Jana Partners (Trades, Portfolio) has revealed another addition to its holding of government contractor and IT specialist Perspecta Inc. (PRSP, Financial).
The activist firm was founded by Barry Rosentein in 2001 and takes a value-orientated approach to investing. The team seeks companies that are undergoing or are expected to undergo changes driven by certain events. They seek to aid value creation by becoming an actively involved shareholder.
According to GuruFocus' Real-Time Picks, the firm purchased an additional 1.96 million shares to add 16.53% to its holding on Oct. 12. The holding was re-established earlier this year after being sold during a short stint of ownership in 2018. The stock traded at an average price of $19.78 per share during the quarter and the purchase had an overall impact of 3.52% on the portfolio. GuruFocus estimates the firm has lost 9.85% on the holding since it was established.
Perspecta
Perspecta provides IT solutions to U.S. government customers in defense, intelligence, civilian, health care and state and local markets. The company provides end-to-end, technology-focused solutions, leveraging the full spectrum of its offerings and industry expertise to ensure broader access to customers, capabilities and contract vehicles.
On Oct. 20, the stock was trading at $19.78 per share with a market cap of $3.18 billion. The Peter Lynch chart suggests the stock has been trading above intrinsic value.
GuruFocus gives the company a financial strength rating of 3 out of 10 and a profitability rank of 4 out of 10. There are two severe warning signs issued for poor financial strength and an Altman Z-Score placing the company in the distress column. The current cash-to-debt ratio of 0.05 is a major contributing factor to the poor financial strength as it rates lower than 95.96% of the industry.
According to Reuters, analysts claim that Perspecta might be in a good position to consider an acquisition deal. The company has cleared its two-year mark after its spinoff from DXC Technology (DXC, Financial), which has eliminated potential tax impediments to a sale. This could explain Jana Partners' recent interest.
Over the last several weeks, Perspecta has also secured multiple new contracts with the Department of Defense and the U.S. Navy. The Navy contract was the most recent to be secured and serves up the potential for a total of $24.65 million to reach the company. Under the contract, Perspecta will provide telecommunications support to help the branch with its emergency preparedness and national security initiatives.
Portfolio overview
With its latest purchase, the firm now holds a total of 13.85 million shares of Perspecta, representing a 20.42% weighting as the second-largest holding in the portfolio. Other top holdings include Conagra Brands Inc. (CAG, Financial) and Callaway Golf Co. (ELY, Financial). By weight, the portfolio is most invested in the consumer defensive (35.84%), technology (20.42%) and consumer cyclical (16.66%) sectors.
Diclaimer: Author owns no stocks mentioned.
Read more here:
- Royce International Premier Fund's Top Trades of the 3rd Quarter
- Ford Sees China Sales Growth for 1st Time in 2 Years
- Jana Partners Ships Out HD Supply
Not a Premium Member of GuruFocus? Sign up for a free 7-day trial here.
