Grantham Mayo Van Otterloo, the firm co-founded by Jeremy Grantham (Trades, Portfolio), disclosed this week that its top five buys for fourth-quarter 2019 were Humana Inc. (HUM, Financial), Lyft Inc. (LYFT, Financial), The Stars Group Inc. (TSG, Financial), Wright Medical Group NV (WMGI, Financial) and Tiffany & Co. (TIF, Financial).
According to its website, GMO applies a long-term, valuation-based investment philosophy to unlock shareholder value for its clients. The firm also mentions that most of the “interesting” investing opportunities occur at market extremes and that pursuing contrarian strategies can result in good value creation.
As of quarter-end, GMO’s $14.97 billion equity portfolio contains 672 stocks, with turnover of 12% and 92 new holdings. The top three sectors in terms of weight are technology, health care and financial services.
Humana
GMO purchased 360,505 shares of Humana, giving the position 0.88% weight in the equity portfolio. Shares averaged $319.30 during the quarter.
The Louisville, Kentucky-based company provides government-sponsored health care plans, including Medicare and Medicaid. GuruFocus ranks the company’s profitability 8 out of 10 on several positive investing signs, which include a 4.5-star predictability rank and a three-year earnings growth rate that outperforms 80% of global competitors.
Other gurus with holdings in Humana include Larry Robbins (Trades, Portfolio)’ Glenview Capital Management and Steve Mandel (Trades, Portfolio)’s Lone Pine.
Lyft
GMO purchased 2,076,584 shares of Lyft, giving the stake 0.60% weight in the equity portfolio. Shares averaged $44.02 during the quarter.
The San Francisco-based rideshare company said on Tuesday that net losses for the quarter were $356 million on an as-reported basis, compared with net losses of $248.9 million during the December 2018 quarter. Despite this, revenues of $1.017 billion outperformed the Refinitiv consensus estimate of $984 million and was over 50% higher than revenues of $669.5 million in the prior quarter.
According to GuruFocus, Lyft has a cash-to-debt ratio of 6.96, suggesting good short-term financial strength.
The Stars Group
GMO purchased 2,319,700 shares of The Stars Group, giving the holding 0.40% weight in the equity portfolio. Shares averaged $22.56 during the quarter.
The Toronto-based company operates a wide range of online and land-based casinos through brands like PokerStars.net and Sky Casino. GuruFocus ranks the company’s profitability 7 out of 10: Even though its net margin and return on equity are underperforming over 71% of global competitors, The Stars Group’s Joel Greenblatt (Trades, Portfolio) return on capital and three-year revenue growth rate are outperforming over 87% of global travel and leisure companies. Additionally, operating margins have increased approximately 2.10% per year over the past five years.
Wright Medical Group
GMO purchased 1,819,000 shares of Wright Medical Group, giving the stake 0.37% weight in the equity portfolio. Shares averaged $26.40 during the quarter.
The Dutch medical instruments company develops devices and products in six categories: lower extremities, upper extremities, biologics, large joints, sport medicine and other. GuruFocus ranks Wright Medical’s financial strength and profitability 3 out of 10 on several weak indicators, which include debt ratios that underperform over 90% of global competitors and net profit margins that underperform over 61% of global medical instruments companies.
Tiffany
GMO purchased 392,433 shares of Tiffany, giving the holding 0.35% weight in the equity portfolio. Shares averaged $119.09 during the quarter.
The New York-based jeweler, which is bound to a merger with LVMH Moet Hennessy Louis Vuitton (MIL:LVMH, Financial), sells its products through retail stores worldwide, the internet and business-to-business operations. GuruFocus ranks Tiffany’s profitability 8 out of 10 on several positive investing signs, which include profit margins and returns outperforming over 93% and 82% of global competitors.
See also
GMO’s other buys for the quarter included holdings in Charles Schwab Corp. (SCHW, Financial) and iShares MSCI China ETF (MCHI, Financial).
Disclosure: Author is long iShares MSCI China.
Read more here:
- First Eagle Buys Buffett’s DaVita in the 4th Quarter
- Tom Gayner’s Top 5 Buys in the 4th Quarter
- Francisco Garcia Parames’ New Buys for the 4th Quarter
Not a Premium Member of GuruFocus? Sign up for a free 7-day trial here.
