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What Gurus Are Selling

Holly LaFon

Holly LaFon

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In the last several weeks, three hedge and mutual fund managers sold shares of their holdings where they own 5% or more of the company, according to GuruFocus Real Time Picks. Most of the managers made large gains on these sales, with one exception. John Paulson reduced his stake in Delphi (DLPH), Third Avenue reduced its stake in Skyline Corp. (SKY),and NWQ Managers reduced its stake in PrivateBancorp (PVTB) and Bob Evans Farms (BOBE). John Paulson and Delphi Auto Plc (DLPH)

John Paulson, president and portfolio manager of Paulson & Co., on March 5 sold 1,107,123 shares of Delphi, with a total value of $35,029,397. Then on March 14, he sold 3,295,997 shares, valued at $104,746,784. He still owns 14.42% of the company. These trades add to the fortune Paulson is making on the company.

Delphi, a GM spin-off, was once in nation’s largest auto supplier until it filed for Chapter 11 bankruptcy in 2005. Four years later, it exited bankruptcy when a group of its lenders and GM bought most of its assets, and lenders forgave some of its debt.

The company launched its $530 million IPO in November 2011, selling 24.1 million shares at $22. At that point, Paulson owned 22% of the company’s shares. He obtained the shares by converting debt to equity during the company’s bankruptcy at $22 per share, MarketWatch reports. At the time of the IPO, he sold 20,590,909 shares for a total $453 million payday on his $14 million investment.

Since November, Delphi stock has appreciated 50%, and Paulson still has 47,334,758 shares. If he sold them all on Friday, he would make $1.4 billion.

Third Avenue and Skyline Corp. (SKY)

On March 12, Third Avenue Management sold 55.7% of its stake in Skyline Corp. for a total value of $3,394,689. It now has 361,805 shares, or 4.31% of the company.

Third Avenue incurred a loss on Skyline. The firm has had the stock since before the second quarter of 2009 after it had been sliding for several years. That quarter, Third Avenue bought it for roughly $20 per share. Since 2009 its stock price has declined 60% and the firm has been mostly selling its shares since then. The stock closed at $7.98 per share on Friday.

Third Avenue Management was founded by legendary value investor Martin Whitman and manages mutual funds, separate accounts and hedge funds. Third Avenue managers believe that the current balance sheet rather than projected future figures are the best measure of a company’s value. Companies they invest in are also usually cheap and safe.

Skyline makes manufactured housing and recreational vehicles. Its revenue per share has been declining at a rate of 13.2% over the last 10 years, and 23.2% in the last 5 years. The company has been operating at a loss since 2008, and EBITDA and free cash flow has been negative since 2007.

NWQ Managers and PrivateBancorp (PVTB) Bob Evans Farms (BOBE)

On February 29, NWQ reduced its stake in PrivateBancorp (PVTB) by 28.48%. At $14.50 per share, the total value of the sale was $18.8 million. It now owns 3,253,454 shares or 4.49% of the company. NWQ initiated its holding in PrivateBancorp in the fourth quarter of 2009 with 4,334,692 shares at an average price of $12.15. It sold shares as the price rose during 2010, and added 2,008,454 shares in the third quarter of 2011 when its price dropped to an average of $10 per share. On Friday, the stock is trading near $15 per share.

PrivateBancorp is a small, regional bank based in Chicago. After its stock fell to a 52-week low of $6.44 in late 2011, its 2011 fourth-quarter and full-year results helped push it up 38% to $15 in 2012. After losses in 2008 and 2009, PVTB’s earnings increased from $1.5 million in 2010 to $44.4 million in 2011. Return on equity increased from 0.1% in 2010 to 3.4% in 2011, and return on assets increased from zero to 0.4%. The company also reported that total loans increased 4% from the third quarter and non-performing loans decreased 15 percent in the fourth quarter.

The stock is also increasingly expensive. Its P/E was near 17 to 20 when the fund bought it in the fourth quarter of 2009 and on Friday reached 35.3.

Also on February 29, NWQ Management reduced its holding in Bob Evans Farms by 4.09%, for a value of $2,254,478. It still has 1,438,160 shares, or 4.89% of the company.

NWQ first bought Bob Evans Farms in the second quarter of 2007 at an average price of $38 per share. The fund has bought and sold shares frequently since then on price fluctuations. It sold shares in the previous two quarters as the stock’s price increased 25% over the past years.

Bob Evans Farms is a restaurant and retail food products company that owns restaurants under the Bob Evans and Mimi Café brand names. NWQ’s stock price has been increasing since it was cut nearly in half in the financial crisis of 2008. The company’s sales have been flagging since 2009, and after a loss in 2009, earnings declined from $70.3 million in fiscal 2010 to $54.2 million in fiscal 2011. Margins were also squeezed as the company experienced 35.5 percent year-over-year increase in sow costs and overall higher commodity costs.

For 2012, the company expects to experience a bevy of headwinds including rising commodity costs, higher gas prices and an overall challenging consumer environment. In response, management hopes to achieve results with better supply-chain management and actual-versus-theoretical food cost program, as well as higher top-line growth.

The company expects earnings per share of $2.36 to $2.44 for fiscal 2012, up from the $1.79 it achieved in fiscal 2011. It also expects 7 to 10 percent earnings growth over the next five years.

To see more stocks bought and sold by gurus, go to GuruFocus Real Time Picks.


Rating: 2.3/5 (7 votes)

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