Bill Nygren (Trades, Portfolio), portfolio manager of the Oakmark Fund, reported his fourth-quarter portfolio on Feb. 26, listing four new positions.
Nygren, who also manages the Oakmark Select Fund and the Oakmark Global Select Fund, invests in mid- and large-cap companies in order to achieve capital appreciation. He looks for growing companies with shareholder-oriented management teams. He will invest in the stock when it is trading at a substantial discount to his estimate of intrinsic value.
The investor established positions in CVS Health Corp. (CVS, Financial), Booking Holdings Inc. (PCLN, Financial), Aptiv PLC (APTV, Financial) and American Airlines Group Inc. (AAL, Financial) in the fourth quarter.
CVS Health
Nygren invested in 2.7 million shares of CVS for an average price of $72.64 per share, giving it 1.05% portfolio space.
The Woonsocket, Rhode Island-based drugstore chain has a market cap of $69.22 billion; its shares were trading around $69.28 on Tuesday with a price-earnings (P/E) ratio of 10.58, a price-book (P/B) ratio of 1.83 and a price-sales (P/S) ratio of 0.38.
The Peter Lynch chart below shows the stock is trading below its fair value, suggesting it is undervalued.
CVS Health’s financial strength was rated 6 out of 10 by GuruFocus as the company’s interest coverage exceeds Benjamin Graham’s standard of 5 and it has a high Altman Z-Score. While the company’s operating margin has been in a five-year decline, its profitability and growth was rated 8 of 10 as it has a strong Piotroski F-Score of 7 and a five-star business predictability rating.
Of the gurus invested in CVS, Barrow, Hanley, Mewhinney & Strauss has the largest holding with 1.53% of outstanding shares. During the quarter, Paul Tudor Jones (Trades, Portfolio), Jim Simons (Trades, Portfolio), Ray Dalio (Trades, Portfolio), the T Rowe Price Equity Income Fund (Trades, Portfolio) and the Vanguard Health Care Fund (Trades, Portfolio) also established positions, while Arnold Van Den Berg (Trades, Portfolio) and Jerome Dodson (Trades, Portfolio) sold out.
Booking Holdings
The guru purchased 110,000 shares of Booking Holdings for an average price of $1,812.37 per share, expanding the portfolio 1.02%.
The Norwalk, Connecticut-based online travel agency, which was formerly known as Priceline, has a market cap of $92.94 billion; its shares were closed at $1,905.64 on Monday with a price-earnings ratio of 26.69, a price-book ratio of 7.21 and a price-sales ratio of 7.80. Along with its name change, the company changed its ticker to BKNG on Tuesday.
According to the Peter Lynch chart below, the stock is overpriced as it is trading above its fair value.
GuruFocus rated Bookings’ financial strength 7 out of 10. Although the company has been issuing new debt over the past three years, it is manageable. In addition, it has a strong Altman Z-Score of 6.41. Its profitability and growth was rated 9 of 10 as it has a high Piotroski F-Score of 7 and a five-star business predictability rating. While its operating margin has been declining, it still outperforms 93% of competitors.
With 1.71% of outstanding shares, Frank Sands (Trades, Portfolio) is the company’s largest guru shareholder. Pioneer Investments (Trades, Portfolio), Simons, Zeke Ashton (Trades, Portfolio), Richard Pzena (Trades, Portfolio), Wallace Weitz (Trades, Portfolio), Louis Moore Bacon (Trades, Portfolio) and George Soros (Trades, Portfolio) also established positions in the fourth quarter.
Aptiv
Nygren bought 2.2 million shares of Aptiv for an average price of $83.71 per share, impacting the portfolio by 1%.
The U.K.-based auto parts manufacturer, which changed its name after spinning off Delphi Technologies (DLPH, Financial) in December, has a market cap of $25.2 billion; its shares were trading around $94.81 on Tuesday with a price-earnings ratio of 18.73, a price-book ratio of 7.64 and a price-sales ratio of 1.97.
Based on the Peter Lynch chart below, the stock is overpriced as it is trading higher than its fair value.
Despite the fact Aptiv has been issuing new long-term debt over the past several years, GuruFocus rated its financial strength 6 out of 10 as it has a high Altman Z-Score of 3.59 and the debt level is manageable. As the company’s operating margins have been expanding and it has a high Piotroski F-Score of 8, its profitability and growth was rated 6 out of 10 as well.
Larry Robbins (Trades, Portfolio) has the largest position in Aptiv among the gurus, holding 1.1% of outstanding shares. During the quarter, Chris Davis (Trades, Portfolio), Jeremy Grantham (Trades, Portfolio), Robert Olstein (Trades, Portfolio), Cohen, Julian Robertson (Trades, Portfolio), Jones and several other gurus also invested in the stock.
American Airlines
The investor established a 1.97 million-share stake in American Airlines for an average price of $49.81 per share, giving it 0.55% portfolio space.
The Fort Worth, Texas-based airline has a market cap of $26.22 billion; its shares were trading around $55.41 on Tuesday with a price-earnings ratio of 14.14, a price-book ratio of 6.75 and a price-sales ratio of 0.64.
According to the Peter Lynch chart below, the stock appears to be trading above its fair value, which indicates it is overpriced.
As the company has issued new long-term debt over the past several years and its Altman Z-Score of 1.37 shows signs of financial stress, GuruFocus rated American Airlines’ financial strength 4 out of 10. Its profitability and growth was rated 5 of 10 as its operating margin is expanding, it has a moderate Piotroski F-Score of 5 and a one-star business predictability rating.
With 10.75% of outstanding shares, PRIMECAP Management (Trades, Portfolio) is the company’s largest guru shareholder. Jones, Simons and Joel Greenblatt (Trades, Portfolio) also established positions during the quarter. Warren Buffett (Trades, Portfolio), Pioneer Investments (Trades, Portfolio), Leon Cooperman (Trades, Portfolio), David Dreman (Trades, Portfolio), John Hussman (Trades, Portfolio) and several others also own the stock.
Other trades
Nygren also added to his positions in Charter Communications Inc. (CHTR, Financial), Comcast Corp. (CMCSA, Financial), HCA Healthcare Inc. (HCA, Financial), Medtronic PLC (MDT, Financial), Netflix Inc. (NFLX, Financial), Apache Corp. (APA, Financial), MGM Resorts International (MGM) and Automatic Data Processing Inc. (ADP) during the quarter.
The current portfolio of 54 holdings is mostly made up of securities in the financial services sector. According to its fact sheet, the Oakmark Fund slightly underperformed the S&P 500 in 2017 with a return of 21.14%.
Disclosure: No positions.
