Auxier Asset Management leader Jeff Auxier (Trades, Portfolio) released his fourth-quarter 2019 portfolio last week, listing six new holdings.
The guru’s Oregon-based firm seeks to invest in “compelling, undervalued” companies that have, among other attributes, strong or improving fundamentals, consistent operating results, a significant competitive advantage, understandable products and a demonstrated ability to earn a high return on capital.
With these criteria in mind, Auxier established positions in 58.com Inc. (WUBA, Financial), Fox Corp. (FOXA, Financial), Illinois Tool Works Inc. (ITW, Financial), Value Line Inc. (VALU, Financial) and Aon PLC (AON, Financial) during the quarter.
He also gained a 12,545-share holding in mass media company ViacomCBS Inc. (VIAC, Financial) in relation to the merger of Viacom Inc. (VIAB) and CBS Corp. (CBS) in December. According to the terms of the agreement, each Viacom Class A and Class B share held by investors was converted into 0.59625 shares of the combined company. Shareholders of CBS continued to own their existing shares. Auxier held approximately 21,155 shares of Viacom prior to the closing of the deal.
58.com
Auxier invested in 4,400 shares of 58.com, dedicating 0.05% of the equity portfolio to the position. The stock traded for an average price of $56.60 per share during the quarter.
The Beijing-based holding company, which owns a portfolio of online classifieds and listing platforms, has an $8.11 billion market cap; its shares were trading around $55.13 on Monday with a price-earnings ratio of 9.25, a price-book ratio of 2.05 and a price-sales ratio of 3.75.
The Peter Lynch chart shows the stock is trading below its fair value, suggesting it is undervalued.
GuruFocus rated 58.com’s financial strength 7 out of 10 on the back of comfortable interest coverage and a high Altman Z-Score of 4.37, which indicates it is in good shape financially.
The company’s profitability scored a 6 out of 10 rating, driven by margins and returns that outperform a majority of competitors and a moderate Piotroski F-Score of 4 that implies operating conditions are stable.
Of the gurus invested in 58.com, Chris Davis (Trades, Portfolio) has the largest position with 0.38% of outstanding shares. Other top guru shareholders are Pioneer Investments (Trades, Portfolio), First Pacific Advisors (Trades, Portfolio), Jim Simons (Trades, Portfolio)’ Renaissance Technologies, Ken Fisher (Trades, Portfolio), the Matthews China Fund (Trades, Portfolio), Lee Ainslie (Trades, Portfolio) and Ray Dalio (Trades, Portfolio).
Fox
Having previously exited a position in Fox in the third quarter, the guru entered a new 6,262-share holding. The trade had an impact of 0.04% on the equity portfolio. Shares traded for an average price of $34.36 each during the quarter.
The media company, which is headquartered in New York, has a market cap of $21.71 billion; its shares were trading around $35.06 on Monday with a price-earnings ratio of 12.24, a price-book ratio of 2.07 and a price-sales ratio of 1.85.
According to the Peter Lynch chart, the stock is slightly undervalued.
Fox’s financial strength and profitability were both rated 5 out of 10 by GuruFocus. Although it has adequate interest coverage, the Altman Z-Score of 2.64 suggests the company is under some financial pressure.
The company is also being supported by strong margins and returns that outperform a majority of industry peers.
With a 4.84% stake, Dodge & Cox is Fox’s largest guru shareholder. Seth Klarman (Trades, Portfolio), Simons’ firm, Daniel Loeb (Trades, Portfolio), Yacktman Asset Management (Trades, Portfolio), the Yacktman Fund (Trades, Portfolio), Mario Gabelli (Trades, Portfolio), Joel Greenblatt (Trades, Portfolio), the MS Global Franchise Fund (Trades, Portfolio), Pioneer and Scott Black (Trades, Portfolio) also have positions in the stock.
Illinois Tool Works
The investor picked up 1,161 shares of Illinois Tool Works, allocating 0.04% of the equity portfolio to the position. He previously sold out of the stock in the first quarter of 2013. During the quarter, the stock traded for an average price of $169.96 per share.
The Glenview, Illinois-based company, which manufactures engineered fasteners and components, equipment and consumable systems and specialty products, has a $58.64 billion market cap; its shares were trading around $182.50 on Monday with a price-earnings ratio of 23.73, a price-book ratio of 19.53 and a price-sales ratio of 4.25.
Based on the Peter Lynch chart, the stock appears to be overvalued. With a share price and price-sales and price-book ratios near 10-year highs, the GuruFocus valuation rank of 1 out of 10 also supports this assessment.
