Paul Tudor Jones (Trades, Portfolio), founder of Tudor Investment Corp., has revealed his second-quarter portfolio. Major changes include the Allergan PLC stake being dissolved, adding to his holdings of TD Ameritrade Holding Corp. (AMTD, Financial) and E*TRADE Financial Corp. (ETFC, Financial) and new buys in Advanced Disposal Services Inc. (ADSW, Financial) and PG&E Corp. (PCG, Financial).
Tudor Investment Corp. is best known for discretionary macro trading and has significant experience and capabilities in model-driven and systematic approaches. They believe that companies must continually innovate in order to compete in rapidly evolving markets.
The portfolio contains 1,139 stocks, with 521 new holdings at the end of the quarter. It was valued at $2.02 billion with a turnover rate of 66%. Top holdings include TD Ameritrade, E*TRADE Financial, IAC/InterActive Corp. (IAC, Financial), Advanced Disposal Services and Legg Mason Inc. (LM, Financial).
By weight, the top three sectors represented in the portfolio are financial services (20.49%), technology (16.41%) and communication services (10.96%).
The portfolio saw the dissolution of the remaining 619,565 shares of Allergan during the quarter. The stock traded for an average price of $185.11 each during the quarter. The transaction had a negative impact of 9.87% on the portfolio and GuruFocus estimates the total gain of the holding at 3.23%.
Allergan markets a portfolio of leading brands and best-in-class products primarily focused on four key therapeutic areas ,including medical aesthetics, eye care, central nervous system and gastroenterology. As part of its approach to delivering innovation for better patient care, Allergan has built one of the broadest pharmaceutical and device research and development pipelines in the industry.
The quarter saw the addition of 2.31 million shares to the holding of TD Ameritrade for an increase of 753.62%. The shares were trading for an average price of $37.55 each during the quarter. The trade came on the heels of a 1,983.82% increase in the holding during the first quarter. The recent addition had an impact of 4.18% on the portfolio and GuruFocus estimates the total gain at 2.90%.
TD Ameritrade is a leading retail brokerage and advisor services firm. Its largest shareholder is Toronto-Dominion Bank (TSX:TD), which beneficially owns more than 40%. The company offers trading in stocks, bonds, options and other asset classes. Recently, TD Ameritrade derived approximately 55% of its revenue from interest rate-related income and fees, 35% from commissions and transaction fees and 10% from investment product and other revenue. Practically all of the company's revenue is generated in the United States.
On Aug. 28, the company was trading at $39.29 with a market cap of $21.21 billion. According to the Peter Lynch chart, the stock was trading below intrinsic value since the beginning of 2019.
GuruFocus gives the company a financial strength rating of 4 out of 10, a profitability rank of 5 out of 10 and a valuation rank of 9 out of 10. The company currently has a lower than average price-earnings ratio of 11 that is higher than 65.85% of the industry. A current cash-to-debt ratio of 2.31 places the company lower than 51.31% of the industry despite increases in cash flows since 2018.
The portfolio also saw a large boost in its holding of E*Trade by 226.56%. Around 1.10 million shares were purchased during the quarter, which were trading for an average price of $42.90. The addition had an impact of 2.73% on the portfolio and GuruFocus estimates the total gain of the holding at 21.67%.
E-Trade is one of the largest direct-to-investor platforms in the United States and housed over $500 billion of invested assets and client cash at the end of 2019. The company generates interest income on uninvested cash on its platform, trading commissions, service charges, including payment for order flow, and fees from stock plan administration. Almost all the company's revenue is generated within the U.S.
Aug. 28 saw the company trading at $54.60 with a market cap of $12.07 billion. The Peter Lynch chart suggests that the stock was undervalued over the last several years.
GuruFocus gives the company a financial strength rating of 3 out of 10, a profitability rank of 5 out of 10 and a valuation rank of 5 out of 10. The company has a cash-to-debt ratio of 0.31 that places it lower than 80.65% of capital markets companies. A severe warning sign is issued for poor financial strength. Revenue and net income have increased in recent years despite the poor financials.
Advanced Disposal Services
Advanced Disposal was added to the portfolio as a new buy for the first time since the second-quarter of 2018. Around 1.45 million shares were purchased at an average price of $31.94. The purchase had an impact of 2.17% on the portfolio and GuruFocus estimates the total loss of the holding at 5.42%.
Advanced Disposal provides fresh ideas and solutions to the business of a clean environment. It offers non-hazardous solid waste collection, transfer, recycling and disposal services to commercial, industrial, municipal and residential customers. It offers other services, such as landfill gas-to-energy operations at municipal solid waste landfills, management of third-party owned landfills, customer service charges relating to overdue payments and customer administrative fees relating to customers.
Shares were trading at $30.14 on Aug. 28, with a market cap of $2.74 billion. The Peter Lynch Chart suggests that the stock is trading above intrinsic value and is overvalued.
GuruFocus gives the company a financial strength rating of 3 out of 10 and a profitability rank of 4 out of 10. There are four severe warning signs issued for declining operating margin percentage, poor financial strength, declining revenue per share and an Altman Z-Score placing it in the distress column. The weighted average cost of capital outweighs the return on invested capital, which indicates the company will destroy value as it grows.
The second-largest new buy of the second quarter was the addition of PG&E. The company was initially sold at the end of the first quarter, but 4.33 million shares were purchased at an average price of $10.90. The purchase had an impact of 1.91% and GuruFocus estimates the total loss at 14.84%.
PG&E is a holding company whose main subsidiary is Pacific Gas and Electric, a regulated utility operating in Central and Northern California that serves 5.3 million electricity customers and 4.4 million gas customers in 47 of the state's 58 counties. PG&E operated under bankruptcy court supervision between January 2019 and June 2020. In 2004, PG&E sold its unregulated assets as part of an earlier post-bankruptcy reorganization.
On Aug. 28, shares were trading at $9.12 with a market cap of $17.97 billion. The Peter Lynch chart suggests that the stock was generally trading above intrinsic value since 2010.
GuruFocus gives the company a financial strength rating of 3 out of 10, a profitability rank of 5 out of 10 and a valuation rank of 9 out of 10. There are currently five severe warning signs issued for the company, including an Altman Z-Score of -0.3 placing it in the distress column with bankruptcy likely in the next two years. The company has also seen a declining operating margin percentage as long-term debt has continued to pile up.
Disclaimer: Author owns no stocks mentioned.
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