Chris Davis (Trades, Portfolio), manager of the Davis Financial Fund, announced Tuesday he expanded his Alibaba Group Holding Ltd. (BABA, Financial) position and introduced four new stocks to his portfolio during fourth-quarter 2017: Aptiv PLC (APTV, Financial), Brandywine Reality Trust (BDN, Financial), American Homes 4 Rent (AMH, Financial) and Invitation Homes Inc. (INVH, Financial).
Alibaba
Davis invested in 2,938,101 shares of Alibaba for an average price of $179.21 per share, increasing the position 530.03%. With this transaction, the manager expanded his portfolio 2.15%.
Alibaba Chief Financial Officer Maggie Wu said the e-commerce retailer finished 2017 with “another great quarter,” highlighted by year-over-year revenue growth of 56%. Continued strength and momentum in business, including Taobao, Tmall and New Retail, contributed to strong three-year compound annual growth rate (CAGR) of sales, which are outperforming 96% of global competitors.
CEO Daniel Zhang mentioned that strong momentum in New Retail, which blossomed during last year’s “11:11 Global Shopping Festival,” enabled the company to continue providing a wide and innovative range of services to consumers in China and beyond. Given the strong performance, management increased the high end of the fiscal-year revenue growth guidance to 56%, up 3% from the prior revenue growth guidance. GuruFocus ranks Alibaba’s business predictability four stars out of five, suggesting consistent revenue and earnings growth.
Aptiv
Davis invested in 2,496,817 shares of Aptiv for an average price of $83.71 per share. With this transaction, the manager increased his portfolio 0.90%.
Aptiv primarily supplies components and systems used in a vehicle’s electrical system. The Gillingham, England-based company said full-year 2017 revenues increased 5% year over year. Despite this, the company’s profitability ranks a modest 6 out of 10 as the company’s five-year CAGR of sales is -1.50%.
Guru invests in REITs
Davis added three real estate investment trusts (REITs) to his portfolio: Brandywine Reality Trust, American Homes 4 Rent and Invitation Homes. The manager added 483,936 shares of Brandywine for an average price of $17.72 per share, 127,782 shares of American Homes for an average price of $21.71 per share and 119,336 shares of Invitation Homes for an average price of $23.14 per share.
Brandywine CEO Jerry Sweeney said the REIT finished the year “achieving or exceeding many of [its] business goals,” including high tenant retention ratios while maintaining low capital costs. The REIT reported a 90% retention ratio for the fourth quarter, up 3% from the prior-year quarter.
GuruFocus ranks Brandywine’s profitability 6 out of 10: although the company’s profit margins are near a 10-year high, the margins underperform over 70% of global competitors.
American Homes and Invitation Homes also have underperforming profit margins even though the margins are near a 10-year high.
Disclosure: I do not have positions in the stocks mentioned.
