Hillman Capital Management recently disclosed its portfolio updates for the fourth quarter of 2020, which ended on Dec. 31.
Mark Hillman (Trades, Portfolio) is the president, CEO and chief investment officer of the firm, which he founded in 1998. The firm's strategy is to invest in companies with distinct competitive advantages that have fallen temporarily out of favor with investors due to short-term, non-recurring issues. Hillman considers factors such as cash flow, dividends, sales, earnings, book value and projected growth rates when valuing a business.
Using the criteria above, the firm's most notable buys for the quarter were Bank of New York Mellon Corp. (BK, Financial), the SSGA SPDR S&P 500 (SPY, Financial) ETF, Merck & Co Inc. (MRK, Financial) and The Kraft Heinz Co. (KHC, Financial).
Bank of New York Mellon
The firm established a new holding of 105,075 shares in Bank of New York Mellon (BK, Financial) after selling out of its previous investment in the company in the first quarter of 2020. The trade had a 2.41% impact on the equity portfolio. During the quarter, shares traded for an average price of $38.47.
Bank of New York Mellon is a New York-based corporate investment banking company that styles itself the "bank of banks." It helps clients such as banks, asset managers, broker-dealers, companies and governments manage and service their financial assets throughout the investment lifecycle.
On Feb. 26, shares of the banking company traded around $42.16 for a market cap of $37.39 billion. According to the GuruFocus Value chart, the stock is modestly undervalued.
The company has a financial strength rating of 4 out of 10 and a profitability rating of 6 out of 10. The cash-debt ratio of 6.28 is lower than 54% of industry peers, while the Piotroski F-Score of 7 out of 9 indicates a very healthy financial situation. The return on equity of 7.84% and return on assets of 0.85% have declined recently after several years of improvement.
SSGA SPDR S&P 500
The firm also invested in 4,740 new shares of the SSGA SPDR S&P 500 (SPY, Financial) ETF after selling out of its previous stake in the third quarter of 2020. The trade had a 0.96% impact on the equity portfolio. Shares traded for an average price of $355.39 during the quarter.
The SPDR S&P 500 ETF is an exchange-traded fund run by State Street Global Advisors. It seeks to track the performance of the S&P 500 Index.
On Feb. 26, shares of the ETF traded around $380.36 for a market cap of $ 331.17 billion. The ETF has gained 22% over the past year.
Merck
The firm upped its investment in Merck (MRK, Financial) by 20,414 shares, or 53.07%, for a total holding of 58,881 shares. The investment had a 0.90% impact on the equity portfolio. During the quarter, shares traded for an average price of $80.13.
Merck, also known as Merck Sharp & Dohme outside of the U.S. and Canada, is a pharmaceutical giant based in Kenilworth, New Jersey. The company focuses its research and production primarily on vaccines, oncology, infectious diseases and cardio-metabolic disorders.
On Feb. 26, shares of Merck traded around $72.62 for a market cap of $183.76 billion. According to the GF Value chart, the stock is modestly undervalued.
The company has a financial strength rating of 5 out of 10 and a profitability rating of 8 out of 10. The interest coverage ratio of 10.06 and Altman Z-Score of 3.81 indicate the company is not in financial distress. The three-year revenue growth rate is 8.3% and the three-year Ebitda growth rate is 16.9%.
Kraft Heinz
The firm added 29,547 shares, or 18.3%, to its investment in Kraft Heinz (KHC, Financial) for a total holding of 190,965 shares. The trade had a 0.55% impact on the equity portfolio. Shares traded for an average price of $32.50 during the quarter.
Kraft Heinz is an iconic American food and beverage company whose brands include Kraft, Heinz, Oscar Mayer, Jell-O and Kool-Aid, among others. Co-headquartered in Pennsylvania and Illinois, it is the third-largest food and beverage company in North America.
On Feb. 26, shares of Kraft Heinz traded around $36.38 for a market cap of $44.50 billion. According to the GF Value chart, the stock is modestly overvalued.
The company has a financial strength rating of 4 out of 10 and a profitability rating of 6 out of 10. The Altman Z-Score of 0.89 indicates that the company could be in danger of bankruptcy, but the Piotroski F-Score of 6 out of 9 is typical of a financially stable company. The weighted average cost of capital has mostly surpassed the return on invested capital in recent years, meaning the company is not creating value for shareholders.
Portfolio overview
As of the quarter's end, the firm held shares in 46 stocks valued at a total of $185 million. It established 11 new positions over the period, sold out of Nike Inc. (NKE, Financial) and added to or reduced several other positions for a turnover of 11%.
The top holdings were Nordstrom Inc. (JWN, Financial) with 5.88% of the equity portfolio, DuPont with 3.77% and Microsoft Corp. (MSFT, Financial) with 3.62%. In terms of portfolio weight, the firm was most invested in health care, financial services and industrials.
Disclosure: Author owns no shares in any of the stocks mentioned. The mention of stocks in this article does not at any point constitute an investment recommendation. Portfolio updates reflect only common stock positions as per the regulatory filings for the quarter in question and may not include changes made after the quarter ended.
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