Richard Snow (Trades, Portfolio), founder of Snow Capital Management, has released his portfolio for the first quarter of 2020. The guru reduced his holdings of Dow Inc. (DOW, Financial) and Kohl's Corp. (KSS, Financial), added to his holdings of Facebook Inc. (FB, Financial) and Laboratory Corp of America Holdings (LH, Financial) and bought into Tyson Foods Inc. (TSN, Financial).
Snow looks for companies that are financially strong, but with stock prices that have been depressed due to temporary or intermediate term difficulties. Snow relies on extensive research to determine the probability of a solution, gain confidence in the company's ability to survive the difficulty and estimate the value of the stock once the difficulty has passed. Snow believes that, when using this strategy, the downside is protected because the stock price is already depressed, making it a reasonably safe strategy, yet one capable of achieving significant returns.
Portfolio overview
The portfolio contains 142 stocks, with 23 new additions. It is valued at $435 million and has seen a 17% turnover rate. Top holdings include JPMorgan Chase & Co. (JPM, Financial) (3.41%), Centene Corp. (CNC, Financial) (3.26%), Biogen Inc. (BIIB, Financial) (3.17%), Bank of America Corp. (BAC, Financial) (3.15%) and Commercial Metals Co. (CMC, Financial) (3.10%).
By weight, the top three sectors include financial services (25.66%), health care (17.70%) and consumer cyclical (13.02%).
Dow
Snow reduced his holding of Dow with the sale of 237,524 shares. This represented a 93.78% reduction in the holding. Shares traded at an average price of $42.95 per share during the quarter and the sale represented a -1.80% impact on the portfolio.
Dow was spun off from parent company DowDuPont in 2019 before going public. The company produces commodity chemicals. As of May 22, the stock was trading at $36.09 per share with a market cap of $26.44 billion. According to the Peter Lynch chart, the stock was trading below its intrinsic value at the beginning of 2020.
GuruFocus gives the company a financial strength rating of 4 out of 10 and a profitability rank of 4 out of 10. The company has an operating margin of 9.01%, placing it higher than 55.40% the chemical industry. A cash-to-debt ratio of 0.13 ranks the company lower than 78.81% of the industry.
Kohl's
The guru also reduced his holding in Kohl's with the sale of 194,051 shares, representing an 81.41% decrease. The shares traded at an average price of $37.94 per share during the quarter and the sale represented a -1.37% impact on the portfolio.
Kohl's is a U.S.-based department store chain. The store primarily retails clothing and softgoods. As of May 22, the company was trading at $17.44 with a market cap of $2.71 billion. According to the Peter Lynch chart, the company was overvalued at the end of 2019.
GuruFocus gives the company a financial strength rating of 5 out of 10, a profitability rank of 8 out of 10 and a valuation rank of 9 out of 10. A cash-to-debt ratio of 0.12, which is lower than 78.86% of the industry, contributes to the low financial strength score. The company boasts a price-earnings ratio of 35.49, which is higher than 95.84% of the industry.
Snow added to his position in Facebook with the purchase of 46,346 shares. The shares traded at an average price of $196.62 during the quarter and the purchase represented a 918.65% increase in the holding. The purchase had an overall 1.78% impact on the portfolio.
Founded by Mark Zuckerberg, the social media and technology company is based in California. As of May 22, the stock was trading at $234.57 per share with a market cap of $669.03 billion. According to the Peter Lynch chart, the company was overvalued at the end of 2019.
GuruFocus gives the company a financial strength rating of 9 out of 10 and a profitability rank of 9 out of 10. The company has a cash-to-debt ratio of 5.83, placing it higher than 54.65% of the industry. An operating margin of 36.21% ranks the company higher than 93.40% of interactive media companies. The company has consistently seen operating cash flow increase.
Laboratory Corp of America Holdings
With the purchase of 48,531 shares, Snow increased his holding in LabCorp by 244.23%. The shares traded at an average price of $168.30 during the quarter and the addition to the holding represented a 1.41% impact on the portfolio.
The American company is headquarted in North Carolina. It operates one of the largest clinical laboratory networks in the world. As of May 22, the stock traded at $170.16 with a market cap of $16.52 billion. The Peter Lynch chart shows the company was overvalued at the end of 2019.
GuruFocus gives the copmany a financial strength rating of 4 out of 10, a profitability rank of 9 out of 10 and a valuation rank of 5 out of 10. The company has a higher than average operating margin, but a cash-to-debt ratio of 0.05 places is lower than 96.05% of the industry.
Tyson
Snow also bought into Tyson for the first time since the third quarter of 2019. The Guru purchased 95,868 shares at an average price of $75.28 per share. The purchase had a 1.27% impact on the porfolio overall.
The Arkansas-based company operates in the food industry. It is one of the largest processor and retailers of meats in the world. As of May 22, the stock was trading at $59.19 per share with a market cap of $21.56 billion. The Peter Lynch chart suggests the company was trading at a fair value at the end of 2019.
GuruFocus gives the company a financial strength rating of 5 out of 10, a profitability rank of 8 out of 10 and a valuation rank of 5 out of 10. The company boasts a forward price-earnings ratio fo 10.46 that is higher than 88.08% of companies in their industry. A low cash-to-debt ratio of 0.04 places it below 88.07% of the industry, but an Altman Z-Score of 2.93 places it on the edge of the safe zone.
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. Portfolio updates reflect only common stock positions as per the regulatory filings for the quarter in question and may not include changes made after the quarter ended.
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