Omega Advisors leader Leon Cooperman (Trades, Portfolio) disclosed on Thursday that he boosted his stake in Gannett Co. Inc. (GCI, Financial) by 22.43%.
At the end of 2018, the guru converted his New York-based hedge fund into a family office structure. In a letter to clients, Cooperman, who is in his 70s, said he decided to make the change because he does not want to spend the rest of his life “chasing the S&P 500 and focused on generating returns on investor capital.” His investment strategy combines a macro view with fundamental valuations.
According to GuruFocus Real-Time Picks, a Premium feature, Cooperman invested in 1.38 million shares of Gannett on Dec. 31, bringing his total holding to 7.5 million shares. The position represents 2.85% of the firm’s equity portfolio. The stock traded for an average price of $6.38 per share.
GuruFocus estimates Cooperman has lost 15% on the investment since the first quarter of 2014.
In November, New Media Investment Group Inc. announced the successful completion of its cash-and-stock acquisition of Legacy Gannett. Following the merger, the combined company changed its name to Gannett Co. Inc. as well as adopted the ticker “GCI” on the New York Stock Exchange.
The McLean, Virginia-based mass media holding company, which is the largest U.S. newspaper publisher as measured by total daily circulation, has a $782.75 million market cap; its shares were trading around $6.37 on Friday with a price-book ratio of 0.61 and a price-sales ratio of 0.24, which GuruFocus noted were near a 10-year low.
According to the median price-sales chart, the stock is trading below its historical average, suggesting it is undervalued.
GuruFocus rated Gannett’s financial strength 4 out of 10 on the back of poor interest coverage as well as a low Altman Z-Score of 1.67, which warns the company could be at risk of going bankrupt since it has recorded a decline in revenue per share over the past three years.
The company’s profitability did not fare much better, scoring a 5 out of 10 rating. In addition to poor margins and returns that underperform over half of its competitors, Gannett has a low Piotroski F-Score of 2, which indicates operating conditions are in poor shape. Its assets are also building at a faster rate than revenue is growing, which indicates the company may be becoming less efficient.
With 6.14% of outstanding shares, Cooperman is by far Gannett’s largest guru shareholder. Other guru investors who see value in the stock are Barrow, Hanley, Mewhinney & Strauss, Chuck Royce (Trades, Portfolio), Jim Simons (Trades, Portfolio)’ Renaissance Technologies, Joel Greenblatt (Trades, Portfolio) and Paul Tudor Jones (Trades, Portfolio).
Portfolio composition
Cooperman’s $1.68 billion equity portfolio, which was composed o f 61 stocks as of the end of the third quarter, is heavily invested in the industrials space, followed by smaller holdings in the energy, communication services and financial services sectors.
Other media companies the guru currently owns are Gray Television Inc. (GTN, Financial), Alphabet Inc. (GOOGL, Financial), The McClatchy Co. (MNI, Financial), AMC Networks Inc. (AMCX, Financial) and Tribune Publishing Co. (TPCO, Financial).
Disclosure: No positions.
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