Elliott Management leader Paul Singer (Trades, Portfolio) released his portfolio for the final quarter of 2017 last week, listing eight new holdings.
The well-known activist investor typically takes large stakes in underperforming companies and then pushes management to implement changes that will turn them toward profitability. Singer’s top five new buys for the quarter are Mednax Inc. (MD, Financial), Akamai Technologies Inc. (AKAM, Financial), Uniti Group Inc. (UNIT, Financial), Convergys Corp. (CVG, Financial) and QEP Resources Inc. (QEP, Financial).
Mednax
Singer invested in 2.47 million shares of Mednax for an average price of $47.14 per share, giving it 0.83% portfolio space.
The Florida-based health care company, which provides neonatal, maternal-fetal and pediatric physician subspecialty services, has a market cap of $5.26 billion; its shares were trading around $56.08 on Tuesday with a price-earnings (P/E) ratio of 16.21, a price-book (P/B) ratio of 1.71 and a price-sales (P/S) ratio of 1.51.
The Peter Lynch chart below shows the stock is trading slightly above its fair value, suggesting it is overpriced.
GuruFocus rated Mednax’s financial strength 5 out of 10. While its interest coverage ratio of 6.44 is above Benjamin Graham’s threshold of 5, the company continues to issue new debt. In addition, the Altman Z-score of 2.51 indicates the company is under some financial stress. The company’s profitability and growth is rated 8 of 10, boosted by a perfect business predictability rating of five stars and consistent revenue and earnings per share growth.
With his purchase, Singer became the company’s largest guru shareholder with 2.64% of outstanding shares. Richard Pzena (Trades, Portfolio) and Charles Brandes (Trades, Portfolio) also established positions during the quarter, while Steven Cohen (Trades, Portfolio) added to his holding. Joel Greenblatt (Trades, Portfolio), First Pacific Advisors (Trades, Portfolio) and David Dreman (Trades, Portfolio) also own the stock.
Akamai Technologies
The guru purchased 2 million shares of Akamai for an average price of $55.34 per share, expanding the portfolio 0.82%.
The Cambridge, Massachusetts-based provider of cloud services has a market cap of $11.33 billion; its shares were trading around $66.64 on Tuesday with a price-earnings ratio of 53.31, a price-book ratio of 3.41 and a price-sales ratio of 4.60.
According to the Peter Lynch chart below, the stock is overpriced as it is trading above its fair value.
GuruFocus rated Akamai’s financial strength 7 out of 10 as it has a high Altman Z-score and sufficient interest coverage. Despite the fact its operating margins are declining, the company’s profitability and growth is rated 8 of 10 as it has a strong Piotroski F-score of 6 and a 4.5-star business predictability rating.
With 1.18% of outstanding shares, Singer has the largest position in Akamai among the gurus. Pioneer Investments (Trades, Portfolio) and Paul Tudor Jones (Trades, Portfolio) are also shareholders.
Uniti Group
Singer bought 6.87 million shares of Uniti for an average price of $16.49 per share. The trade had an impact of 0.77% on the portfolio.
The Little Rock, Arkansas-based real estate investment trust has a market cap of $2.8 billion; its shares were trading around $15.95 on Tuesday with a forward price-earnings ratio of 232.56 and a price-sales ratio of 2.97.
Based on the Peter Lynch chart below, the stock appears to be overpriced as it is trading above its fair value.
Uniti’s financial strength was rated a weak 3 out of 10 by GuruFocus. Its low Altman Z-score of -0.09 indicates it is in severe financial distress and could face bankruptcy in the near future. Its profitability and growth was rated 6 of 10. Despite having a moderate Piotroski F-score of 4, its operating margin of -19.98% underperforms 96% of competitors.
Singer is the company’s largest shareholder among the gurus with 3.92% of outstanding shares. Pioneer Investments and Mario Gabelli (Trades, Portfolio) also hold the stock.
Convergys
The investor established a 4.52 million-share stake in Convergys for an average price of $24.69 per share, giving it 0.67% portfolio space.
The Cincinnati-based IT service management company has a market cap of $2.11 billion; its shares were trading around $22.92 on Tuesday with a price-earnings ratio of 17.42, a price-book ratio of 1.53 and a price-sales ratio of 0.80.
The Peter Lynch chart below suggests the stock is overpriced as it is trading above its fair value.
As Convergys has sufficient interest coverage and a strong Altman Z-score, its financial strength was rated 7 of 10 by GuruFocus. Its profitability and growth was rated 8 of 10 due to operating margin expansion and a high Piotroski F-score of 7.
With 4.89% of outstanding shares, Singer is the company’s largest guru shareholder. Pioneer Investments and Jeremy Grantham (Trades, Portfolio) also established positions during the quarter, while Greenblatt, Jones and Chuck Royce (Trades, Portfolio) added to their holdings.
QEP Resources
Having previously exited a position in QEP Resources in the third quarter of 2016, Singer established a new 10.5 million-share stake for an average price of $9.05 per share. The transaction expanded the portfolio 0.63%.
The Denver-based oil and gas company has a market cap of $2.14 billion; its shares were trading around $8.89 on Tuesday with a price-earnings ratio of 296.33, a price-book ratio of 0.58 and a price-sales ratio of 1.35.
According to the Peter Lynch chart below, the stock appears to be overpriced as it is trading above its fair value.
As a result of a high level of debt and a low Altman Z-score of 1.10, which implies the risk of bankruptcy, QEP’s financial strength was rated 5 out of 10 by GuruFocus. Its profitability and growth was rated 4 of 10 due to a moderate Piotroski F-score of 5 and declining gross margins.
Singer holds 4.36% of the company’s outstanding shares, making him the largest guru shareholder. Arnold Schneider (Trades, Portfolio), Jim Simons (Trades, Portfolio), Greenblatt, Gabelli and Leucadia National (Trades, Portfolio) also own the stock.
Other trades
During the quarter, Singer also started positions in Caesars Entertainment Corp. (CZR, Financial), Tidewater Inc. (TDW, Financial) and Wipro Ltd. (WIT, Financial).
His current portfolio of 59 holdings is largely composed of exchange-traded funds and securities in the technology and energy sectors.
Disclosure: No positions.
