Scott Black's Top 4 New Holdings of 3rd Quarter

Guru's largest purchase is research and development company

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Nov 22, 2016
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Scott Black (Trades, Portfolio), president and founder of Delphi Management, acquired nine new holdings in the third quarter. His top four new positions are Icon PLC (ICLR, Financial), Lionbridge Technologies (LIOX, Financial), Omega Healthcare Investors (OHI, Financial) and National General Holdings Corp. (NGHC, Financial).

A disciple of the Graham-Dodd value strategy, Black’s firm employs an investment strategy that emphasizes the underlying fundamental performance of companies as opposed to making bets on short-term market movements. The investment firm only invests in companies that meet a developed set of quantitative criteria and are under good management. The firm takes only long positions in U.S.-listed companies.

Black purchased 29,492 shares of Icon for an average price of $75.14 per share. The transaction had an impact of 1.4% on the portfolio.

Icon conducts contract research and provides outsourced development services to the pharmaceutical, biotechnology and medical device industries. The Irish company has a market cap of $4.3 billion and an enterprise value of $4.4 billion. It has a price-earnings (P/E) ratio of 17.2, a forward P/E of 14.5, a price-book (P/B) ratio of 4.3 and a price-sales (P/S) ratio of 2.7.

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GuruFocus ranked the company’s financial strength 7 of 10. The moderate Piotroski F-Score of 6 and high Altman Z-Score of 5 suggest the company is financially stable. The company’s return on invested capital (ROIC) outperforms its weighted average cost of capital (WACC), which means the company is creating value as it grows.

GuruFocus ranked Icon’s profitability and growth 8 of 10. It has an operating margin of 18.5% and a net margin of 15.4%. The return on equity (ROE) and return on assets (ROA) outperform 95% and 92% of other companies in the global diagnostics and research industry. The return on capital (ROC) also outperforms 92% of competitors.

Ron Baron (Trades, Portfolio) holds the largest position among the gurus with 1.6% of Icon’s outstanding shares, which is 0.4% of his total assets managed. In all, seven gurus hold positions.

The DCF Calculator gives the stock a fair value of $54.09; it was trading at $76.63 on Tuesday.

The guru purchased 381,011 shares of Lionbridge for an average price of $4.68 per share. The transaction had an impact of 1.2% on the portfolio.

Lionbridge is the world’s largest provider of globalization solutions including translation, localization and global marketing services. The Massachusetts-based company has a market cap of $313.7 million and an enterprise value of $392.8 million. It has a P/E of 28.4, a forward P/E of 7.6, a P/B of 3.6 and a P/S of 0.6.

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GuruFocus ranked the company’s financial strength 5 of 10. It has a high Piotroski F-Score of 7, which indicates a healthy financial condition. However, it has a moderate Altman Z-Score of 2.4 that suggests the company has experienced minor financial stress. The company is destroying value as it grows because its ROIC underperforms its WACC.

GuruFocus ranked Lionbridge’s profitability and growth 7 of 10. It has an operating margin of 3.13% and a net margin of 1.7%. The ROE and ROC outperform 59% and 50% of other companies in the global business services industry. In contrast, the ROA underperforms 52% of competitors.

Jim Simons (Trades, Portfolio) is the largest shareholder of Lionbridge among the gurus with 0.8% of outstanding shares. Paul Tudor Jones (Trades, Portfolio) also holds a position.

The DCF Calculator gives the stock a fair value of $1.93; it was trading for $5.17 on Tuesday.

Black purchased 50,508 shares of Omega Healthcare for an average price of $35.54 per share. The transaction had an impact of 1.12% on the portfolio. He previously sold out in the first quarter of 2014.

The Maryland-based company is a self-administered real estate investment trust involved in health care facilities. Omega has a market cap of $5.5 billion and an enterprise value of $10.3 billion. It has a P/E of 17.9, a P/B of 1.4 and a P/S of 6.3.

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GuruFocus ranked the company’s financial strength 4 of 10. The modest Piotroski F-Score of 4 and Altman Z-Score of 0.7 suggest the company is in stable financial condition but does have some pecuniary stress. However, the company is creating value as it grows since its ROIC outperforms its WACC.

GuruFocus ranked Omega’s profitability and growth 8 of 10. It has an operating margin of 55.6% and a net margin of 34.5%. The ROE and ROA outperform 59% and 52% of other companies in the global REIT- healthcare facilities industry. However, the ROC underperforms 55% of competitors.

Simons holds the largest position among the gurus with 0.16% of Omega’s outstanding shares. This represents 0.02% of his total assets managed.

The DCF Calculator gives the stock a fair value of $21.99; it was trading at $28.49 on Tuesday.

The investor purchased 78,154 shares of National General Holdings for an average price of $21.79. The transaction had an impact of 1.1% on the portfolio. Black previously sold out in the first quarter.

National General Holdings is a property and casualty insurance company based in North Carolina. The company has a market cap of $2.4 billion and an enterprise value of $3.2 billion. It has a P/E of 19.04, a P/B of 1.6 and a P/S of 0.7.

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GuruFocus ranked the company’s financial strength 6 of 10. The Piotroski F-Score of 4 suggests the company is financially stable.

GuruFocus ranked the company’s profitability and growth 4 of 10. It has an operating margin of 5.8% and a net margin of 4.5%. The ROE and ROA outperform 50% and 56% of other companies in the global insurance- property and casualty industry.

Simons is the largest shareholder of National General Holdings among the gurus. He holds 0.11% of outstanding shares. Murray Stahl (Trades, Portfolio), Tudor Jones and David Dreman (Trades, Portfolio) also hold positions.

The DCF Calculator gives the stock a fair value of $12.73; it was trading at $22.65 on Tuesday.

Other companies in which Black took positions during the quarter are Celestica Inc. (CLS, Financial), M/I Homes Inc. (MHO, Financial), Steelcase Inc. (SCS, Financial), Carnival Corp. (CCL, Financial) and Hooker Furniture Corp. (HOFT, Financial).

Disclosure: I do not own stock in any companies mentioned in the article.

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