Mario Cibelli (Trades, Portfolio), leader of Marathon Capital Management, has released his portfolio for the third quarter. Major trades include changes in the holdings of Stitch Fix Inc. (SFIX, Financial), Uber Technologies Inc. (UBER, Financial), World Wrestling Entertainment Inc. (WWE, Financial), The Simply Good Foods Co. (SMPL, Financial) and PayPal Holdings Inc. (PYPL, Financial).
Cibelli launched Marathon Partners in 1997 after working with Mario Gabelli (Trades, Portfolio) at Gamco Investors. He is a long-term investor who seeks stocks that will double in value over a three- to five-year holding period regardless of current market conditions. Cibelli is known for focusing on less efficient portions of the market.
Portfolio overview
At the end of the quarter, the portfolio contained 11 stocks, with two new holdings in Stitch Fix and Twitter Inc. (TWTR, Financial). It is valued at $218.00 million and has seen a turnover rate of 11%. Top holdings at the end of the quarter were e.l.f. Beauty Inc. (ELF, Financial), Uber, Facebook Inc. (FB, Financial), World Wrestling Entertainment and HD Supply Holdings Inc. (HDS, Financial).
By weight, the top three sectors represented are communication services (37.02%), consumer defensive (20.65%) and technology (15.19%).
Stitch Fix
Stitch Fix was added to the portfolio during the quarter with the purchase of 380,000 shares. The stock traded at an average price of $25.73 during the quarter. Overall, the purchase had an impact of 4.73% on the portfolio and GuruFocus estimates the total gain of the holding at 44.31%.
Stitch Fix offers personal style service for men and women. The company engages in delivering personalized clothing to clients through the combination of data science and human judgment. The company offers products across categories, brands, product types and price points, including Women's, Petite, Maternity, Men's and Plus. It also offers various product types, including denim, dresses, blouses, skirts, shoes, jewelry and handbags, and sells merchandise across various range of price points.
On Nov. 23, the stock was trading at $37.20 per share with a market cap of $3.89 billion. The Peter Lynch chart shows that the stock has been trading above intrinsic value.
GuruFocus gives the company a financial strength rating of 6 out of 10 and a profitability rank of 4 out of 10. There is currently one severe warning sign issued for a low Piotroski F-Score that implies poor business operations. The company has a cash-to-debt ratio of 1.74 that ranks high among competitors despite debt rising this year.
Uber
Uber represented the largest negative impact on the portfolio as the holding was cut by 19.33% with the sale of 217,500 shares. The sale had an overall impact on the portfolio of -3.12% and GuruFocus estimates the holding has gained a total of 47.75% for the guru.
Uber is a technology provider that matches riders with drivers, hungry people with restaurants and food delivery service providers and shippers with carriers. The firm's on-demand technology platform could eventually be used for additional products and services, such as autonomous vehicles, delivery via drones and Uber Elevate, which provides "aerial ride-sharing." Uber Technologies is headquartered in San Francisco and operates in over 63 countries with over 110 million users that order rides or food at least once a month.
As of Nov. 23, the stock was trading at $50.39 per share with a market cap of $88.56 billion. The Peter Lynch chart suggests the stock could be overpriced.
GuruFocus gives the company a financial strength rating of 4 out of 10 and a profitability rank of 1 out of 10. There are two severe warning signs issued for new long-term debt and an Altman Z-Score of 1.38 placing the company in the distress column. The poor profitability comes from negative operating and net margin percentages.
World Wrestling Entertainment
One of the top holdings in the portfolio, World Wrestling Entertainment, saw its stake boosted during the third quarter. The guru purchased an additional 150,000 to add 26.09% to the holding. During the quarter, the shares traded at an average price of $43.84. Overall, the purchase had an impact of 2.78% on the portfolio and GuruFocus estimates the total loss of the holding at 10.63%.
World Wrestling Entertainment develops and produces television programming, pay-per-view programming and live wrestling events. The company also licenses branded consumer products.
Nov. 23 saw the stock trading at $41.57 per share with a market cap of $3.24 billion. The GF Value Line shows that the stock is trading at a significantly undervalued level.
GuruFocus gives the company a financial strength rating of 5 out of 10, a profitability rank of 7 out of 10 and a valuation rank of 4 out of 10. There is currently one severe warning sign issued for assets growing faster than revenue. The weighted average cost of capital is easily supported by the strong return on invested capital, which indicates the company will increase value alongside new investments.
Simply Good Foods
Simply Good Foods was one of two companies to bite the dust during the third quarter. The guru sold the 252,500 shares that were first purchased in the second quarter. The shares traded at an average price of $23.20 during the quarter. The sale had an impact of -2.17% on the portfolio and GuruFocus estimates the total gain of the holding at 31.15% during its short stint in the portfolio.
Simply Good Foods provides nutritional bars, shakes, treats and other nutritional products. They sell under the Atkins, Quest and Simply Protein brands. The firm also licenses the Atkins brand to Bellisio Foods, which produces frozen meals.
The stock traded at $23.24 with a market cap of $2.23 billion on Nov. 23. The Peter Lynch chart suggests that the stock is trading well above intrinsic value.
GuruFocus gives the company a financial strength ratio of 5 out of 10 and a profitability rank of 4 out of 10. There are two severe severe warning signs issued for declining revenue per share and a Sloan ratio indicating poor quality of earnings. Cash flows have decreased in 2020 for the first time.
PayPal
Cibelli continued on a trend with the reduction in his PayPal holding by 15.11%. The quarter saw 17,000 shares sold. The stock traded at an average price of $188.22 during the quarter. Overall, the sale had an impact of -1.37% on the portfolio and GuruFocus estimates the total gain of the holding at 280.43%.
PayPal was spun off from eBay in 2015 and provides electronic payment solutions to merchants and consumers, with a focus on online transactions. The company had over 300 million active accounts at the end of 2019, including 20 million merchant accounts. The company also owns Xoom and Venmo.
On Nov. 23, the stock was trading at $200.62 per share with a market cap of $235.90 billion. The GF Value Line shows that the stock is trading at a significantly overvalued level.
GuruFocus gives the company a financial strength rating of 6 out of 10 and a profitability rank of 8 out of 10. There is one severe warning sign for declining gross margin percentage. The company has consistently increased revenue and net income since 2014.
Disclosure: Author owns no stocks mentioned.
Read more here:
- Stanley Druckenmiller Slashes JPMorgan Chase and PayPal in the 3rd Quarter
- Jim Simons' Firm's Top 5 Sells of the 3rd Quarter
- Daniel Loeb's Top 5 Trades in the 3rd Quarter
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