Despite having sufficient interest coverage, GuruFocus rated Illinois Tool Works’ financial strength 5 out of 10. The company also has a high Altman Z-Score of 7.13, which suggests it is in good financial health.
The company’s profitability fared better with a 9 out of 10 rating, driven by operating margin expansion, strong returns that outperform a majority of competitors and a high Piotroski F-Score of 8, which indicates business conditions are healthy. Due to a slowdown in revenue per share growth over the past 12 months, the business predictability rank of three out of five stars is on watch. According to GuruFocus, companies with this rank typically see their stocks gain an average of 8.2% per annum over a 10-year period.
Pioneer has the largest holding in Illinois Tool Works with 0.26% of outstanding shares .Tom Gayner (Trades, Portfolio), John Rogers (Trades, Portfolio), Greenblatt, Chuck Royce (Trades, Portfolio), Gabelli, Dalio, Ainslie, Fisher and Mairs and Power (Trades, Portfolio) also own the stock.
Value Line
After selling out of Value Line in the third quarter of 2019, Auxier purchased a new 7,740-share holding, expanding the equity portfolio 0.04%. The stock traded for an average per-share price of $25.61 during the quarter.
The independent investment research and financial publishing company, which is headquartered in New York, has a market cap of $288.18 million; its shares were trading around $29.89 on Monday with a price-earnings ratio of 22.82, a price-book ratio of 5.6 and a price-sales ratio of 7.62.
The Peter Lynch chart suggests the stock is overvalued. Along with a share price and price-sales ratio near 10-year highs, the GuruFocus valuation rank of 1 out of 10 leans toward overvaluation as well.
On the back of comfortable interest coverage and a cash-debt ratio of 2.67, Value Line’s financial strength was rated 6 out of 10 by GuruFocus. The robust Altman Z-Score of 5.44 indicates it is in good standing financially.
The company’s profitability scored a 7 out of 10 rating. In addition to strong margins and returns that outperform more than half of its industry peers, Value Line is supported by a moderate Piotroski F-Score of 6 and a one-star business predictability rank. GuruFocus says companies with this rank typically see their stocks gain an average of 1.1% per year.
With 0.77% of outstanding shares, Royce is the company’s largest guru shareholder. Simons’ firm also has a position in the stock.
Aon
Having previously divested of a position in Aon in the fourth quarter of 2017, the guru bought a new 1,012-share holding, giving it 0.04% space in the equity portfolio. During the quarter, the stock traded for an average price of $198.38 per share.
The British insurance company has a $53.11 billion market cap; its shares were trading around $227.19 on Monday with a price-earnings ratio of 35.88, a price-book ratio of 15.66 and a price-sales ratio of 4.98.
According to the Peter Lynch chart and the GuruFocus valuation rank of 1 out of 10, the stock is overvalued.
GuruFocus rated Aon’s financial strength 5 out of 10. Although the company has issued approximately $1.1 billion in new long-term debt over the past three years, it is at a manageable level due to adequate interest coverage. The Altman Z-Score of 1.95, however, indicates it is under some financial pressure since it has recorded a loss in operating income over the past several years.
The company’s profitability fared much better, scoring a 9 out of 10 rating on the back of strong margins and returns that outperform a majority of competitors, a high Piotroski F-Score of 7 and consistent earnings and revenue growth. Aon also has a four-star business predictability rank. GuruFocus noted that companies with this rank typically see their stocks gain an average of 9.8% per year.
Of the gurus invested in Aon, First Pacific has the largest position with 0.39% of outstanding shares. Other top guru shareholders include Andreas Halvorsen (Trades, Portfolio), Steven Romick (Trades, Portfolio), Pioneer, Wallace Weitz (Trades, Portfolio), NWQ Managers (Trades, Portfolio), First Eagle Investment (Trades, Portfolio), Steven Cohen (Trades, Portfolio) and Dalio.
Additional trades and portfolio composition
During the quarter, Auxier also boosted several holdings, including Cisco Systems Inc. (CSCO, Financial), Cognizant Technology Solutions Corp. (CTSH, Financial), The Mosaic Co. (MOS, Financial) and Alphabet Inc. (GOOGL, Financial).
The guru’s $537 million equity portfolio, which is composed of 165 stocks, is largely invested in the health care, financial services and consumer defensive sectors.
In his fourth-quarter letter to investors, Auxier said the Auxier Focus Fund returned 20.20% in 2019, underperforming the S&P 500 Index’s 31.49% return.
Disclosure: No positions.
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