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Kyle Bass’ Top Five Third Quarter Stocks

November 19, 2013 | About:
Monica Wolfe

Monica Wolfe

133 followers
Kyle Bass is the founder as well as principal of Hayman Capital Management, a Dallas-based hedge fund. The guru is known for successfully predicting and benefiting from the subprime mortgage crisis as well as for his prediction of the European sovereign-debt crisis and his expectations for Japan’s economic future.

Over the past quarter Kyle Bass had a busy quarter, selling out of one company and buying in to eight. As of the close of the third quarter, Bass holds on to 14 stocks valued at $408 million. The following five companies are Bass’ top five portfolio holdings. Of the Bass’s top five positions only one is not a new position for the guru.

PennyMac Mortgage Investment Trust (PMT)

The guru’s largest position is in PennyMac Mortgage Investment Trust where he holds on to 3,570,000 shares of the REIT’s stock. His position makes up for 19.8% of his total portfolio and 5.07% of the company’s shares outstanding.

This was a new buy for the guru over the past quarter. Bass purchased his 3.5 million shares in the third quarter price range of $20.39 to $23.52, with an estimated average quarterly price of $21.84 per share. From this average the price per share has gone up approximately 2.2%.

Bass’ historical holding history:

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PennyMac is a recently-formed finance company that invests mainly in residential mortgage loans and mortgage-related assets. The company's objective is to provide attractive risk-adjusted returns to its investors over the long-term, mainly through dividends and secondarily through capital appreciation.

PennyMac’s historical revenue and net income:

1384814388205.png

The analysis on PennyMac reports that the company has issued $2 billion of debt over the past three years, its revenue has been in decline over the past three years and its dividend yield is near a 1-year high. It also notes that the company’s P/E and P/B ratios are near historical lows.

Top guru shareholders of PennyMac:

1. Kyle Bass: 3,570,000 shares, representing 5.07% of the company’s shares outstanding.

2. Leon Cooperman: 2,175,170 shares, representing 3.09% of the company’s shares outstanding.

3. Chuck Royce: 492,100 shares, representing 0.7% of the company’s shares outstanding.

PennyMac Mortgage Investment Trust has a market cap of $1.57 billion. Its shares are currently trading at around $22.25 with a P/E ratio of 7.10, a P/S ratio of 3.00 and a P/B ratio of 1.00. The company’s dividend yield is currently at 10.30%.

Tempur Sealy International (TPX)

The guru’s second largest position goes to Tempur Sealy where he holds on to 1,327,256 shares of the company’s stock. His holdings in the company represent 14.3% of his total portfolio as well as 2.20% of the company’s shares outstanding.

Over the duration of the third quarter Bass added 287.17% to his holdings. The guru purchased an additional 984,445 shares in the quarterly price range of $36.16 to $46.93, with an estimated average quarterly price of $41.52 per share. Since his buy the price per share has increased an additional 12.1%.

Bass’ historical holding history:

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Tempur Sealy International is a global manufacturer, marketer and distributor of premium mattresses and pillows, which it sells globally in 80 countries under the TEMPUR(r) and Tempur-Pedic(r) brands. It sells its mattresses and pillows through four distribution channels: retail, direct, healthcare and third party distributors.

Tempur Sealy’s historical revenue and net income:

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The analysis on Tempur Sealy reports that the company’s price is near a 1-year high, its operating margin is continually expanding and its P/E ratio is at a 10-year high.

Top guru shareholders of Tempur Sealy:

1. Steven Cohen: 1,641,262 shares, representing 2.72% of the company’s shares outstanding.

2. Kyle Bass: 1,327,256 shares, representing 2.2% of the company’s shares outstanding.

3. David Einhorn: 1,150,000 shares, representing 1.9% of the company’s shares outstanding.

The Peter Lynch Chart suggests that the company is currently overvalued:

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Tempur Sealy International has a market cap of $2.8 billion. Its shares are currently trading at around $46.37 with a P/E ratio of 38.50, a P/S ratio of 34.00. The company had an annual average earnings growth of 16.70% over the past ten years.

J.C. Penney Co. (JCP)

Kyle’s fourth largest position is in the struggling J.C. Penney where he holds on to 5,687,516 shares of the company’s stock. The guru’s holdings make up for 12.3% of his total holdings as well as 2.58% of Penney’s total shares outstanding.

