In the third quarter of 2013, Ruane, Cunniff & Goldfarb Inc. reduced its Mohawk Industries Inc. (MHK) position by 18.98%, with current shares remaining at over 3 million or 4.25% of shares outstanding. Because four gurus sold out their MHK in the second quarter and four increased, here’s a company update to sort out why the billionaire investors are so divided on this well-known flooring company.
Guru: Ruane, Cunniff & Goldfarb Inc.
Mohawk Industries Inc. (MHK): Reduced
Impacts Portfolio: -0.58%
Up 53% over 12 months, Mohawk Industries Inc. has a market cap of $9.01 billion; its shares were traded at around $124.21 with a P/E ratio of 32.30.
Mohawk Industries Inc. is a producer of floor covering products for residential and commercial applications in the U.S. and Europe. The company is a carpet and rug manufacturer; and manufacturer, marketer and distributor of ceramic tile, natural stone and hardwood flooring in the U.S., and a producer of laminate flooring in the U.S. and Europe.
Mohawk is a well-respected name in flooring but the company’s revenue has been in decline for the last five years, and its price, PB ratio and P/S ratio are all hitting close to a 10-year high, according to GuruFocus warning signs.
The company reported financial results for the second quarter of 2013 with net sales up 35% year over year at $2 billion. The company’s net earnings of $85 million for the quarter translated to $1.16 in diluted earnings per share. For the six –month period ending June 29, 2013, net sales were also up by 20% over the same quarter of last year, at $3.5 billion. Mohawk’s carpet segment net sales were reported at $771 million, reflecting a 5% increase, year over year.
Mohawk’s chairman and CEO Jeffrey S. Lorberbaum, commented in a company press release: “Mohawk, the world's largest flooring manufacturer, today reported our most successful second quarter on record with strong revenue and profit growth, as both our legacy business and recent acquisitions delivered solid performances that exceeded our expectations. For the quarter, our legacy net sales increased 6% as reported, with the balance of our growth stemming from our recent acquisitions of Pergo, Marazzi and Spano. Our adjusted SG&A improved by 110 basis points due to continuing control of our costs, and our adjusted operating income rose to 10% of sales, an improvement of 190 basis points.”
Guru Action: In the third quarter, long-time Mohawk stakeholder, Ruane Cunniff reduced its position by 18.98%, selling shares at an average price of $117.49 per share. Current shares remain at 3,085,475.
Check out this remarkable trading history of gains:
Across a five-year trading history, Ruane, Cunniff & Goldfarb Inc. has averaged a gain of 166% on 345,649 shares bought at an average price of $46.72 per share. The firm has also averaged a gain of 79% on 9,196,914 shares sold at an average price of $69.36 per share.
Track historical pricing, revenue and net income:
More Guru Action: As of the second quarter of 2013, four gurus sold out, including Ray Dalio, Tom Russo, Ken Heebner and John Burbank. Steven Cohen chopped his MHK by 58.24%, whereas Jeremy Grantham made a new buy of 10,800 shares in the same quarter, and three more gurus increased their positions.
Check out the trading histories of all the gurus holding MHK along with very active insider selling in 2013.
Ruane, Cunniff & Goldfarb Inc. and the Sequoia Fund, Inc. (SEQUX), a mutual fund, were founded by the late William Ruane, a superinvestor recognized by Warren Buffett. Richard T. Cunniff directs the current investment committee.
As of Sept. 10, 2013, the portfolio of Ruane Cunniff lists 148 stocks, 13 of them new, with a total value of $15.5 billion, and a quarter-over-quarter turnover of 1%. The portfolio’s top three sector weightings are healthcare at 26.8%, financial services at 22.4% and consumer cyclical at 21.4%.
Check out Ruane Cunniff’s complete portfolio.
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