Snow Capital Management leader Richard Snow (Trades, Portfolio) disclosed his third-quarter portfolio earlier this week.
Founded in 1980, the guru's Milwaukee-based firm takes a contrarian, fundamental, relative value approach to stock picking, typically investing in financially strong companies that are experiencing a temporary setback.
Keeping these criteria in mind, Snow entered 10 new positions during the quarter, sold out of 13 holdings and added to or reduced a slew of other investments. Notable trades included new positions in Intel Corp. (INTC, Financial) and Argo Group International Holdings Ltd. (ARGO, Financial), a boost to The Hartford Financial Services Group Inc. (HIG, Financial) holding and the divestment of National General Holdings Corp. (NGHC, Financial) and UnitedHealth Group Inc. (UNH, Financial).
Intel
Having previously exited a position in Intel in the third quarter of 2014, Snow invested in 161,372 shares, allocating 1.66% of the equity portfolio to the new holding. The stock traded for an average price of $52.07 per share during the quarter.
The Santa Clara, California-based semiconductor company has a $186.83 billion market cap; its shares were trading around $45.59 on Thursday with a price-earnings ratio of 8.94, a price-book ratio of 2.51 and a price-sales ratio of 2.51.
The Peter Lynch chart shows the stock is trading below its fair value, suggesting it is undervalued. The GuruFocus valuation rank of 9 out of 10 aligns with this assessment since the price ratios are all approaching multiyear lows.
GuruFocus rated Intel's financial strength 6 out of 10 on the back of comfortable interest coverage and a high Altman Z-Score of 3.37 that indicates it is in good standing even though assets are building up at a faster rate than revenue is growing. The return on invested capital also surpassed the weighted average cost of capital, indicating value creation.
The company's profitability fared even better, scoring a 9 out of 10 rating. In addition to operating margin expansion, Intel is being supported by strong returns that outperform a majority of competitors, a high Piotroski F-Score of 7, which suggests business conditions are healthy, and consistent earnings and revenue growth. It also has a predictability rank of four out of five stars. According to GuruFocus, companies with this rank return an average of 9.8% annually over a 10-year period.
Of the gurus invested in Intel, Ken Fisher (Trades, Portfolio) has the largest stake with 0.69% of outstanding shares. Other to p guru shareholders include PRIMECAP Management (Trades, Portfolio), Chris Davis (Trades, Portfolio), Pioneer Investments (Trades, Portfolio), Jim Simons (Trades, Portfolio)' Renaissance Technologies, Michael Price (Trades, Portfolio) and the Parnassus Endeavor Fund (Trades, Portfolio).
Argo Group International
The guru picked up 80,656 shares of Argo Group, dedicating 0.55% of the equity portfolio to the position. Shares traded for an average price of $34.91 each during the quarter.
The insurance company, which is headquartered in Bermuda, has a market cap of $1.36 billion; its shares were trading around $39.25 on Thursday with a price-book ratio of 0.8 and a price-sales ratio of 0.74.
According to the median price-sales chart, the stock is undervalued. The GuruFocus valuation rank of 6 out of 10 aligns with this assessment.
Argo Group's financial strength and profitability were both rated 4 out of 10 by GuruFocus. In addition to having a low cash-to-debt ratio that is underperforming versus its history as well as its industry, the company's assets are growing at a faster rate than its revenue.
The company is also being weighed down by margins and returns that underperform a majority of industry peers as well as a low Piotroski F-Score of 3, which indicates operations are in poor shape. Due to a slowdown in revenue per share growth over the past 12 months, its one-star predictability rank is on watch. GuruFocus says companies with this rank typically return 1.1% annually on average.
With a 2.42% stake, Richard Pzena (Trades, Portfolio) is Argo's largest guru shareholder. Simons' firm, Hotchkis & Wiley and Mario Gabelli (Trades, Portfolio) also own the stock.
Hartford Financial Services Group
The investor expanded the Hartford Financial holding by 93.62%, buying 146,266 shares. The trade had an impact of 1.07% on the equity portfolio. During the quarter, the stock traded for an average per-share price of $39.85.
Snow now holds 302,495 shares total, which represent 2.22% of the equity portfolio. GuruFocus estimates he has gained 11.67% on the investment since establishing it in the first quarter of the year.
The Hartford, Connecticut-based financial services company, which provides investment and insurance services, has a $16.11 billion market cap; its shares were trading around $44.95 on Thursday with a price-earnings ratio of 9.4, a price-book ratio of 0.92 and a price-sales ratio of 0.78.
