Olstein’s investing philosophy prioritizes downside risk avoidance, and also focuses on companies with temporary problems creating a disjoint between their market price and business value, excess cash flow, and strategy success, quality earnings and sustainable performance brought to light through “forensic analysis of financial statements.”
Overall, the Olstein All-Cap Value Fund has 103 stocks, a total value of $508 million, a 23.4% weighting in its most-represented sector technology, and an 8% quarter-over-quarter turnover.
Ross Stores (ROST)
Up 15.9% over the last 12 months to $60.28 per share on Tuesday morning, Ross Stores’ share price toppled to within several dollars of its 52-week low in the fourth quarter, when Olstein made his purchase. Olstein bought 87,000 shares of the company for $58 per share on average.
It was a temporary dip after a years-long run-up, as demonstrated in the chart below:
Ross Stores, a Fortune 500 company, operates the nation’s largest off-price apparel and home fashion chain, with 1,097 locations in 33 states, the District of Columbia, and Guam.
In the company’s third quarter, net earnings grew 11% to $159.5 million, from $144 million the previous year. Sales increased 11% to $2.26 billion, with comparable store sales increasing 6%, outpacing the prior year’s 5% gain.
The company’s vice chairman and COE, Michael Balmuth, attributed the solid quarter to the company’s strategy of offering name-brand bargains and operating with lower inventories while controlling expenses, which has been leading to expanded profit margins.
Ross Stores has a P/E of 18.09, P/B of 7.83 and P/S of 1.46.
ROST data by GuruFocus.com
Charles River Laboratories International (CRL)
Olstein bought 123,000 shares of Charles River Laboratories for $39 per share on average in the fourth quarter. Its shares are up 21% over the past 12 months and trade for $40.99 per share Tuesday morning.
CRL’s business is to help companies accelerate the discovery, development and manufacture of new drugs and therapies.
Over the past five years, its revenue increased at a rate of 3.1%, while free cash flow grew at the robust rate of 35.5%.
In its third quarter statements which included increased revenue and earnings quarter over quarter, the company said it is strategizing how to help clients in a “pivotal” moment when drug companies are reinventing their business models, continue acquisitions and partnerships, and take market share in a tightly competitive sector.
Vishay Intertechnology (VSH)
Olstein bought 356,000 shares for $9 per share on average. The company’s stock had been on a mostly downward trend since late 2010 and was near its lowest level in roughly a year when Olstein purchased in the fourth quarter. Olstein’s new investment has gained 19% year to date and trades for $12.65 on Tuesday.
Vishay Intertechnology is a semiconductor and passive components company with a $1.81 billion market cap.
Its revenue in the past five years grew at a rate of 1%, as free cash flow increased at 27.4%. The past 12 months saw a steep decline in its results: Revenue declined 11%, EBITDA 35.2% and free cash flow 64.2%. Book value at the same time increased 8.3%.
It also saw declines in results in the fourth quarter of 2012 compared to the fourth quarter of 2011. Revenue was $530.6 million, compared to $551.4 million, and net earnings were $21 million, or $0.14 per diluted share, compared to $31 million, or $0.19 per diluted share.
The results were the lowest quarter of the company’s year as the world economy fluctuated, although the company produced $287 million in free cash flow in 2011, its 11th consecutive year of cash flow over $200 million. It also invested $150 million in capital expenditures to expand its business.
See Olstein’s portfolio here. Also check out the Undervalued Stocks, Top Growth Companies, and High Yield stocks of Robert Olstein.