Michael Price (Trades, Portfolio) runs MFP Investors, a New York-based hedge fund that focuses on value investing. Â Price is one of the richest people in the world, according to Forbes. His fund disclosed an equity portfolio valued at some $699 million as of the end of the third quarter of 2015. The equity portfolio is mainly invested in Finance (37%), Technology (16%) and Health Care (15%) stocks.
In Price's latest 13F filing, among the 10 largest holdings of his equity portfolio (which comprises 41.11% of the total portfolio value), his second principal position is worth analysis.
Dolby Laboratories Inc (DLB, Financial) is Price´s second principal holding. MPF holds 4.99% of its portfolio in this $3.42 billion market cap company, with 1.02 million shares. The value of the stake amounts to $33.4 million.
The principal guru shareholder is Price, but notobly, Chuck Royce (Trades, Portfolio) is the third largest guru shareholder, with 596,949 shares, valued at $19.46 million, as of the end of the Q3 2015.
Jim Simons (Trades, Portfolio) also has an important position with 373,600 shares valued at $12.18 million. In the July-September period, the stock lost almost 18% and on a year-to-date basis the loss is more than 21%.
Dolby Laboratories' stock price has been moving in a trading range between $29.87 and $45.18 in the past 52 weeks. Its last price of $34.18 is far from the top of the range.
The stock has plummeted by almost 50% in the past five years. According to Yahoo Finance, the estimated one-year target share price is $45.25, so if you buy shares at the current market price, your return from price appreciation would be 32.3%.
Also, you have to consider any cash flow received by the asset. Holding the stock one year, you'll be paid a dividend of 48 cents at the end of the year. If we divide this number by current price per share, we obtain the dividend yield, which is the other component of the return on investment for a stock, and in this case is 2.8%. So the total expected return for investing in Dolby will be about 34%, which we believe is very attractive.
During the past 13 years, the highest trailing annual dividend yield was 1.23%, the lowest was 0.22% and the median was 0.73%. Today, the stock dividend yield is close to a two-year high.
The firm has good metrics to consider it as a candidate in your portfolio. Its ROE of 7.9% is ranked higher than 66% of the 386 companies in the Global Media - Diversified industry.
On the other hand, the operating margin has been in five-year decline. The average rate of decline per year is 14.5%. In the next table, we can appreciate this is a sign of weakness within the company.
| Quarter Ended | Sep-06 | Sep-07 | Sep-08 | Sep-09 | Sep-10 | Sep-11 | Sep-12 | Sep-13 | Sep-14 | Sep-15 |
| Operating Margin (%) | 33.10 | 38.78 | 44.79 | 50.54 | 46.53 | 44.97 | 38.80 | 26.96 | 28.51 | 21.97 |
From a valuation standpoint, a 19.93 P/E, which stands at a discount compared to the industry median, indicates that other companies operating in the same sub-industry are more richly valued. One of its major competitors includes DTS Inc. (DTSI, Financial). The following table compares the current valuations:
| Ticker | Company | P/E Ratio | P/B Ratio | P/S Ratio |
| DLB | Dolby | 19.93 | 1.93 | 3.7 |
| DTSI | DTS | 184.17 | 1.89 | 3.18 |
Further, the P/B Ratio is close to a 10-year low of 1.76 and the P/S Ratio is close to a two-year low of 3.37.
Final Comment
Michael Price (Trades, Portfolio) was bullish in the trimester he upped his stake by 45.82%. Diamond Hill Capital (Trades, Portfolio) was bullish too, with an increase of 36.66% in that time-frame. On the other hand, Chuck Royce (Trades, Portfolio), Mario Gabelli (Trades, Portfolio), Jim Simons (Trades, Portfolio) and Paul Tudor Jones (Trades, Portfolio) have reduced their positions in the stock.
From my view, Dolby stock is cheap at this current price and an appealing buy with valuations at a low level.
Disclosure: Omar Venerio holds no position in any stocks mentioned.