Based on the Peter Lynch chart and the GuruFocus valuation rank of 7 out of 10, the stock appears to be undervalued.
GuruFocus rated Hartford's financial strength 4 out of 10. Despite having adequate interest coverage, the company has a low cash-to-debt ratio. The WACC also eclipses the ROIC, indicating value is being destroyed.
The company's profitability did not fare much better, scoring a 5 out of 10 rating on the back of margins and returns that are outperforming over half of its competitors as well as a moderate Piotroski F-Score of 6, indicating business conditions are stable. While Hartford has recorded a slowdown in revenue per share growth over the past year, it has a one-star predictability rank.
Diamond Hill Capital (Trades, Portfolio) is the company's largest guru shareholder with a 1.74% stake. Other top guru investors include Hotchkis & Wiley, Pioneer, Simons' firm, Pzena, Steven Cohen (Trades, Portfolio), Joel Greenblatt (Trades, Portfolio), Gabelli and Caxton Associates (Trades, Portfolio).
National General Holdings
With an impact of -2.35% on the equity portfolio, Snow sold his 521,898 remaining shares of National General Holdings. The stock traded for an average price of $32.97 per share during the quarter.
GuruFocus data shows he gained an estimated 7.22% on the investment.
The insurance holding company, which is headquartered in New York, has a market cap of $3.87 billion; its shares were trading around $34.11 on Thursday with a price-earnings ratio of 9.06, a price-book ratio of 1.46 and a price-sales ratio of 0.72.
The Peter Lynch chart suggests the stock is undervalued.
National General Holdings' financial strength was rated 5 out of 10 by GuruFocus, driven by sufficient interest coverage and moderate debt-to-equity and equity-to-asset ratios.
The company's profitability scored a 6 out of 10 rating on the back of strong margins and returns that outperform a majority of industry peers as well as a high Piotroski F-Score of 7.
Of the gurus invested in National General, Jeremy Grantham (Trades, Portfolio) has the largest holding with 0.14% of outstanding shares. Gabelli and Chuck Royce (Trades, Portfolio) also own the stock.
UnitedHealth Group
Impacting the equity portfolio by -0.85%, the guru sold his 13,927 remaining shares of UnitedHealth Group. Shares traded for an average price of $307.11 each during the quarter.
GuruFocus data shows Snow gained approximately 38.17% on the investment.
The Minnetonka, Minnesota-based managed care company, which provides health care products and insurance services, has a $340.23 billion market cap; its shares were trading around $358.58 on Thursday with a price-earnings ratio of 20.59, a price-book ratio of 5.22 and a price-sales ratio of 1.39.
According to the Peter Lynch chart, the stock is overvalued. The GuruFocus valuation rank of 1 out of 10 also leans toward overvaluation since the share price, price-book and price-sales ratios are approaching 10-year highs.
UnitedHealth's financial strength was rated 6 out of 10 by GuruFocus. Although the company has issued approximately $13.3 billion in new long-term debt over the past three years, it is still at a manageable level due to having comfortable interest coverage. The company also has a robust Altman Z-Score of 3.8 even though assets are building up faster than revenue is growing. Since the ROIC exceeds the WACC, the company is also creating value.
The company's profitability fared even better with a 9 out of 10 rating. In addition to an expanding operating margin, UnitedHealth is supported by strong returns that outperform a majority of competitors and a high Piotroski F-Score of 8. Despite recording a slowdown in revenue per share growth over the past year, the company has a five-star predictability rank. GuruFocus data shows that companies with that rank return, on average, 12.1% annually.
With a 0.96% stake, the Vanguard Health Care Fund (Trades, Portfolio) is UnitedHealth's largest guru shareholder. Other top guru investors include Dodge & Cox, Steve Mandel (Trades, Portfolio), Grantham, Barrow, Hanley, Mewhinney & Strauss, Ruane Cunniff (Trades, Portfolio) and Pioneer.
Additional trades and portfolio performance
Other new positions Snow established during the quarter included J2 Global Inc. (JCOM, Financial), Norwegian Cruise Line Holdings Ltd. (NCLH, Financial), Taylor Morrison Home Corp. (TMHC, Financial), Cinemark Holdings Inc. (CNK, Financial) and ACCO Brands Corp. (ACCO, Financial).
The firm's $502 million equity portfolio, which is composed of 140 holdings, is most heavily invested in the financial services (28.54%) and consumer cyclical (19.29%) sectors, followed by a smaller exposure to the health care space (11.48%).
According to GuruFocus, the All Cap Equity Composite Fund returned 25.87% in 2019, underperforming the S&P 500's 31.48% return.
Disclosure: No positions.
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