Jana Partners Ships Out HD Supply

Jana Partners (Trades, Portfolio) has revealed another reduction in its holding of HD Supply Holdings Inc. (NASDAQ:HDS) according to GuruFocus Real-Time Picks.

The investment management firm specializes in event-driven investing and was founded in 2001 by Barry Rosenstein. The firm typically applies a fundamental value discipline to identify undervalued companies that have one or more specific catalysts to unlock value.

The firm initially acquired HD Supply back in 2014 and has continually sold shares since the third quarter of 2017. On Oct. 2, the firm sold an additional 517,064 shares for an overall reduction of 38.01% in the holding. The shares traded at an average price of $41.74 on the day of the transaction. The sale had a -2.03% impact on the portfolio and GuruFocus estimates the total gain of the investment at 19.86%.

• Warning! GuruFocus has detected 4 Warning Signs with HDS. Click here to check it out.
• HDS 30-Year Financial Data
• The intrinsic value of HDS
• Peter Lynch Chart of HDS

Through a combination of acquisitions and organic growth, HD Supply has become one of the largest industrial distributors in North America. It is the market leader in the two sectors in which it operates (facilities and home improvement maintenance, repair and operations and specialty construction). Today, HD Supply offers 650,000 stock-keeping units and serves 500,000 customers through 270 branches across the U.S. and Canada.

On Oct. 15, the stock was trading at $42.02 per share with a market cap of $6.82 billion. The GF Value line shows that the company is currently trading at a fair value rating.

GuruFocus gives the company a financial strength rating of 5 out of 10 and a profitability rank of 6 out of 10. The company has raised its cash-to-debt ratio to 0.03, up from 0.01 earlier this year, but ranks lower than 94.74% of the industry after seeing long-term debt increase slightly. HD supply fares much better on its profitability ranking with an operating margin of 11.4% and a return on equity of 29.19%, both of which outdo the majority of the industry.

Top shareholders include Vanguard Group Inc. (Trades, Portfolio), BlackRock Inc. (Trades, Portfolio), Fiduciary Management Inc. /WI/ (Trades, Portfolio) and Seth Klarman (Trades, Portfolio).

Portfolio overview

The end of the second quarter saw Jana Partners invested in nine stocks, with no new holdings added to the portfolio. Top holdings include Conagra Brands Inc. (NYSE:CAG), Perspecta Inc. (NYSE:PRSP) and Callaway Golf Co. (NYSE:ELY). By weight, the portfolio is most invested in the consumer defensive (35.84%), technology (20.42%) and consumer cyclical (16.66%) sectors.

Disclaimer: Author owns no stocks mentioned.

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