Investment firm Jana Partners (Trades, Portfolio) revealed earlier this week it pared its stake in Bloomin' Brands (BLMN, Financial) by 22.14%.
The New York-based firm, which was founded in 2001 by Barry Rosenstein, takes a value-oriented, event-driven approach to picking stocks, often entering activist positions in order to help unlock value for shareholders.
Having already reduced the position by 7.92% in the second quarter, GuruFocus Real-Time Picks, a Premium feature, showed the activist firm sold another 1.63 million shares of the Tampa, Florida-based restaurant holding company on Sept. 1, impacting the equity portfolio by -2.46%. The stock traded for an average price of $16.10 per share on the day of the transaction.
GuruFocus estimates the firm has gained 7.4% on the investment since establishing it in the third quarter of 2019. Now holding 5.7 million shares, Bloomin' Brands represents around 8.87% of Jana's equity portfolio and was its sixth-largest holding as of the three months ended June 30.
When it made the initial investment in 2019, Jana said it might attempt to influence the board of directors to sell the company, divest some parts of the business or change its financial operations or board membership.
In April, the two parties reached an agreement in regard to adding two new independent directors to its board. In exchange for adding John Gainor, former president and CEO of International Dairy Queen, and Jana's Scott Ostfeld to the board, the investment firm agreed to withdraw its Jan. 30 notice of its intent to propose two directors during the 2020 annual meeting. In addition, it agreed to a 60-day period of not acquiring an ownership interest of 14.99% or higher, selling shares of the company to a third party that would result in that party owning more than 4.9% of the stock and several other customary standstill and voting commitments.
The company, which has the Outback Steakhouse, Carrabba's Italian Grill and Bonefish Grill brands, along with several others, under its umbrella, has a $1.46 billion market cap; its shares were trading around $16.69 on Thursday with a price-book ratio of 69.3 and a price-sales ratio of 0.4.
The Peter Lynch chart shows the stock is trading above its fair value, suggesting it is overpriced.
In July, the company reported its second-quarter results. While the earnings loss of 74 cents per share beat analysts' estimates of a $1.15 loss, revenue of $578.5 million declined 43.4% from the prior-year quarter and fell short of expectations of $589.5 million. Due to Covid-19 pandemic, it, like many other companies, has not provided guidance for the coming quarter or year.
As a result of issuing approximately $97.12 million in new long-term debt over the past three years, GuruFocus rated Bloomin' Brands' financial strength a weak 3 out of 10. The low Altman Z-Score of 0.68 also warns the company could be at risk of going bankrupt.
The company's profitability fared better, scoring a 7 out of 10 rating, even though the operating margin is in decline and returns are negative and underperforming over half of its competitors. While the Piotroski F-Score of 5 suggests stability, the one-star predictability rank is on watch as a result of a loss in operating income and declining revenue per share over the past several years.
Jana remains the company's largest guru shareholder with a 6.54% stake. Other top guru investors are Jeremy Grantham (Trades, Portfolio), Richard Snow (Trades, Portfolio), Jim Simons (Trades, Portfolio)' Renaissance Technologies, Joel Greenblatt (Trades, Portfolio), John Hussman (Trades, Portfolio), Paul Tudor Jones (Trades, Portfolio) and Lee Ainslie (Trades, Portfolio).
Portfolio composition
As of the three months ended June 30, Jana had 35.84% of its $1.07 billion equity portfolio, which consisted of nine stocks, invested in the consumer defensive sector. Technology had the second-largest representation at 20.42%, followed by the consumer cyclical space at 16.66%.
The firm's top five holdings as of the end of the second quarter were Conagra Brands Inc. (CAG, Financial), Perspecta Inc. (PRSP, Financial), the SPDR S&P 500 exchange-traded fund (SPY, Financial), Callaway Golf Co. (ELY, Financial) and Hillenbrand Inc. (HI, Financial).
Disclosure: No positions.
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