Spiros Segalas (Trades, Portfolio), manager of the Harbor Capital Appreciation Fund, disclosed five new positions when he released his first-quarter portfolio earlier this week.
Part of Chicago-based Harbor Funds, the guru’s fund primarily invests in companies with market caps of at least $1 billion at the time of purchase. He focuses on companies that have strong balance sheets and earnings performance, good sales momentum and growth outlook, a history of high profitability, a unique market position and a capable, committed management team.
Based on these criteria, Segalas established holdings in Eli Lilly & Co. (LLY, Financial), Uber Technologies Inc. (UBER, Financial), LVMH Moet Hennessy Louis Vuitton SE (XPAR:MC, Financial), Boston Scientific Corp. (BSX, Financial) and Goldman Sachs Group Inc. (GS, Financial) during the quarter.
Eli Lilly
The guru invested in 2.35 million shares of Eli Lilly, allocating 1.02% of the equity portfolio to the stake. The stock traded for an average price of $126.22 per share during the quarter.
The Indianapolis-based pharmaceutical company has a $128.58 billion market cap; its shares were trading around $132.02 on Friday with a price-earnings ratio of 15.48, a price-book ratio of 49.48 and a price-sales ratio of 5.62.
The Peter Lynch chart shows the stock is trading above its fair value, suggesting it is overvalued. The GuruFocus valuation rank of 1 out of 10 also leans toward overvaluation even though the price-earnings ratio is near a five-year low.
GuruFocus rated Eli Lilly’s financial strength 5 out of 10. Although the company has issued approximately $7 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 3.39 also indicates it is in good financial standing despite having a Sloan ratio that is indicative of poor earnings quality.
The company’s profitability scored an 8 out of 10 rating, driven by an expanding operating margin, strong returns that outperform a majority of competitors and a moderate Piotroski F-Score of 6, which implies conditions are stable. Eli Lilly also has a business predictability rank of one out of five stars. According to GuruFocus, companies with this rank typically return an average of 1.1% per annum over a 10-year period.
Of the gurus invested in Eli Lilly, PRIMECAP Management (Trades, Portfolio) has the largest stake with 4.49% of its outstanding shares. Other top guru shareholders are the Vanguard Health Care Fund (Trades, Portfolio), Dodge & Cox, Pioneer Investments (Trades, Portfolio), Ken Fisher (Trades, Portfolio), Jeremy Grantham (Trades, Portfolio), Mairs and Power (Trades, Portfolio), Steven Cohen (Trades, Portfolio), the Eaton Vance Worldwide Health Sciences Fund (Trades, Portfolio), Louis Moore Bacon (Trades, Portfolio), Mario Gabelli (Trades, Portfolio) and Hotchkis & Wiley.
Uber Technologies
Having previously sold out of Uber in the third quarter of 2019, Segalas entered a new 8.82 million-share stake, dedicating 0.99% of the equity portfolio to it. During the quarter, the stock traded for an average price of $30.9 per share.
The ridesharing service, which is headquartered in San Francisco, has a market cap of $48.47 billion; its shares were trading around $25.42 on Friday with a price-book ratio of 3.1 and a price-sales ratio of 2.76.
According to the median price-sales chart, the stock is overvalued.
Uber’s financial strength was rated 5 out of 10 by GuruFocus. Even though it has a good cash-debt ratio of 1.49, the low Altman Z-Score of 0.94 warns that the company could be in danger of going bankrupt.
The company’s profitability fared even worse, scoring a 1 out of 10 rating on the back of negative margins and returns that underperform a majority of industry peers. It also has a low Piotroski F-Score of 3, which suggests poor operating conditions.
With 2.22% of outstanding shares, Andreas Halvorsen (Trades, Portfolio) is Uber’s largest guru shareholder. Other top guru investors include Chase Coleman (Trades, Portfolio), Steve Mandel (Trades, Portfolio), Cohen, Philippe Laffont (Trades, Portfolio), Pioneer Investments (Trades, Portfolio), Stanley Druckenmiller (Trades, Portfolio), Bacon, Paul Tudor Jones (Trades, Portfolio), Lee Ainslie (Trades, Portfolio), Ray Dalio (Trades, Portfolio)’s Bridgewater Associates, Mario Cibelli (Trades, Portfolio) and Gabelli.
LVMH
The investor picked up 355,407 shares of LVMH, expanding the equity portfolio by 0.48%. Shares traded for an average price of 408.61 euros ($450.04) each during the quarter.
The French luxury goods company, which is in the process of acquiring iconic jeweler Tiffany & Co. (TIF, Financial), has a market cap of 183.16 billion euros; its shares closed at 363.7 euros on Thursday with a price-earnings ratio of 25.58, a price-book ratio of 5.01 and a price-sales ratio of 3.41.
