Olstein Capital Management Chairman and Chief Investment Officer Robert Olstein (Trades, Portfolio) has revealed his firm's portfolio for the third quarter. The portfolio saw multiple holdings cut entirely with few new positions added.
Olstein and his team focus on a company's financial statement to assess financial strength and potential downside risk. With a "defense first" approach, the team aims to minimize investment errors and avoid companies that demonstrate aggressive accounting practices.
Portfolio overview
At the end of the quarter, the portfolio contained 103 stocks, with three new holdings in SS&C Technologies Holdings Inc. (SSNC, Financial), Intelligent Systems Corp. (INS) and Levi Strauss & Co. (LEVI, Financial). The portfolio is valued at $551 million and has seen turnover rate of 7%.
Top holdings include Invesco Ltd. (IVZ, Financial), Discovery Inc. (DISCK, Financial), Alphabet Inc. (GOOG, Financial), Walgreen Boots Alliance Inc. (WBA, Financial) and ViacomCBS Inc. (VIAC, Financial).
By weight, the top three sectors represented are financial services (18.44%), industrials (18.33%) and technology (16.18%).
Chevron
Chevron Corp. (CVX, Financial) represented the biggest impact on the portfolio as the remaining 52,000 shares were sold. The shares traded at an average price of $84.13 during the quarter. Overall, the sale had a -0.87% impact on the portfolio and GuruFocus estimates the total loss on the holding at 19.31% throughout its three-year holding period.
Chevron is an integrated energy company with exploration, production and refining operations worldwide. Chevron is the second-largest oil company in the United States with production of 3.2 million barrels of oil equivalent a day, including 7.6 million cubic feet a day of natural gas and 2.0 million barrels of liquids a day. Production activities take place in North America, South America, Europe, Africa, Asia and Australia. Its refineries are in the United States, South Africa and Asia and account for a total refining capacity of 1.7 million barrels of oil a day.
On Nov. 13, the stock traded at $80.32 per share with a market cap of $154.64 billion. The GF Value line shows that the company is trading at a fairly valued level.
GuruFocus gives the company a financial strength rating of 5 out of 10, a profitability rank of 6 out of 10 and a valuation rank of 3 out of 10. There are currently two severe warning signs issued for declining revenue per share and gross margin percentage. Debt spiked in 2016, but has been on a steady decline over the last four years.
Apple
The quarter also saw a significant cut in the firm's holding of Apple Inc. (AAPL, Financial), bringing it to an overall low over the 10-year holding period. The holding was cut by 48,000 shares, a 43.64% decrease, bringing the total number of shares down to 62,000. The shares traded at an average price of $109.02 during the quarter. Overall, the sale had an impact of -0.82% on the portfolio and GuruFocus estimates the total gain of the holdingat 68.12%.
Apple designs a wide variety of consumer electronic devices, including smartphones, tablets, PCs, smartwatches and TV boxes. The iPhone makes up the majority of Apple's total revenue. In addition, Apple offers its customers a variety of services such as Apple Music, iCloud, Apple Care, Apple TV+, Apple Arcade, Apple Card and Apple Pay, among others. Apple's products run internally developed software and semiconductors, and the firm is well known for its integration of hardware, software and services.
As of Nov. 13, the stock was trading at $119.21 with a market cap of $2.03 trillion. According to the GF Value line, the stock is trading at a significantly overvalued level.
GuruFocus gives the company a financial strength rating of 6 out of 10, a profitability rank of 9 out of 10 and a valuation ratio of 1 out of 10. There is currently one severe warning sign issued for declining operating margin percentage. Despite the warning sign, Apple maintains operating margin and net margin percentages that outperform over 94% of the industry.
SS&C Technologies
One of the few new buys for the quarter was the purchase of SS&C Technologies. The firm opened the holding with 71,000 shares. The stock traded at an average price of $59.80 during the quarter. The purchase had an overall impact of 0.78% on the portfolio and GuruFocus estimates that the holding has already gained the firm 8.26%.
SS&C Technologies provides software products and software-enabled services to a variety of customers primarily in financial services but also health care firms. SS&C GlobeOp provides fund administration services to alternative and traditional asset managers. In addition, SS&C provides portfolio accounting, portfolio management, trading, banking/lending and other software to asset managers, banks and financial advisors.
Nov. 13 saw the stock trading at $64.14 with a market cap of $16.42 billion. The GF Value line shows that the company is trading at a fairly valued level.
GuruFocus gives the company a financial strength rating of 4 out of 10, a profitability rank of 8 out of 10 and a valuation rank of 8 out of 10. There are currently four severe warning signs issued for declining operating and gross margin percentages, assets growing faster than revenue and an Altman Z-Score of 1.64 placing the company in the distress column. In the last year, the company saw significant cash flow and revenue growth that fully supports its dividend payments.
Regal Beloit
The seven-year holding of Regal Beloit Corp. (RBC, Financial) was also cut from the portfolio during the third quarter. It had seen consistent reductions since 2018 before the remaining 43,964 shares were sold. The shares traded at an average price of $94.73 during the quarter. Overall, the sale had an impact of -0.72% on the portfolio and GuruFocus estimates the total gain on the holding at 7.99%.
Regal Beloit manufactures electric motors, electrical motion controls and power generation products. It offers heavy motors with several applications, including categories with variable speed controls and voltage to diversify its product line. Products for the heating, ventilation and air conditioning market can be vital to move air at the designated temperature. The company has four operating segments: commercial, industrial systems (which contributes the majority of total sales), climate solutions and power transmission solutions.
On Nov. 13, the stock was trading at $114.09 per share with a market cap of $4.63 billion. According to the GF Value line, the stock is currently significantly overvalued.
GuruFocus gives the company a financial strength rating of 6 out of 10, a profitability rank of 6 out of 10 and a valuation rank of 2 out of 10. The company has managed to decrease debt over the last several years while maintaining their cash flows. However, the return on invested capital is outweighed by the weighted average cost of capital, which will destroy value as the company grows.
Generac Holdings
Rounding out the top five impacts on the portfolio was the reduction in the firm's Generac Holdings Inc. (GNRC) position. The third quarter saw 23,000 shares sold to reduce the holding by 31.08%. During the quarter, the shares traded at an average price of $164.15. Overall, the sale had an impact of -0.53% on the portfolio and GuruFocus estimates the total gain of the holding at 160.71%.
Generac Holdings designs and manufactures power generation equipment and other engine-powered products serving residential, commercial, oil, gas and other industrial markets. It offers standby generators and portable and mobile generators for a variety of applications. In addition, the company offers lighting, heating, pumps and outdoor power equipment.
As of Nov. 13, the stock was trading at $216.13 per share with a market cap of $13.58 billion. The GF Value line shows that the stock is trading at a significantly overvalued rating.
GuruFocus gives the company a financial strength rating of 6 out of 10, a profitability rank of 8 out of 10 and a valuation rank of 1 out of 10. There is currently one severe warning sign issued for declining operating margin percentage. Revenue and net income have seen slow but steady increases over the last five years.
Disclosure: Author owns no stocks mentioned.
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