Jeff Ubben's ValueAct Picks Up 2 New Stocks in 4th Quarter

Firm invests in Express Scripts, Citigroup

Author's Avatar
Feb 20, 2018
Article's Main Image

Jeff Ubben (Trades, Portfolio)’s ValueAct Holdings released its fourth-quarter portfolio last week, listing two new positions.

According to filings with the SEC, ValueAct, which is activist in nature, makes large investments in a limited number of fundamentally undervalued companies and works with them to maximize returns. Ubben, who handed the management of the $9.88 billion portfolio over to Mason Morfit in July, remains at the company as CEO. While he no longer is actively involved in portfolio decisions, he still finds investment opportunities and serves on boards.

The two stocks that were added to the portfolio during the quarter are Express Scripts Holding Co. (ESRX, Financial) and Citigroup Inc. (C, Financial).

Express Scripts

Morfit invested in 1.2 million shares of Express Scripts for an average price of $63.93 per share, giving it 0.91% portfolio space.

The St. Louis-based pharmacy benefit management company, which is the largest in the U.S., has a market cap of $42.61 billion; its shares closed at $75.23 on Friday with a price-earnings (P/E) ratio of 12.48, a price-book (P/B) ratio of 2.68 and a price-sales (P/S) ratio of 0.45.

The Peter Lynch chart below shows the stock is trading below its fair value, suggesting it is undervalued.

1519059952411.png

Boosted by a high Altman Z-score and sufficient interest coverage, GuruFocus rated Express Scripts’ financial strength 6 of 10. The company’s profitability and growth was rated 9 out of 10 as a result of a strong Piotroski F-score of 9, a predictability rating of four stars and expanding operating margins.

Of the 25 gurus invested in the company, Dodge & Cox has the largest holding with 6.14% of outstanding shares. During the quarter, Pioneer Investments (Trades, Portfolio), Leucadia National (Trades, Portfolio) and Glenn Greenberg (Trades, Portfolio) also established positions in the stock.

Citigroup

The portfolio manager purchased 1.1 million shares of Citigroup for an average price of $73.92 per share, expanding the portfolio 0.83%.

The New York-based bank has a market cap of $197.41 billion; its shares closed at $76.82 on Friday with a forward price-earnings ratio of 12.15, a price-book ratio of 1.08 and a price-sales ratio of 2.97.

According to the Peter Lynch chart below, the stock appears to be trading close to its fair value.

1519061512266.png

Impacted by declining revenue per share and low interest coverage, Citigroup’s financial strength was rated 4 out of 10 by GuruFocus. Despite having expanding operating margins, the bank’s profitability and growth was rated 5 of 10 as its business predictability ranks a mere one star (out of five).

With 0.53% of outstanding shares, Barrow, Hanley, Mewhinney & Strauss is the company’s largest guru shareholder. Steven Cohen (Trades, Portfolio) and Leon Cooperman (Trades, Portfolio) also established positions in the stock during the quarter.

Other trades

During the quarter, Morfit also added to the firm’s positions in Trinity Industries Inc. (TRN, Financial), KKR & Co. LP (KKR, Financial), Morgan Stanley (MS, Financial) and Microsoft Corp. (MSFT, Financial).

In addition, he reduced the CBRE Group Inc. (CBG, Financial) holding and exited the Baker Hughes (BHGE, Financial), Willis Towers Watson PLC (WLTW, Financial) and Bioverativ Inc. (BIVV, Financial) stakes.

The current portfolio of 13 stocks is largely composed of securities in the financial services sector.

Disclosure: No positions.