During the third quarter Bass bought in to the company. He bought these near 5.7 million shares in the quarterly price range of $8.80 to $17.67, with an estimated average quarterly price of $14.26. Since then the price per share has plummeted an additional -36.7%.

The guru’s historical holding history:

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J.C. Penney is one of the nation’s largest apparel and home furnishing retailers. According to their website they are “undergoing a resurgence to become America’s preferred retail destination for unmatched style, quality and value.”

J.C. Penney’s historical revenue and net income:

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J.C. Penney has really been struggling as of late, and is trying several tactics to help rebrand the company. The company recently announced that they would be launching a Disney Shop inside of 565 of their stores nationwide.

The analysis on J.C. Penney reports that the revenue has been in decline for the past 5 years, its P/S and P/B are trading at historical lows and its price is at a 10-year low.

J.C. Penney has a market cap of $2.65 billion. Its shares are currently trading at around $8.69 with a P/S ratio of 0.20 and a P/B ratio of 0.90.

Microsoft Corporation (MSFT)

Bass also bought into Microsoft Corporation this quarter making it his fourth largest position. The guru holds on to 1,500,000 shares of the company’s stock, representing 12.2% of the company’s shares outstanding and 0.02% of the company’s shares outstanding.

Bass purchased these shares in the third quarter price range of $31.20 to $36.27, with an estimated average quarterly price of $32.90 per share. Since then the price per share has increased approximately 15%.

Bass’ historical holding history:

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Microsoft develops, manufactures, licenses and supports a wide range of software products and services for many different types of computing devices.

Microsoft’s historical revenue and net income:

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The analysis on Microsoft reports that the company’s price is near a 10-year high, its gross and operating margins have been in a 5-year decline and its interest coverage is comfortable, meaning they have enough cash to cover all debt. The company has also shown predictable revenue and earnings growth.

Top guru shareholders of MSFT:

1. Dodge & Cox: 86,524,349 shares, representing 1.04% of the company’s shares outstanding.

2. Jeff Ubben: 66,865,530 shares, representing 0.8% of the company’s shares outstanding.

3. PRIMECAP Management: 62,747,091 shares, representing 0.75% of the company’s shares outstanding.

The Peter Lynch chart shows that Microsoft currently appears to be undervalued:

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Microsoft has a market cap of $310.55 billion. Its shares are currently trading at around $37.20 with a P/E ratio of 14.00, a P/S ratio of 4.00 and a P/B ratio of 3.90. The company has a dividend yield of 2.40%. The company has also seen average earnings growth of 12.3% over the past ten years.

GuruFocus rated Microsoft the business predictability rank of 3-star.

Vodafone Group PLC (VOD)

Bass’ fifth largest position is in Vodafone Group where he currently holds on to 1,349,200 shares of the company’s stock. The guru maintains 11.6% of his portfolio in Vodafone as well as holding on 0.03% of the company’s shares outstanding.

This new stock was bought in the third quarter price range of $28.66 to $35.18, with an estimated average quarterly price of $31.01 per share. Since his buy the price per share is up approximately 20.1%.

Bass’ historical holding history:

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Vodafone Group PLC is a provider of mobile communications. It has a single group of related services and products being the supply of communications services and products. Segment information is provided on the basis of geographic areas, which are: Germany, Italy, Spain, UK, Europe, India and Africa, Middle East and Asia Pacific.

Vodafone’s historical revenue and net income:

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The analysis on Vodafone reports that the company’s issued GBP4.9 billion of debt over the past year, it’s price is also trading near a 10-year high as are its P/E, P/S and P/B ratios. The analysis also recognized that Vodafone’s dividend yield is also at a 5-year low.

The Peter Lynch Chart suggests that the company is currently overvalued:

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Vodafone has a market cap of $181.3 billion. Its shares are currently trading at around $37.42 with a P/E ratio of 257.90, a P/S ratio of 2.60 and a P/B ratio of 1.60. The company currently holds a dividend yield of 4.10%. Vodafone had an annual average earnings growth of 2.40% over the past five years.

Check out Kyle Bass’ complete third quarter portfolio here.

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Rating: 3.8/5 (5 votes)

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