Based on the Peter Lynch chart, the stock appears to be overvalued. The GuruFocus valuation rank of 1 out of 10 supports this assessment even though the price ratios are near multiyear lows.
GuruFocus rated LVMH’s financial strength 5 out of 10. Despite issuing approximately 4.6 billion euros in new long-term debt over the past three years, it is still at a manageable level since the company has a comfortable level of interest coverage. The Altman Z-Score of 2.7, however, suggests it is under some financial pressure.
The company’s profitability scored a 9 out of 10 rating, driven by expanding margins, strong returns that outperform a majority of competitors and a moderate Piotroski F-Score of 6. Due to consistent earnings and revenue growth, LVMH also has a perfect five-star business predictability rank. GuruFocus says companies with this rank typically return an average of 12.1% per year.
No other gurus currently hold the company’s Paris-listed shares.
Boston Scientific
The guru purchased 3.44 million shares of Boston Scientific, giving it 0.45% space in the equity portfolio. The stock traded for an average per-share price of $43.53 during the quarter.
The Marlborough, Massachusetts-based medical device manufacturer has a $41.88 billion market cap; its shares were trading around $30.38 on Friday with a price-earnings ratio of 9, a price-book ratio of 3.02 and a price-sales ratio of 3.93.
The Peter Lynch chart suggests the stock is undervalued. The GuruFocus valuation rank of 3 out of 10, however, leans toward overvaluation.
Boston Scientific’s financial strength was rated 4 out of 10 by GuruFocus. As a result of issuing approximately $4.3 billion in new long-term debt over the past three years, the company has poor interest coverage. The Altman Z-Score of 1.95 indicates it is under some financial pressure as it has poor earnings quality and its assets are building up at a faster rate than revenue is growing.
The company’s profitability scored a 6 out of 10 rating on the back of an expanding operating margin, strong returns that outperform a majority of industry peers and a moderate Piotroski F-Score of 4. Boston Scientific’s one-star business predictability rank is on watch, however.
PRIMECAP is the company’s largest guru shareholder with a 3.20% stake. Other gurus invested in the stock include Vanguard’s Health Care Fund, Halvorsen, Daniel Loeb (Trades, Portfolio), Pioneer, Diamond Hill Capital (Trades, Portfolio), David Carlson (Trades, Portfolio), Frank Sands (Trades, Portfolio), Cohen, Eaton Vance, Dodge and Cox, Gabelli, the Signature Select Canadian Fund (Trades, Portfolio), Fisher and Mairs & Power.
Goldman Sachs
After divesting of a position in Goldman Sachs in the second quarter of 2019, Segalas opened a new 240,661-share holding. The trade had an impact of 0.18% on the equity portfolio. During the quarter, shares traded for an average price of $229.48.
The investment bank, which is headquartered in New York, has a market cap of $55.13 billion; its shares were trading around $159.88 on Friday with a price-earnings ratio of 7.62, a price-book ratio of 0.72 and a price-sales ratio of 1.81.
According to the Peter Lynch chart, the stock is undervalued. The GuruFocus valuation rank of 8 out of 10 supports this assessment.
Weighed down approximately $12.2 billion in new long-term debt, GuruFocus rated Goldman Sachs’ financial strength 3 out of 10.
The company’s profitability did not fare much better, scoring a 4 out of 10 rating despite having margins and returns that outperform at least half of its competitors. It also has a one-star business predictability rank.
Of the many gurus invested in Goldman Sachs, Warren Buffett (Trades, Portfolio) has the largest stake with 3.39% of outstanding shares. Other top guru shareholders include Dodge and Cox, Hotchkis & Wiley, Bill Nygren (Trades, Portfolio), Richard Pzena (Trades, Portfolio), Pioneer, Tom Gayner (Trades, Portfolio), Charles de Vaulx (Trades, Portfolio), Fisher, Chris Davis (Trades, Portfolio) and Yacktman Asset Management (Trades, Portfolio).
Additional trades and portfolio performance
Segalas also boosted several other holdings during the quarter, including PayPal Holdings Inc. (PYPL, Financial), Kering SA (XPAR:KER, Financial), Alphabet Inc. (GOOG, Financial)(GOOGL), Shopify Inc. (SHOP), Workday Inc. (WDAY) and Amazon.com Inc. (AMZN).
The guru’s $32.31 billion equity portfolio, which is composed of 61 stocks, is heavily invested in the technology sector at 33.32%, followed by smaller positions in the consumer cyclical (22.98%) and communication services (13.55%) spaces.
According to its fact sheet, the Capital Appreciation Fund posted a return of 33.28% in 2019, eclipsing the S&P 500’s 31.49% return.
Disclosure: No positions.
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