Guru Scott Black (Trades, Portfolio) of Delphi Management, Inc. just appeared on CNBC and talked about four of the fund's holdings. One: Apple (AAPL, Financial) being a recent pick. Delphi Management pursues a proven, conservative investment strategy with a focus on fundamentals. It is rigorous with its quantitative analysis but also tries to buy into companies that are well managed. It considers itself a classic value investor of the Graham-Dodd ilk.
Apple
The premier consumer electronics company of this day is an unusual pick for a Graham-Dodd value investor. Black bought it when it pulled back in August and thinks it is statistically very cheap. When you back out cash, it trades at 9x expected earnings. It is also financially sound with little debt and very high margins. Black only talks about very briefly, but it is also owned by many other gurus.
Pharmaceutical giant Pfizer (PFE) is trying to buy Allergan for $160 billion in what is the highest profile tax inversion deal of the year. It has Washington incensed, and the media and analysts assign a lot of risk to the deal completion. The result is that it trades at a 15% discount to Pfizer’s bid. That’s a lot, and Black doesn’t see a lot of downside with the company likely earning $16 to $17 per share next year. If it would trade up to a 5% discount, he would definitely sell it.
Allergan is attracting a lot of gurus, from Paul Singer (Trades, Portfolio), George Soros (Trades, Portfolio) and Kyle Bass (Trades, Portfolio) to Jana Partners (Trades, Portfolio), Jeremy Grantham (Trades, Portfolio) and many others.
Lam Research (LRCX, Financial)
Lam Research, a wafer maker and semiconductor industry supplier, is statistically a very cheap company with $11 share in cash, a forward P/E 11x and net cash of about $1.5 billion. It is in the process of acquiring KLA-Tencor (KLA, Financial). This acquisition will make it a powerhouse in its industry, almost equal to Applied Materials. The company also did a great job picking up market share over the past year. The company truly has a pristine balance sheet with cash vastly in excess of debt. It is also held by other gurus ranging from Joel Greenblatt (Trades, Portfolio) to Jim Simons (Trades, Portfolio).
Super Micro Computer (SMCI, Financial)
Super Micro Computer is a server technology and green computing company. Great pick if you want to up your stake in sustainability. Black’s thesis is the company ramped production and added 25% extra capacity. It upped its investment in R&D, and this has caused earnings to stay flat even though revenue is up. Margins are down, but Black expects these to get restored which implies the company is trading at just an 8.5x forward multiple.
He keeps hammering on the importance of statistically cheap companies and also likes that it is a $1.1 billion micro cap. The company delivers mainly high-end server for scientific usage. It owns a lot of proprietary technology and several other gurus also own shares.
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