MFP Investors LLC recently disclosed its portfolio updates for the first quarter of 2020, which ended on March 31.
MFP Investors is a New York-based hedge fund led by renowned money manager Michael Price (Trades, Portfolio), who became the manager after selling Heine Securities to Franklin Resources in 1996. Price utilizes a value-based investing style, focusing on out-of-favor small caps that trade at an attractive valuation.
Based on its investing criteria, the firm’s top buys for the quarter were Taubman Centers Inc. (TCO, Financial) and FLIR Systems Inc. (FLIR, Financial), while its top sells were Tiffany & Co. (TIF, Financial) and Campbell Soup Co. (CPB, Financial).
Price established a new position of 215,000 shares in Taubman Centers after selling out of the firm’s previous investment in the company in the third quarter of 2017. The trade had a 1.83% impact on the equity portfolio. During the quarter, shares traded for an average price of $41.53.
Taubman Centers is a real estate investment trust that owns, manages and leases outlet shopping centers in the U.S. and several Asian countries. Based in Bloomfield Hills, Michigan, the company’s portfolio consists of 26 properties.
On May 28, shares of Taubman Centers traded around $40.23 apiece for a market cap of $2.49 billion and a price-earnings ratio of 12.05. According to the Peter Lynch chart, the stock is trading above its intrinsic value but in line with its historical median valuation.
GuruFocus gives the company a financial strength rating of 2 out of 10 and a profitability rating of 7 out of 10. The Altman Z-Score of 0.35 and interest coverage ratio of 1.11 suggest that the company may need to source additional liquidity to avoid bankruptcy. The operating margin of 24.71% is below 77.16% of competitors, while the return on invested capital is only slightly higher than the weighted average cost of capital, indicating low profitability.
FLIR Systems Inc.
The firm also added 123,114 shares to the holding in FLIR Systems, increasing the stake by 3221.19% for a total holding of 126,936 shaes. The trade a 0.80% impact on the equity portfolio. Shares traded for an average price of $47.38 during the quarter.
Headquartered in Wilsonville, Oregon, FLIR Systems is a global leader in the designing and manufacturing of thermal imaging infrared cameras, components and sensors. Its products are used for defense, industrial and commercial applications.
On May 28, shares of FLIR Systems traded around $44.95 apiece for a market cap of $5.97 billion and a price-earnings ratio of 49.54. According to the Peter Lynch chart, the stock is trading above what recent earnings were worth.
GuruFocus gives the company a financial strength rating of 6 out of 10 and a profitability rating of 7 out of 10. The cash-debt ratio of 0.37 is lower than 78.47% of competitors, but the Altman Z-Score of 4.33 suggests that the company is not in danger of bankruptcy. With an operating margin of 13.29%, which is higher than 84.50% of competitors, FLIR has grown its top line steadily in recent years, though net income has been more variable.
The firm cut its investment in Tiffany & Co. by 132,500 shares, or 84.13%, reducing the holding to 25,000 shares and impacting the equity portfolio by -2.47%. During the quarter, shares traded for an average price of $131.71.
Tiffany & Co. is an American luxury jewelry and retail company. The company is set to be acquired by Louis Vuitton (MIL:LVMH) in an all-cash transaction, though the deal's close has been pushed back to October.
On May 28, shares of Tiffany traded around $128.25 apiece for a market cap of $15.59 billion and a price-earnings ratio of 28.67. The Peter Lynch chart shows that the stock is in the overvalued range.
GuruFocus gives the company a financial strength rating of 6 out of 10 and a profitability rating of 8 out of 10. The interest coverage ratio of 19.03 and Altman Z-Score of 4.81 indicate the company has a strong balance sheet. The operating margin of 16.67% and net margin of 12.41% are higher than 92% of competitors, and both metrics have grown steadily over the company’s history.
Price’s firm sold out of its 218,175-share investment in Campbell Soup, impacting the equity portfolio by -1.51%. Shares traded for an average price of $48.13 during the quarter.
Campbell Soup is an American processed food and snack company that is most famous for its wide variety of canned soups. The company also owns the Goldfish, V8 and Pepperidge Farm brands.
On May 28, shares of Campbell traded around $49.34 apiece for a market cap of $14.89 billion and a price-earnings ratio of 10.34. The Peter Lynch chart indicates that the stock could be overvalued.
GuruFocus gives the company a financial strength rating of 4 out of 10 and a profitability rating of 7 out of 10. The cash-debt ratio of 0.01 is lower than 95.79% of competitors, but the Altman Z-Score of 2.14 suggests that the company is likely safe from bankruptcy. The operating margin of 14.1% is higher than 84.32% of competitors, but lower than the company’s median of 16.19%. The WACC also increased in the last full fiscal year, nearly bringing it above the ROIC and indicating lower profitability.
At the end of the quarter, the equity portfolio consisted of 109 stock holdings valued at a total of $493 million. The top holdings were Intel Corp. (INTC) with a 22.57% portfolio weight, S&W Seed Co. (SANW) with 6.64% and Dolby Laboratories Inc. (DLB) with 5.97%.
In terms of sector weighting, the firm was most invested in financial services, technology and communication services.
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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