Gayner’s portfolio has an equity value of $2.34 billion and contains 98 stocks. Gayner invests in stocks based on the worth of its present value of future cash flows. He also sums up what he looks for in any investment under four qualities: 1) a profitable business, 2) a solid management team, 3) good reinvestment opportunities such as positive returns on capital, and lastly, 4) a fair or better purchase.
The top sectors represented in Gayner’s portfolio are financials, industrials, consumer goods and consumer services. Its top three holdings to date are: CarMax Inc. (KMX) at 6.2 percent ownership, Berkshire Hathaway Inc. (BRK.A) at 6.1 percent ownership and Diageo PLC (DEO) at 6 percent ownership.
Below are three companies among the stocks of which he completely sold out in the third quarter that made the most impact to his portfolio: Western Union Co. (WCU), Marriott Vacations Worldwide Corp. (VAC) and Altria Group Inc. (MO).
Western Union Co. (WCU)
The transaction to sell all of Gayner’s Western Union Co. (WCU) shares impacted his portfolio by 0.30 percent.
Headquartered in Colorado, Western Union is involved in the business of money transfers, business services and commercial services.
Recently, Western Union’s market price underwent an eye-opening plunge, trading at about $17 on Oct. 30, and then dropping to about $12 the following day.
On the same day of the price drop, which also happened to be the day after fierce storm, Hurricane Sandy, wreaked havoc in the east coast, Western Union announced in a press release a series of disaster relief efforts.
The efforts included giving away $75,000 worth of grants to organizations supporting disaster relief efforts, enabling a “no transfer fee” program to all of its consumers available through Nov. 30, and a donation initiative through the Western Union Foundation that matched all U.S.-based employee donations to the foundation worth $2 for every $1.
WU data byGuruFocus.com
In Western Union’s latest quarterly report dated Oct. 30, the company announced pretty positive gains for its third quarter. Western Union reported a 1 percent revenue increase, an earnings per share of $0.45 compared to the $0.38 in the prior year, and an EBITDA margin of 30.7 percent compared to 30 percent flat in the same period last year.
“In the third quarter…business was challenging, as soft global economic conditions, compliance-related changes and competitive pressures in certain money transfer corridors impacted revenues,” Western Union president and chief executive officer, Hikmet Ersek said in the release. “We continue to generate strong cash flow, and year-to-date we have now returned $600 million to shareholders through share repurchase and dividends.”
Ersek also spoke of three key areas that the company will specifically focus on in strategic actions for improvement: consumer value proposition, digital channels and cost optimization.
Gayner reported to owning 390,000 Western Union Shares in the second quarter, before selling all of them recently. This was his first sell of company shares since acquiring it in the fourth quarter of 2010.
Western Union is currently trading at $12.55 per share, almost up 2 percent today, with a market cap of $10.82 billion. It has a Financial Strength rank of 5 out of 10, a Profitability & Growth rank of 7 out of 10 and two Severe Warning signs that reveal severe cash flow divergence and a possibility that the company is losing efficiency.
Marriott Vacations Worldwide Corp. (VAC)
Gayner’s transaction to sell all of his shares of Marriott Vacations Worldwide Corp.(VAC) affected his portfolio by 0.19 percent.
Gayner only acquired Marriott Vacations in the first quarter of this year, starting off with 133,877 shares. Gayner then reduced 762 shares in the second quarter before completely selling all 133,115 shares recently.
As a global hospitality resort chain, Marriott Vacations operates under three brands: Marriott Vacation Club, The Ritz-Carlton Destination Club and Grand Residences by Marriott.
Marriott Vacations stocks are currently trading at $37.49 per share. While its stock is down three percent for today, Marriott’s stock price is trading near its five-year high of about $40; around the same time last year, Marriott stocks were only selling for $17 per share.
In October, the company released its third quarter financial results, which ended Sept. 7.
As the company nears its first full year as a separate public company after announcing its spin-off from Marriott International Inc.(MAR) in November 2011, it reported organizational costs of $33 million in adjusted earnings before taxes, depreciation and amortizations (EBITDA), a $17 million increase compared to the same period last year.
Additionally, the company’s North American contract sales increased 13 percent compared to year-over-year data, as well as experienced an increase in adjusted net income by $5 million.
Stephen Weisz, president and chief executive officer says the company expects to drive $15 million to $20 million of annualized cost saving by 2014, in connection with its separation efforts from Marriott International and scheduled evaluation of Marriott Vacations’ organizational structure.
“Our strong third quarter performance continues to underscore the successful execution of our top-line growth and margin expansion strategies,” he said. “Given three consecutive quarters of strong performance and positive outlook for the fourth quarter, we are raising our full year Adjusted EBITDA as adjusted guidance to $130 million, to $140 million from 115 million, to $125 million.”
Marriott Vacations has a market cap of $1.33 billion, a P/E (ttm) ratio of 43.1, a P/B ratio of 1.1 and a P/S ratio of 0.8. Its two Severe Warning signs denote an low Altman Z-score and a low interest coverage, and its one Medium Warning sign highlights its price being close to its 52-week high.
Altria Group Inc. (MO)
Gayner’s decision to sell all of his shares of Altria Group Inc. (MO) impacted his portfolio by 0.19 percent.
Altria Group is the parent company of several tobacco and wine brands such as Phillip Morris USA, John Middleton, U.S. Smokeless Tobacco Co., John Middleton, Ste. Michelle Wine and Nu Mark.
It’s currently trading at $31.50 per share and is currently down 1.41 percent for the day.
Altria announced its third quarter results in Oct. 25, which focused solely on shareholder returns.
While its diluted earnings per share for the quarter decreased 43.9 percent compared to the same period last year, its nine-month reported diluted earnings per share increased 22.8 percent.
Additionally, Altria chairman and chief executive officer, Marty Barrington, announced an expansion of the company’s already $1 billion share repurchase program.
“Altria delivered solid financial results for the third quarter and first nine months of 2012 while taking steps to strengthen its ability to create shareholder value in the future,” he said. “The business performance of our operating companies enabled us to increase our already strong cash returns to shareholders…Altria increased its dividend by 7.3% and repurchased over $260 million of our stock in the third quarter. Today, we are announcing a $500 million expansion of our $1.0 billion share repurchase program."
Gayner’s holding history with Altria spans back since the third quarter of 2003.
GuruFocus gives Altria a Financial Strength of 6 out of 10 and a Profitability & Growth rank of 5 out of 10.
Its two Good Signs indicate an expanding operating margin and a low P/E ratio. In contract, its two Severe Warning signs indicate that its revenue has been in decline for the last five years and a cash flow experiencing severe divergence. Its Medium Warning sign denotes that its dividend pay out ratio is too high and may not be sustainable.
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