New Guru Stock Adds - Icahn and Nuance, Gabelli and Layne Christensen
Corporate activist Carl Icahn has shown acute interest in Nuance Communications this year. He started a position with the company in the first quarter, buying just under 4 million shares when the price averaged $21. He then aggressively added to the position in the second and third quarters, buying more than 27 million shares and 20 million shares when the price averaged $20 and $19, respectively.
Nuance is a pioneer in voice-command technology that has made huge strides in refining machines’ ability to understand and replicate the human voice. Its devices are becoming ubiquitous. It partners with nearly two-thirds of Fortune 100 companies, the eight largest handset companies and 10 largest auto makers.
Yet to date this year, Nuance’s stock dove almost 37%, possibly attracting the man with a history of optimizing stalled companies.
The company’s issues surfaced in its results for the quarter ended March 31, about which the company’s CEO, Paul Ricci, commented: ““We are disappointed with our results for the second quarter, which were driven by a combination of execution issues and external factors.” That quarter the company reported a 15.6% year-over-year revenue increase, with a net loss of $25.8 million, or $0.08 per share, down from $0.9 million in earnings, or $0.34 per diluted share, the previous year.
The biggest lapse came in its Enterprise division, where revenue fell 18.5% year over year, while its other segments all improved – Healthcare up 53%, Mobil & Consumer up 1% and Imaging up 4.4%.
Losses steepened the next quarter at $35 million, or $0.11 per share, as the company faltered this time in its Mobile & Consumer unit, where revenues fell 16.2% year over year. Other segments continued to increase revenues, and Enterprise recovered, with rising 5.9%.
Upon Icahn’s entrance on the scene, the company on Aug. 20 adopted a shareholder rights plan to protect against any individual acquiring 20% or more of the company without the board’s permission.
In the fourth quarter of the company’s fiscal 2013, Nuance again reported increased revenue, and a GAAP loss of $32.3 million, compared to earnings of $117.6 million the previous year. Results were in line with its expectations. Revenues were also down from the previous year in three of its segments, with only Healthcare seeing an increase. The CEO noted that the company had made progress in its strategy to “enter new growth markets, deliver a new generation of solutions and enable attractive, recurring revenue streams.”
Nuance’s share price at $14.19 Thursday is close to a three-year low, trading with a P/B of 1.67 and P/S of 2.4, both near three-year lows.
Mario Gabelli Buys Layne Christensen (LAYN)
GAMCO Investors’ Mario Gabelli also took on 5.93% more Lanyne Christensen shares, for a total of 1,869,997 shares in his holding, worth 9.41% of the company. Gabelli has been consistently growing GAMCO’s ownership in Layne Christensen since the beginning of 2011.
The $290.9 million market-cap company is priced near its five-year low at $14.63 on Thursday, after shares lost almost 40% this year.
This year Layne Christensen has had three straight quarters of year-over-year revenue declines, caused primarily by weakness in construction, expense of moving its headquarters to Texas and lost profitability in mineral exploration.
Though involved in a number of products and services, Layne Christensen wants predominantly to profit from the global decrease in access to drinking water, while supporting other natural resources. It focuses its business in water resources, mineral exploration, geoconstruction and energy services.
In addition, the company is in the process of expanding its historic water management knowledge to energy clients by offering FRAC water solutions to drought-affected areas, and it is serving the world’s largest mining companies.
Layne Christensen as of Oct. 31 has $29 million in cash, down from $44 million a year prior, and $102.7 million in long-term debt, down from $118 million a year prior. Its P/B ratio at 0.95 is close to a one-year low and P/S ratio at 0.3 is close to a five-year low.
Layne Christensen has attracted heavy investment by other gurus as well. Small-cap investor Chuck Royce controls 7.06% of outstanding shares and has traded the company since 2008. Arnold Van Den Berg of Century Management actually has a greater position than Gabelli, having acquired 9.8% of the company since starting to invest in mid-2012.
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