Spiros Segalas (Trades, Portfolio) has revealed his portfolio for the fourth quarter, which ended Oct. 31, 2020, earlier this week. His top trades included reductions in Mastercard Inc. (MA, Financial), Goldman Sachs Group Inc. (GS, Financial) and Alibaba Group Holding Ltd. (BABA, Financial). As well, he sold out of his holding in Eli Lilly and Co. (LLY, Financial) and made a new buy into Peloton Interactive Inc. (PTON, Financial).
Segalas is the manager of the Harbor Capital Appreciation Fund, part of the Chicago-based Harbor Funds. The fund focuses on companies that have mid to large market caps and have above-average prospects for growth. For an investment to be considered, the company must have superior sales growth, improving profitability and a strong balance sheet.
Portfolio overview
At the end of the quarter, Segalas' portfolio contained 56 stocks, with six new holdings. Top holdings in the portfolio include Amazon.com Inc. (AMZN, Financial), Tesla Inc. (TSLA, Financial), Apple Inc. (AAPL, Financial), Microsoft Corp. (MSFT, Financial) and Facebook Inc. (FB, Financial).
By weight, the top three sectors represented are technology (36.01%), consumer cyclical (26.66%) and communication services (18.37%).
Mastercard
During the quarter, Segalas slashed his holding of Mastercard by 38.69%. The guru sold 1.47 million shares at an average price of $334.55 per share during the quarter. Overall, the sale had an impact of -1.22% on the portfolio and GuruFocus estimates that Segalas has gained 115.65% during the lifetime of the holding.
Mastercard is the second-largest payment processor in the world, processing $4.8 trillion in purchase transactions in 2019. Mastercard operates in over 200 countries and processes transactions in over 150 currencies.
On Jan. 5, the stock was trading at $349.80 per share with a market cap of $348.72 billion. 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 rank of 1 out of 10. There is currently one severe warning sign issued for assets growing faster than revenue. Since 2014, the company has consistently increased cash flows to levels that easily support dividend payouts.
Goldman Sachs
The guru's holding in Goldman Sachs also saw a massive reduction with the sale of 1.96 million shares. This sale cut the holding by 90.95% as the shares traded for an average price of $202.85 during the quarter. GuruFocus estimates the total gain of the holding at 10.70% and the trade had an impact of -1.04% on the equity portfolio.
Goldman Sachs is a leading global investment bank whose activities are organized into investment banking, global markets, asset management and consumer and wealth management segments. Approximately 60% of the company's net revenue is generated in the Americas, 15% in Asia and 25% in Europe, the Middle East and Africa. In 2008, Goldman reorganized itself as a financial holding company regulated by the Federal Reserve System.
As of Jan. 5, the stock was trading at $271.81 with a market cap of $93.51 billion. The GF Value Line shows the stock trading at fair value.
GuruFocus gives the company a financial strength rating of 3 out of 10, a profitability rank of 5 out of 10 and a valuation rank of 7 out of 10. There is one severe warning sign issued for poor financial strength. The company has slowly decreased debt levels over the last few years while increasing cash levels.
Eli Lilly
Eli Lilly served a short term in the portfolio and was sold out during the quarter for an overall impact of -0.98% on the quarter. Segalas sold all 2.42 million shares for an average price of $148.20 per share during the quarter. During the one-year holding period, GuruFocus estimates that the holding gained a total of 14.19%.
Eli Lilly is a drug company with a focus on neuroscience, endocrinology, oncology and immunology. Its key products include Alimta and Verzenio for cancer; Jardiance, Trulicity, Humalog and Humulin for diabetes; and Taltz and Olumiant for immunology.
Jan. 5 saw the stock trading at $166.38 per share with a market cap of $159.16 billion. It is trading at a significantly overvalued rating according to the GF Value Line.
GuruFocus gives the company a financial strength rating of 5 out of 10, a profitability rank of 8 out of 10 and a valuation rank of 2 out of 10. There is currently one severe warning sign issued for a Sloan ratio indicating poor quality of earnings. The company boasts strong operating and net margin percentages that outdo the majority of the industry and contribute to the strong profitability rank.
Peloton
Segalas made a new buy into Peloton after selling out in the first quarter of 2020. The purchase added 3.01 million shares to the portfolio at an average price of $93.37 per share. Overall, the purchase had an impact of 0.91% on the portfolio and the holding has a total estimated gain of 52.18% according to GuruFocus.
Peloton operates an interactive fitness platform. It operates its business in three reportable segments: connected fitness products, subscription and other. Connected fitness product revenue consists of sales of bike and tread and related accessories, associated fees for delivery and installation and extended warranty agreements. Subscription revenue consists of revenue generated from monthly connected fitness subscriptions and digital subscriptions. Other revenue primarily consists of Peloton-branded apparel. The company generates the majority of the revenue from the sale of Connected Fitness Products.
On Jan. 5, the stock was trading at $146.71 per share with a market cap of $42.74 billion. Peloton saw a massive rise in per-share price starting in March of 2020 as public gyms shut down and people increasingly sought at-home workout options.
GuruFocus gives the company a financial strength rating of 6 out of 10. There is currently one severe warning sign issued for days inventory building up. The current weighted average cost of capital outweighs the return on invested capital, indicating value is being destroyed.
Alibaba
Alibaba rounded out Segalas' top five trades with a 40.71% reduction. The guru sold 1.28 million shares that traded at an average price of $282.37 during the quarter. The sale had an overall impact of -0.86% on the portfolio and GuruFocus estimates the total gain of the holding at 114.27%.
Alibaba is the world's largest online and mobile commerce company, measured by GMV. It operates China's most-visited online marketplaces, including Taobao (consumer-to-consumer) and Tmall (business-to-consumer). Alibaba's China marketplaces accounted for 68% of revenue in fiscal 2019, with Taobao generating revenue through advertising and other merchant data services and Tmall deriving revenue from commission fees.
As of Jan. 5, the stock was trading at $239.68 per share with a market cap of $647.65 billion. According to the GF Value Line, the stock is trading at a modestly undervalued rating.
GuruFocus gives the company a financial strength rating of 8 out of 10 and a profitability rank of 9 out of 10. There are currently two severe warning signs issued for declining operating and gross margin percentages. The company has significantly increased cash flows over the last several years while debt has remained steady since 2018.
Disclosure: Author owns no stocks mentioned.
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