Investment firm Barrow, Hanley, Mewhinney & Strauss disclosed last week it exited its stake in MGM Growth Properties LLC (MGP, Financial).
Founded in 1979, the Dallas-based firm says on its website it adheres to “a strict definition of value,” which is exhibited in its equity portfolios through “below-market price-to-earnings ratios, below-market price-to-book ratios, and above-market dividend yields, regardless of market conditions.”
According to GuruFocus Real-Time Picks, a Premium feature, the fund sold its 6.43 million remaining shares of MGM Growth Properties on Dec. 31, impacting the equity portfolio by -0.38%. The stock traded for an average price of $30.10 per share.
Since establishing the position in the second quarter of 2018, GuruFocus estimates the fund has gained 5.18% on the investment.
The Las Vegas-based real estate investment trust, which invests in large-scale destination entertainment and leisure resorts, has a $10.13 billion market cap; its shares closed at $32.32 on Jan. 17 with a price-earnings ratio of 32.98, a price-book ratio of 4.6 and a price-sales ratio of 2.48.
The Peter Lynch chart shows the stock is trading above its fair value, suggesting it is overpriced.
The REIT reported its third-quarter financial results on Nov. 5, posting earnings of 24 cents per share on $219.8 million in rental revenue.
While GuruFocus did not rate MGM’s financial strength or profitability, it did identify some potential red flags to watch out for. For instance, it is being weighed down by low interest coverage. In addition, the Altman Z-Score of 1.3 warns the company is in financial distress and could be at risk of going bankrupt.
The REIT is also being weighed down by returns on equity and assets that underperform a majority of competitors. Regardless, GuruFocus noted its operating margin outperforms over half of its industry peers and it has a moderate Piotroski F-Score of 6, which indicates business conditions are stable.
NWQ Managers (Trades, Portfolio) is now MGM Growth Properties’ largest guru shareholder with 0.44% of outstanding shares. Ron Baron (Trades, Portfolio), Jim Simons (Trades, Portfolio)’ Renaissance Technologies, Steven Cohen (Trades, Portfolio) and Caxton Associates (Trades, Portfolio) also have positions in the stock.
Portfolio composition
The firm’s $50.94 billion equity portfolio, which is composed of 313 stocks as of the end of third-quarter 2019, is heavily invested in the industrials and financial services sectors.
Representing 2.42% of the equity portfolio, other real estate stocks Barrow, Hanley, Mewhinney & Strauss has holdings in as of the three months ended Sept. 30 include CoreCivic Inc. (CXW, Financial), Simon Property Group Inc. (SPG, Financial), Liberty Property Trust (LPT, Financial), Boston Properties Inc. (BXP, Financial), The GEO Group Inc. (GEO, Financial), Healthpeak Properties Inc. (PEAK, Financial) and Jones Lang LaSalle Inc. (JLL, Financial).
See the firm's current portfolio here.
Disclosure: No positions.
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