Marathon Partners Equity Management founder Mario Cibelli (Trades, Portfolio) disclosed on Monday he trimmed his J. Alexander’s Holdings Inc. (JAX, Financial) position by 15.6%.
Known for focusing on less efficient portions of the market, the activist investor’s firm relies on fundamental research to find long-term opportunities among undervalued stocks.
According to GuruFocus Real-Time Picks, a Premium feature, the guru sold 132,200 shares of J. Alexander’s on Aug. 26. He now holds 715,000 shares, which represent 3.49% of the equity portfolio. The stock traded for an average price of $11.75 per share.
GuruFocus estimates Cibelli has gained 16.05% on the investment since the third quarter of 2015.
The Nashville, Tennessee-based company, which operates restaurant chains like J. Alexander’s, Redlands Grill, Lyndhurst Grill, Overland Park Grill, Stoney River and Merus Grill, has a $172.96 million market cap; its shares were trading around $11.78 on Tuesday with a price-earnings ratio of 27.37, a price-book ratio of 1.37 and a price-sales ratio of 0.69.
The Peter Lynch chart shows the stocks is trading above its fair value, suggesting it is overpriced.
On Aug. 9, the restaurant operator reported second-quarter financial results, posting earnings of 15 cents per share on $62.2 million in revenue.
Following a buyout offer and letter from activist investment firm Ancora Advisors in April, J. Alexander’s also announced in August its board is exploring additional opportunities to maximize value for shareholders. Among these options is a possible merger or sale, a large strategic investment in the company, a significant share repurchase program and potential acquisitions of complementary businesses that will increase the revenue base and operating leverage.
GuruFocus rated J. Alexander’s financial strength 5.4 out of 10. Although it has sufficient interest coverage, the Altman Z-Score of 2.01 indicates the company is under some financial pressure.
The company’s profitability and growth fared a bit better, scoring a 6 out of 10 rating. Despite having a declining operating margin and poor returns that underperform a majority of competitors, J. Alexander’s has a moderate Piotroski F-Score of 5, which suggests business conditions are stable.
With 4.86% of outstanding shares, Cibelli is the company’s largest guru shareholder. Jim Simons' (Trades, Portfolio) Renaissance Technologies and Paul Tudor Jones (Trades, Portfolio) also have positions in the stock.
Portfolio composition
Cibelli’s $242 million equity portfolio, which is composed of 16 stocks, is heavily invested in the consumer defensive sector with a weight of 38.48%.
As of the end of the second quarter, the guru’s five largest holdings were e.l.f. Beauty Inc. (ELF, Financial), U.S. Foods Holding Corp. (USFD, Financial), PayPal Holdings Inc. (PYPL, Financial), HD Supply Holdings Inc. (HDS, Financial) and GrubHub Inc. (GRUB, Financial).
Disclosure: No positions.
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