John Griffin (Trades, Portfolio), president of Blue Ridge Capital, seeks long-term capital appreciation through investments in companies with strong performance relative to competitors. The former partner of Julian Robertson (Trades, Portfolio) added three retail companies during the third quarter: Ulta Beauty Inc. (ULTA, Financial), O’Reilly Automotive Inc. (ORLY, Financial) and Alibaba Group Holding Ltd. (BABA, Financial).
Ulta Beauty
Griffin invested in 1,080,669 shares of Ulta Beauty for an average price of $241.62 per share. The fund manager expanded his portfolio 4.39% with this transaction.
Ulta offers cosmetics, fragrance, skin and hair care products. The beauty retailer has eight positive investing signs, including strong profit margins, consistent revenue growth and no debt. Additionally, GuruFocus ranked Ulta’s profitability 9 out of 10 and business predictability 4.5 stars out of 5.
CEO Mary Dillon said the company “delivered another quarter of excellent performance” during the 13 weeks ending July 29, including “strong top line growth coupled with robust margin expansion.” For the quarter ending Oct. 30, Dillon expects net sales between $1.331 billion and $1.353 billion, which would outperform prior-year quarter sales by approximately $200 million.
O’Reilly
Griffin added 410,000 shares of O’Reilly for an average price of $198.08 per share. With this transaction, the fund manager increased his portfolio 1.59%.
O’Reilly, one of the largest retailers of aftermarket auto parts, offers good growth potential as discussed in a previous article. The company’s profitability ranks 8 out of 10, driven by strong margins and returns. O’Reilly’s operating margin outperforms 93% of global auto parts companies, suggesting good performance relative to peers.
Alibaba
Griffin added 185,000 shares of Alibaba for an average price of $161.93 per share. With this transaction, the fund manager increased his portfolio 0.57%.
The Chinese retail giant’s profitability ranks a solid 9 out of 10, driven by expanding operating margins and consistent revenue growth. Alibaba’s profit margin and three-year compound annual growth rate (CAGR) of sales both outperform over 96% of global retail companies, suggesting strong growth potential relative to competitors.
Third Point fund manager Daniel Loeb (Trades, Portfolio) expanded his Alibaba position during the quarter as the company offers strong growth potential.
See also
Our Value Investing Forum included a good post on the retail sector, an interesting sector given Amazon.com Inc.’s (AMZN, Financial) recent acquisition of Whole Foods. Premium members can view guru trades from a specific sector, e.g., specialty retail. The premium membership also gives you access to other key guru features, including real-time picks, the aggregated portfolio of gurus, ETFs in gurus’ portfolios and the new user-defined GURUG function.
Disclosure: I do not have positions in the stocks mentioned.
