Investment guru Tom Gayner (Trades, Portfolio) dumped his stake in two high-profile oil and gas companies for a position in a California-based company that provides DNA sequencing technology to academic and commercial labs.
Gayner traded up after signs of weakness in refinery production and disappointing earnings reported by global players early this month. Gayner sold out of longtime holdings in global leader, Dallas-based Exxon Mobil Corp. (XOM, Financial) and Schlumberger Ltd. (SLB, Financial), the world’s largest oil and gas supplier of products and services.
Instead, he established a position in Ilumina Inc. (ILMN, Financial), which has been working on the development of the human genome. In Monday trading, shares of Ilumina were up 2% to just under $222 a share. In the last year, the stock fell 1%, but is up 3% over the last three months.
Snapshot of Ilumina Inc.
Last year, shares of the company dove because of throughput problems with production. The stock, however, began to inch upward after it announced at an investors’ health conference last year plans for its potential to deliver the world’s first affordable full human genome test. Investors who like the stock believe it has high growth potential as it continues research in DNA sequencing for diseases, including cancer. Its rankings by GuruFocus underscore that conclusion. The company's financial strength was rated 7 of 10 and its profitability and growth 9 of 10.
Other financial measures
In its fourth-quarter filings, the company reported revenue of $778 million, up 26% from the prior-year quarter. Revenues have been climbing.
Net income, based on GAAP results, for the quarter was 46 cents per share, or $68 million, compared to $124 million, or 84 cents a share, in the prior-year quarter. The estimate for the fourth-quarter included the one-time transition tax as a result of the new federal tax law.
For 2017, revenue was $2.8 million, a 15% increase compared to $2.4 million in 2016.
In the fourth quarter, the company reported cash flow from operations of $294 million compared to $262 million during the same period a year ago.
Its free cash flow was $218 million for the quarter compared to $180 million in the prior-year quarter.
It reported a gross margin of almost 69.7% compared to 67.7% in the prior-year quarter.
The company’s long-term debt was $1.18 billion as of Oct. 1, 2017, compared to $1.056 billion as of Jan. 1, that same year, its balance sheet shows.
Guru portfolio
The Markel Gayner Asset Management Corp. consists of a portfolio of over $5.2 million in assets, including the stocks of more than 130 entities.
The bulk of the portfolio, or 28.4%, is invested in stocks of companies dedicated to financial services. Consumer cyclical makes up 22.5% of Gayner’s holdings; industrials, 13.7%; consumer defensive, 12.1%; technology and healthcare combined, 14%; real estate, 5.8%; basic materials 25%, communication services 1%.
Exxon Mobil
In the last six months, the guru had up to 8% of his portfolio invested in the oil and gas giant. He has no current holdings of the company in his current portfolio.
He sold at a loss of about 3% since he began buying shares in 2015.
Exxon shares were just under $77 a share, up 0.93%, in Monday trading. The company reported lower-than-expected earnings in its quarterly report this month, sending its stock price down by as much as 6%.
Analysts had been disappointed by the Dallas company’s performance, along with California-based Chevron Corp. (CVX, Financial), after technological weaknesses in refinery production hampered revenue expectations. Wall Street had hoped a recent three-year high on Brent crude would boost earnings of both companies.
Chevron shares were up 0.46%, just over $114 a share, in Monday trading.
Schlumberger
The guru started buying shares of the company in 2012, raising his position in 2016 to as much as 662,000 shares
In the second quarter of last year, he reduced his position by 99.40% and sold out, at a price of under $65 a share, the final 4,000 shares as of Dec. 31. The guru lost 14% on the investment over five years or so.
Schlumberger employs more than 105,000 workers in more than 85 countries. It is known to provide the oil and gas industry with the widest range of products and services, from exploration to production.
On Monday, the company was trading around $67 a share, up 2.8%. GuruFocus rates it a 5 of 10 in financial strength and in profitability and growth.
