On March 13, 2013, Guru Richard Perry of Perry Capital bought 6,500,000 shares of a new holding, CommonWealth REIT (CWH), at the current price $22.01, with a change from average up 1%. CommonWealth REIT is an office and industrial real estate investment trust that invests in commercial office buildings located in major metropolitan areas throughout the U.S. and in Australia.
According to Bloomberg today, the company is up against a campaign by its largest shareholders, Corvex Management LP and The Related Companies LP, to remove the board of directors. Corvex Management and Related Companies own around a 10% stake in CommonWealth REIT, and are interested in acquiring the real estate investment trust. Perry’s recent 13D filing says that Perry supports efforts to improve the company’s corporate governance.
GuruFocus did a financial and performance checkup on CWH and found that CommonWealth REIT displays poor financial strength, usually caused by too much debt. The company has an Altman Z-score of 0.75, meaning the distress zone. This usually implies the possibility of bankruptcy in the next two years. CWH also has a low Piotroski F-Score of 3, which usually implies poor business operation. Additionally, CommonWealth REIT revenue has been in decline for the last five years. The company’s operating margin has been in a 5-year decline, with an average rate of decline per year at 8.1%. Furthermore, CommonWealth REIT has issued new debt of $632.019 million over the past three years. Ben Graham prefers that companies' interest coverage is at least five; CommonWealth REIT's interest coverage is low at 1.4. The dividend payout of CommonWealth REIT is 2.38, which seems too high. (If a company's dividend payout ratio is too high, its dividend may not be sustainable.)
Other warnings are: CWH stock dividend yield (6.55%) is close to a 5-year low of 5.9%, and its P/S Ratio (1.8932) is close to one-year high of 1.97. CommonWealth REIT had an operating loss over the past three years.
CommonWealth REIT (CWH) has a market cap of $1.9 billion, and a P/B ratio of 0.62.
As of Dec. 31, 2012, Perry Capital has a portfolio of 24 stocks with a total value of $2.7 billion and a quarter-over-quarter turnover of 21%. Top industry sectors in the portfolio are energy, 28.4%, financial services, 21.2%, and consumer cyclical, 13%. Guru Perry has been called a hedge fund superstar. See Richard Perry’s portfolio here.
Richard Perry’s top buys, top sells, and top holdings:
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