David Dreman (Trades, Portfolio), founder, chairman and CIO of Dreman Value Management, has a reputation for being a contrarian investor who takes a low P/E approach to his stock choices. He believes markets are not perfectly efficient and that investor actions are influenced by behavioral psychology.
Dreman’s preference is stocks in financial services, and many of his first-quarter buys fall in that category, but some do not. “When temptations to change course are at their worst,” the Dreman Value Management website proclaims, “we're at our best.” It looks good on paper, but how does it hold up in practice? Dreman made 23 new buys in the first quarter, which may prove instructive as time goes by.
Dreman’s purchase of 672,805 shares of Medical Properties Trust Inc (MPW, Financial), a Birmingham, Alabama-based real estate investment trust providing capital to acute care facilities, made MPW the 17th-largest stake by volume in his portfolio. Dreman paid an average price of $14.85 per share. The transaction had a 0.86% impact on his portfolio.
It is a familiar holding for Dreman. In 2010 and 2011, his stake in Medical Properties Trust exceeded 3.8 million shares, but he had sold the stake by the end of 2011. This purchase is the first time MPW has been in his portfolio since.
Medical Properties Trust has a market cap of $2.86 billion and an enterprise value of $4.71 billion. It has a P/E of 32.5, a Price/Book of 1.6 and a Price/Sales of 7.4. John Keeley (Trades, Portfolio) has shares of Medical Properties Trust in his portfolio.
Dreman also acquired 174,998 shares of ALLETE Inc (ALE, Financial), a Duluth, Minnesota-based holding company, serving mostly the automobile and energy industries, for an average price of $54.93 per share. Like Medical Properties Trust, ALLETE was also formerly in Dreman’s portfolio; he initially invested in it in the first quarter of 2010, and his stake eventually grew to more than 1 million shares, but he sold them all by the middle of 2012. His reinvestment in ALLETE had a 0.8% impact on his portfolio.
ALLETE has a market cap of $2.44 billion and an enterprise value of $3.75 billion. It has a P/E of 16.9, a Price/Book of 1.4 and a Price/Sales of 1.9. John Keeley (Trades, Portfolio), Bill Frels (Trades, Portfolio), Chuck Royce (Trades, Portfolio), Bernard Horn (Trades, Portfolio), Jim Simons (Trades, Portfolio), Mario Gabelli (Trades, Portfolio) and Paul Tudor Jones (Trades, Portfolio) have shares of ALLETE in their portfolios.
Dreman bought 2006,008 shares of Con-way Inc (CNW, Financial), a freight transportation and logistics company based in Ann Arbor, Michigan, for an average price of $44.13 per share. The acquisition had a 0.79% impact on Dreman’s portfolio.
Con-way has a market cap of $2.31 billion and an enterprise value of $2.6 billion. It has a P/E of 15.5, a Price/Book of 1.9 and a Price/Sales of 0.4. HOTCHKIS & WILEY, James Barrow (Trades, Portfolio), Richard Pzena (Trades, Portfolio), Joel Greenblatt (Trades, Portfolio), Steven Cohen (Trades, Portfolio), Pioneer Investments (Trades, Portfolio) and Paul Tudor Jones (Trades, Portfolio) have shares of Con-way in their portfolios.
Dreman’s other new buys in the first quarter were Regal Beloit Corp (RBC, Financial), Universal Forest Products Inc (UFPI, Financial), DeVry Education Group Inc (DV, Financial), Stepan Co (SCL, Financial), AVX Corp (AVX, Financial), Chipmos Technologies Bermuda Ltd (IMOS, Financial), Netgear Inc (NTGR, Financial), HCA Holdings Inc (HCA, Financial), Big 5 Sporting Goods Corp (BGFV, Financial), HollyFrontier Corp (HFC), Quanta Services Inc (PWR), AbbVie Inc (ABBV), Archer-Daniels Midland Co (ADM), American Express Co (AXP), Baker Hughes Inc (BHI), Cummins Inc (CMI), EMC Corp (EMC), Gilead Sciences Inc (GILD), Intel Corp (INTC), Albemarle Corp (ALB), Cameron International Corp (CAM), Dana Holding Corp (DAN), Fluor Corp (FLR), Macerich Co (MAC), Oceaneering International Inc (OII), Southwestern Energy Co (SWN), Western Refining Inc (WNR), Atlas Air Worldwide Holdings Inc (AAWW), Andersons Inc (ANDE), Anixter International Inc (AXE), Cal-Maine Foods Inc (CALM), Helix Energy Solutions Group Inc (HLX), Iconix Brand Group Inc (ICON), Rosetta Resources Inc (ROSE), Selective Insurance Group (SIGI), Synnex Corp (SNX), SPX Corp (SPW), Terex Corp (TEX), Trustmark Corp (TRMK) and United Stationers Inc (USTR).
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