Ken Heebner (Trades, Portfolio), co-founder of Capital Growth Management, disclosed last week that his firm closed its position in Citigroup Inc. (C, Financial) and Morgan Stanley (MS, Financial) and trimmed over 80% of its holding in Bank of America Corp. (BAC, Financial). With the proceeds, the firm established 26 new positions, including large bets on Tiffany & Co. (TIF, Financial) and VF Corp. (VFC, Financial).
Known for making bold and swift sector calls and making large bets based on his convictions, Heebner saw potential in retail: the firm said in its second-quarter letter that retail sales “bounced back from a slow first quarter” and rose 0.8% in May according to the Commerce Department.
Firm exits financial services holdings
The firm sold 920,000 shares of Citigroup for an average price of $70.70 per share and 2.5 million shares of Morgan Stanley for an average price of $48.83 per share, trimming 9.09% of its portfolio in the aggregate. CGM also sold 4.646 million shares of Bank of America, axing 80.42% of the position and a further 6.59% of the equity portfolio.
CGM said in its letter the fund declined 9.8% during the June quarter, underperforming the Standard & Poor’s 500 index's return of 3.4%. Trade tensions and rising interest rates negatively influenced stock prices, sending the SPDR Select Sector Fund – Financial (ARCA:XLF) down approximately $2, or 7%, over the past six months.
Top new buy is in luxury jeweler
CGM invested in 460,000 shares of Tiffany & Co. for an average price of $130.72 per share. The firm dedicated 3.07% of its equity portfolio to the position.
New York-based Tiffany & Co. designs, manufactures and markets jewelry, watches and luxury accessories using polished diamonds made directly in the company’s workshops. CEO Alessandro Bogliolo said worldwide sales increased 12% on continued “strength and breath” of growth across all regions and product categories. Asia-Pacific sales increased 28% on increased spending from local and foreign customers. Based on the strong performance, Bogliolo increased the full-year earnings guidance by over 10 cents from the previous guidance range of $4.50 to $4.70 per diluted share.
GuruFocus ranks Tiffany’s business predictability three stars out of five on consistent revenue growth over the past 10 years. The company’s Piotroski F-score ranks a strong 8 out of 9 on several positive indicators, which include increasing current ratios, gross margin and asset turnover year over year.
Spiros Segalas (Trades, Portfolio) invested in 471,044 shares of Tiffany & Co. during the quarter.
VF Corp
The firm invested in 450,000 shares of VF Corp., the parent company of major apparel brands like The North Face and Vans. Shares averaged $90.59 during the quarter and constitute 2.17% of the equity portfolio.
The Greensboro, North Carolina-based company said active segment revenues increased 19% year over year on strong growth in Vans, a major manufacturer of skateboarding shoes and related apparel. GuruFocus ranks the company’s profitability 7 out of 10 on several positive investing signs, which include consistent revenue growth and a strong Piotroski F-score of 7. Additionally, the company’s business predictability ranks two stars out of five.
See also
The firm’s other top buys included United Rentals Inc. (URI, Financial), Eli Lily and Co. (LLY, Financial) and D.R. Horton Inc. (DHI, Financial).
Disclosure: No positions.
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