Sands Capital Management recently disclosed its portfolio updates for the fourth quarter of 2019.
Founded in 1992 by Frank M. Sands Sr., Sands Capital Management is a staff-owned independent investment management firm that invests in high-quality growth business. Frank Sands (Trades, Portfolio) Jr. joined the firm in 2000 and now serves as CEO and Chief Investment Officer. The Arlington, Virginia-based firm has two main concentrated growth strategies: Select Growth, which chooses innovative businesses, and Global Growth, which diversifies holdings in countries outside of the U.S. Sands Capital Management has achieved success by focusing on its six investment criteria: sustainable above-average earnings growth, leadership position in a promising business space, a clear mission with a focus on value, good financial strength, rational valuation and significant competitive advantages.
The $34.44 billion equity portfolio consisted of 75 stocks at the end of the fourth quarter. The top holdings were in Visa Inc. (V, Financial) at 8.19% of the equity portfolio, Alibaba Group Holding Ltd. (BABA, Financial) with 6.6% and Amazon.com Inc. (AMZN, Financial) with 6.22%.
In terms of sector weighting, the firm is most invested in technology, communication services and health care.
Based on the firm’s investment criteria, it sold out of its common stock positions in BioMarin Pharmaceutical Inc. (BMRN, Financial), Incyte Corp. (INCY, Financial) and Palo Alto Networks Inc. (PANW, Financial) during the quarter. It also sold out of its holdings in the SPDR S&P 500 ETF Trust (SPY, Financial).
BioMarin Pharmaceutical
Sands Capital Management sold out of its 5,565,620-share holding of BioMarin Pharmaceutical, impacting the equity portfolio by -1.21%. Shared traded at an average price of $75.94 during the quarter.
GuruFocus calculations estimate that the position returned a total gain of 66.04%.
BioMarin is a biotechnology company based in San Rafael, California. Its core research is in enzyme replacement therapies that treat rare genetic diseases. In order to efficiently address these numerous tiny markets, BioMarin develops and commercializes new treatments at a significantly faster rate than the market average.
On Feb. 18, BioMarin shares traded around $88.70 for a market cap of $15.91 billion. GuruFocus has assigned the company a financial strength score of 6 out of 10 and a profitability score of 4 out of 10.
The cash-debt ratio of 0.84 is lower than 81.52% of competitors in the biotechnology industry. The three-year revenue growth rate of 14.8% is weighed down by the return on capital of -6.75% and the industry-typical difficulty in achieving positive net income.
Incyte
The firm also sold out of its 4,149,675 shares of Incyte. The trade had a -0.99% impact on the equity portfolio. During the quarter, the stock traded at an average price of $85.83 per share.
According to GuruFocus estimates, the position returned a total loss of 29.71% to the portfolio.
Incyte is a biopharmaceutical company based in Wilmington, Delaware. It has one drug, Jakafi, which has been Food and Drug Administration-approved as a secondary treatment option for polycythemia vera.
On Feb. 18, Incyte shares traded around $79.28 for a market cap of $17.05 billion and a price-earnings ratio of 38.38. GuruFocus has assigned the company a financial strength score of 9 out of 10 and a profitability score of 6 out of 10.
With a cash-debt ratio of 35.16, Incyte has a strong financial foundation. The three-year revenue growth rate of 20.3% and three-year Ebitda growth rate of 33.3% are outperforming 81.13% of competitors in the biotechnology industry.
Despite these positive signs, Incyte’s shares have been slammed by the negative results of phase three trials in recent years, creating a sort of stigma around its one-drug label. Thus, the stock is not likely to be profitable for investors until the company receives FDA approval for another drug.
Palo Alto Networks
Sands Capital Management sold out of its 1,300,636-share stake in Palo Alto Networks, impacting the equity portfolio by -0.85%. Shares traded at an average price of $227.25 for the quarter.
According to GuruFocus estimates, the investment returned a total gain of 22.08% to the firm.
Based in Santa Clara, California, Palo Alto Networks is a cybersecurity company with core products that include advanced and cloud-based firewalls. With over 60,000 enterprise customers, it is one of the largest cybersecurity companies in the world.
On Feb. 18, shares of Palo Alto Networks traded around $248.86 apiece for a market cap of $24.42 billion. The company has a GuruFocus financial strength score of 4 out of 10 and a profitability score of 4 out of 10.
The cash-debt ratio of 1.58 is average for the industry, but the debt-to-equity ratio of 1.2 is underperforming 87.31% of competitors in the software industry.
The company has a three-year revenue growth rate of 24.7%, and its shares have increased at around the same pace. However, the return on capital is -2.09% and the operating margin is -2.45%, which could be indicative of difficulty controlling expenses or macroeconomic difficulties.
SPDR S&P 500 ETF Trust
During the quarter, the firm also sold out of 270,000-share holding in the SPDR S&P 500 ETF Trust, which it had established in the previous quarter, impacting the equity portfolio by 0.26%. Shares traded around $308.48 over the observed period.
Disclosure: Author owns no shares in any of the stocks mentioned. The mention of stocks in this article does not at any point constitute an investment recommendation. Investors should always conduct their own careful research and/or consult registered investment advisors before taking action in the stock market.
Read more here:
- Bill Ackman's Pershing Square: 4th-Quarter Update
- Chuck Akre's Firm's Biggest 4th-Quarter Buys
- Howard Marks' Oaktree Buys 4 Stocks in 4th Quarter
Not a Premium Member of GuruFocus? Sign up for a free 7-day trial here.
