Activist investment firm Jana Partners (Trades, Portfolio) disclosed on June 27 it trimmed its stake in HD Supply Holdings Inc. (HD) by 24.33%.
The New York-based investment firm, which was founded in 2001 by Barry Rosenstein, picks stocks using a value-oriented, event-driven approach, meaning it will push management to make changes in order to improve performance.
According to GuruFocus real-time picks, Jana sold 2.2 million shares of Atlanta-based HD Supply for an average price of $43.37 per share. It now holds 6.8 million shares, which represent 9.15% of the portfolio.
GuruFocus data reveals the firm has made an estimated gain of 21% on the investment since the first quarter of 2016.
The industrial distributor has a market cap of $7.92 billion; its shares were trading around $43.09 on Friday with a price-earnings ratio of 8.40, a price-book ratio of 5.32 and a price-sales ratio of 1.48.
According to the Peter Lynch chart below, the stock is overpriced since it is trading higher than its fair value.
In addition, GuruFocus estimates the stock has risen 10% year to date.
HD Supply’s financial strength and profitability and growth were both rated 5 out of 10 by GuruFocus. The company has insufficient interest coverage, which means it has difficulty paying the interest on its outstanding debt. In addition, its Altman Z-Score of 2.92 implies it is struggling financially. Further, the company’s Beneish M-Score of -2.06 indicates it possibly manipulates its financial statements.
The company’s strengths include an expanding operating margin, which outperforms 87% of competitors, and a Piotroski F-Score of 7, which suggests it has good business operations.
Despite the reduction, Jana is still HD Supply’s largest shareholder among the gurus with 3.75% of outstanding shares. Other top guru investors include John Griffin (Trades, Portfolio), Steven Cohen (Trades, Portfolio), Mario Cibelli (Trades, Portfolio) and First Eagle Investment (Trades, Portfolio).
Portfolio
Consumer cyclical stocks make up the largest percentage of the firm’s $3.4 billion portfolio, which is composed of 43 stocks, followed by the health care and industrials sectors.
Other investments Jana has made in the industrials sector are Northrop Grumman Corp. (NOC, Financial), ADT Inc. (ADT, Financial), Osprey Energy Acquisition Corp. (OSPRU, Financial), W.W. Grainger Inc. (GWW, Financial) and First Data Corp. (FDC, Financial).
Disclosure: No positions.
