Milwaukee-based Westport Asset Management reported its portfolio updates for the third quarter that ended Sept. 30, a short list containing only one reduction and one complete sell of all its shares of one company, in addition to three increases in current shareholdings and one new holding – six transactions in total.
The two companies in which Westport sold its shares are Fossil Inc. (FOSL) and General Communication Inc. (GNCMA). Both companies are ranked 4.5 out of 5 stars in Business Predictability on GuruFocus, as well as ranked 9 out of 10 in Profitability and Growth.
Focusing on companies that are selling lower than its intrinsic value, Westport describes its investment approach as a modified version of the classic bottom-up approach, combining “low valuation, a value attribute, with improving earnings and cash flow, a growth attribute,” as explained on its website.
The logic behind the combination is the anticipation to reduce downside risk as capital appreciates and stocks gain value.
On its website, Westport also lists two reasons for deciding to sell a security: one, if a negative change in the company’s fundamentals has occurred since Westport’s initial analysis, and two, if a stock reaches a pre-determined price objective.
Fossil Inc. (FOSL)
As of the third quarter, Westport sold out its shares of Texas-based consumer accessories and clothing company, Fossil (FOSL).
Fossil is trading at $82.07 per share, a value higher than its intrinsic value (DCF) of $47.73, but also significantly lower than its trading price in May, when its stocks underwent a significant drop after Fossil announced its acquisition of accessory brand, Skagen Designs Ltd., and also the continuation of the company’s $750 million stock repurchase plan; so far, Fossil has reported to repurchasing about $646 million of its common stock in its third quarter results, or about 8.5 million shares since the company originally announced the repurchase plan in August 2010.
Compared to fellow watch producers Guess (GES) and Movado (MOV), Fossil reveals a positively expanding operating margin trend line, which indicates efficiency; however, Fossil is trading about $60 more than its counterparts.
Fossil has a market cap of $5.31 billion and a strong Financial Strength of 9 out of 10.
Besides Fossil, there is only one other fashion stock in Westport’s portfolio: infant and children apparel retailer, Carter’s Inc. (CRI).
General Communications Inc. (GNCMA)
General Communications Inc. (GNCMA) is an information technology company that also enables the integration of audio and video within its services.
As of the end of the third quarter, Westport Asset Management reported to decreasing its shares of General Communications by 35.76 percent.
Ever since its holdings history with General Communications started in the fourth quarter of 2011, Westport’s transactions only consisted of reductions and zero purchases.
General Communications shows a weak 4 out of 10 Financial Strength rank on GuruFocus, showing a significant growing presence of long-term debt compared to its ability to pay off.
Westport’s ownership of General Communications stands at 0.33 percent.
Technology makes up the second largest sector represented in Westport’s portfolio, besides industrials and consumer services. Westport’s largest tech holding is Synopsys (SNPS) at 5.4 percent ownership and Parametric Technology Corp. (PMTC) at 2.3 percent ownership.
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