Arnold Schneider's Top 5 Buys in 2nd Quarter

Top buys include Einhorn's Brighthouse Financial

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Aug 14, 2018
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Arnold Schneider (Trades, Portfolio), founder and chief investment officer of Schneider Capital Management, disclosed on Monday that his five top buys for the second quarter were Brighthouse Financial Inc. (BHF, Financial), SM Energy Co. (SM, Financial), Manitowoc Co. Inc. (MTW, Financial), Arconic Inc. (ARNC, Financial) and American International Group Inc. (AIG, Financial).

According to its fact sheet, the Schneider Small Cap Value Fund seeks long-term capital growth by investing in undervalued securities with potential for positive change based on fundamental analysis.

Brighthouse Financial

Schneider invested in 367,506 shares of Brighthouse Financial, one of David Einhorn (Trades, Portfolio)’s largest holdings. The stock averaged $48.12 during the quarter; Schneider dedicated 2.89% of his equity portfolio to the position.

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Brighthouse Financial disclosed on Aug. 6 a net loss of $239 million for the quarter, compared to net income of $246 million in the prior-year quarter. Net derivative mark-to-market losses contributed to the net loss.

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GuruFocus ranks Brighthouse Financial’s profitability 3 out of 10 on several factors, including a three-year revenue growth rate of -9.50% and profit margins that underperform 95% of global competitors.

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Brighthouse CEO Eric Steigerwalt said the company still expects to reach its full-year guidance targets, which include adjusted earnings between $8.50 and $9 per share and adjusted return on equity of 8%.

SM Energy

Schneider invested in 522,507 shares of SM Energy for an average price of $23.32 per share. With this transaction, the guru increased his equity portfolio 2.63%.

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Denver-based SM Energy engages in the acquisition, exploration and development of oil and natural gas in onshore North America. CEO Jay Ottoson said on Aug. 1 that the company made “significant improvements” in profit margins and capital efficiency,” driven primarily by strong operations execution and “best in class” results from the company’s RockStar wells.

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Hotchkis and Wiley also invested in SM Energy during the quarter.

Manitowoc

Schneider invested in 208,973 shares of Manitowoc for an average price of $26.47 per share. With this transaction, the guru expanded his equity portfolio 1.06%.

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Milwaukee-based Manitowoc manufactures cranes, foodservice equipment and other related products. CEO Barry Pennypacker said Manitowoc achieved its fifth consecutive quarter of year-over-year improvement in earnings before interest, taxes, depreciation and amortization percentage, along with a 14% year-over-year increase in orders. Quarterly net sales of $495.3 million increased 26% year over year on strong crane shipments across all regions, especially in the U.S. and Europe.

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Chuck Royce (Trades, Portfolio) also established a position in Manitowoc during the quarter.

Arconic

Schneider invested in 278,000 shares of Arconic for an average price of $19.37 per share. The guru increased his equity portfolio 0.93% with this transaction.

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Alcoa Corp. (AA, Financial) spinoff Arconic said on July 31 that organic revenues increased 5% year over year, driven by several factors, including high volumes in commercial transportation, automotive, aerospace engines, defense and building markets.

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CEO Chip Blankenship said while “there is plenty of work left to do,” Arconic is delivering strong operational performance “where [the company] needs it the most.” Arconic’s operating margin of 9.35% outperforms 62% of global competitors.

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AIG

Schneider invested in 83,349 shares of AIG for an average price of $54.14 per share. The guru increased his equity portfolio 0.87% with this transaction.

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New York-based AIG provides various insurance and financial services, including property, casualty and life insurance, retirement products and mortgage insurance. GuruFocus lists three positive investing signs for AIG, including a price-sales ratio near a five-year low and a dividend yield near a five-year high.

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See also

Schneider’s other buys for the quarter include Cameco Corp. (CCJ, Financial), Intrepid Potash Inc. (IPI, Financial), Babcock & Wilcox Enterprises Inc. (BW, Financial), Ur-Energy Inc. (URG, Financial) and U.S. Gold Corp. (USAU, Financial).

Disclosure: No positions.