Daniel Loeb (Trades, Portfolio), founder of Third Point LLC, follows an event-driven, value-oriented investment style. During the first-quarter, Loeb invested in T-Mobile US Inc. (TMUS, Financial), Salesforce.com Inc. (CRM, Financial) and Qualcomm Inc. (QCOM, Financial). The guru also eliminated his position in Apple Inc. (AAPL, Financial), PrivateBancorp Inc. (PVTB, Financial) and Chubb Ltd. (CB, Financial).
T-Mobile US
Loeb purchased 5 million shares of T-Mobile US for an average price of $61.47 per share. The Third Point manager expanded his portfolio 3.15% with this transaction.
Even though the company’s financial strength ranks a poor 4 out of 10, T-Mobile has a Piotroski F-score of 7. T-Mobile’s net margin, ROE and ROA are near a 10-year high, suggesting good short-term growth potential.
As discussed in a previous article, T-Mobile offers the highest growth potential among U.S. wireless companies, including Verizon Communications Inc. (VZ), AT&T Inc. (T) and Sprint Corp. (S). CEO John Legere reported T-Mobile’s “winning Un-carrier formula” produced 1 million additional customers each quarter since it merged with MetroPCS in 2013.
Salesforce.com
Loeb added 3 million shares of Salesforce.com to his portfolio for an average price of $79.89 per share. With this transaction, the guru increased his portfolio 2.41%.
Salesforce.com, a California-based application software company, has moderately strong financial strength and profitability. The company’s Altman Z-score of 4.09 suggests negligible financial distress. Despite good financial strength scores, Salesforce.com has interest coverage of 0.72, significantly lower than Benjamin Graham’s required threshold of 5.
The customer relationship management (CRM, Financial) company reported solid fiscal 2017 (January 2016 – January 2017) results, including double-digit revenue growth for the fourth quarter and the entire year. CEO Marc Benioff praised the team for delivering “incredible innovation and unprecedented customer success.” CRM’s three-year revenue growth and three-year EBITDA growth outperform 84% and 96% of global competitors respectively.
CRM’s business predictability ranks 3.5 stars out of five as of May 12, 2017.
Qualcomm and Apple
Loeb added 3.5 million shares of Qualcomm for an average price of $58.02. With this transaction, the guru increased his portfolio by 1.96%. On the sell side, Loeb axed his stake in Apple, selling his shares at an average price of $131.33. The guru trimmed his portfolio 2.1% with this transaction.
Qualcomm has four good signs, including consistent revenue growth and a dividend yield close to a 10-year high. The company’s margins and returns outperform 92% and 83% of global competitors respectively, suggesting higher growth potential. The company reported good earnings performance, with “healthy year-over-year growth across [Qualcomm’s] QTL licensing and QCT semiconductor businesses.” QCT revenues increased 10% year-over-year while QTL revenues increased 5% year-over-year. These results contributed to a profitability rank of 8.
Apple, on the other hand, has a modest outlook for the year. According to a previous article, Apple reported higher sales in several of their products, including the MacBook Pro and the Apple Watch. Despite this, the company’s operating margin and gross margin have declined 2.9% and 1.2% on average over the past five years. The company’s share price of $156.1 is near a 10-year high and slightly above its 10-year median price-sales ratio.
Warren Buffett (Trades, Portfolio) has 57,359,652 shares of Apple as of fourth-quarter 2016.
PrivateBancorp and Chubb
Loeb eliminated his positions in PrivateBancorp and Chubb, selling 3 million and 1.2 million shares respectively. PrivateBancorp averaged $56.04 per share while Chubb averaged $134.50 per share. The guru trimmed his portfolio 3.2% in the aggregate with these two transactions.
PrivateBancorp, a Midwest regional bank, has a modest financial strength rank of 5. The company has a cash-to-debt ratio of $0.11 and a Beneish M-score of -2.16, the latter suggesting possible earnings manipulation. The company is also significantly overvalued based on its share price, price-book ratio and price-sales ratio. PrivateBancorp’s share price of $59.56 is near a 10-year high and close to its 10-year maximum price-sales valuation.
Chubb, a Swiss property and casualty company, also has modest financial strength and profitability. Although the company has interest coverage of 9.15, Chubb only has $0.08 per $1 in debt. Chubb has a Beneish M-score of -2.23, which is just under the threshold of -2.22. This M-score suggests that Chubb shows mild signs of earnings manipulation.
Disclosure: No postions.
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