decreased over the past six years and now stands at a near-historic low of 1.52.
On 7/12/2011, Journal Communications announced a share repurchase program of up to $45 million of its outstanding Class A common stock and/or class B common stock until the end of 2013 through the open market and/or in private transactions based on market conditions and other factors. According to Executive Vice President and CFO Andre Fernandez, "While debt reduction remains our primary use of cash, this share repurchase authorization provides us with the flexibility both to offset the dilutive impact of employee incentive compensation plans and to repurchase shares opportunistically." As of 6/30/2011, there were 44.7 million shares of class A and 7.3 million shares of class B common stock outstanding.
Energy XXI Ltd. (EXXI)
Energy XXI paid off extremely well for Dell's portfolio. His fund first purchased over 10 million shares when the stock traded for an average price of $0.61 in the second quarter of 2009. He later bought another 12 million shares in the fourth quarter of 2009 when the stock rose to an average of $2.05. When EXXI prices shot up in the start of 2010, Dell sold nearly 19 million shares of the company at a price of $17.19, netting him a whopping return upwards of 2700% on his initial purchase. As the company's stock continued to increase, Dell bought another 2.5 million shares at an average price of $24.84 and then sold them at an average price of $30.83 last quarter, earning another 24% return. Recently, he again increased his holdings in the company by 113.14% for $33.32 per share, giving him a total now of 4,583,528 shares in the company.
Energy XXI is an independent oil & natural gas exploration and production company whose growth strategy emphasizes acquisitions, enhanced by its value-added organic drilling program. The company targets mature oil-producing assets on the Gulf of Mexico shelf and then develops the acquired properties through production optimization and low-risk drilling. It also pursues a complementary exploration program designed to provide organic growth for the future.
According their latest quarterly results, revenues for Energy XXI Limited grew 72% from $150 million to $258.6 million, spurred in large part by strong growth in oil sales. Net income grew 66% from $11 million to $18 million. Free cash flow stands at $84.75 million, improving on last year's $67.3 million gain as well as last quarter's $65.6 million loss. According to Chairman and CEO John Schiller, "Energy XXI clearly is benefiting from the transformational acquisition of ExxonMobil Gulf of Mexico (XOM, Financial) shelf assets in December 2010. Increased production and cash flow drove continued balance sheet strengthening, with an $80 million reduction in debt during the quarter." Long-term debt less current maturities on the balance sheet represents $1.23 billion of a total $2.05 billion in liabilities.
Currently the stock trades at a P/E ratio of 52.34, a number that has been climbing since October of 2008 and is at a near peak. The same holds true for the stock's P/S ratio, which at 2.93 also represents a near historic high.
As alluded to earlier, towards the end of 2010, Energy XXI purchased $1 billion of declining oil and gas properties from ExxonMobil in the Gulf of Mexico that doubled the size of the company. On 6/16/2011, Energy XXI announced that it has been granted operatorship of two oil fields obtained in the Exxon Mobil acquisition. According to Schiller, "Gaining control of these fields allows us to move forward with our production optimization and capital programs."
On 5/12/2011, Energy XXI announced that it has agreed to sell a number of non-core, mostly non-operated onshore natural gas assets to a private buyer for $41 million in cash.
This is part of GuruFocus Real Time Picks report, which reports the stock trades of Gurus within the last few days. For more information, go to Real Time Picks.
