Snow Capital Management leader Richard Snow (Trades, Portfolio) disclosed his first-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 14 new positions during the three months ended March 31, sold out of 19 holdings and added to or trimmed a slew of other existing investments. Notable trades included new investments in Alliance Data Systems Corp. (ADS, Financial) and Lockheed Martin Corp. (LMT, Financial), a boost to the Centene Corp. (CNC, Financial) holding, a reduction in the PNC Financial Services Group Inc. (PNC, Financial) position and the divestment of AECOM (ACM, Financial).
Alliance Data Systems
Snow invested in 82,073 shares of Alliance Data Systems (ADS, Financial), allocating 1.33% of the equity portfolio to the position. The stock traded for an average price of $89.83 per share during the quarter.
The Columbus, Ohio-based financial services company, which provides private-label credit cards, loyalty programs and marketing services, has a $5.97 billion market cap; its shares were trading around $121.42 on Wednesday with a price-earnings ratio of 12.53, a price-book ratio of 3.39 and a price-sales ratio of 1.37.
The GF Value Line suggests the stock is modestly overvalued based on its historical ratios, past performance and future earnings projections.
The valuation rank of 9 out of 10, however, leans more toward undervaluation even though the share price and price-sales ratio are both approaching multiyear highs.
GuruFocus rated Alliance Data Systems' financial strength 3 out of 10. Although the company has adequate interest coverage, the Altman Z-Score of 1.28 warns it could be at risk of bankruptcy if it does not improve its liquidity. The return on invested capital has also fallen below the weighted average cost of capital, indicating struggles with creating value.
The company's profitability fared better, scoring a 6 out of 10 rating even though the operating margin is in decline. Alliance Data is also supported by strong returns on equity, assets and capital that outperform over half of its competitors as well as a moderate Piotroski F-Score of 4, which indicates business conditions are stable. Although revenue per share had been declining for the past five years, it still has a predictability rank of one out of five stars. According to GuruFocus, companies with this rank return an average of 1.1% annually over a 10-year period.
Of the gurus invested in Alliance Data Systems, Steven Cohen (Trades, Portfolio) has the largest position with 1.63% of outstanding shares. David Tepper (Trades, Portfolio), Jeremy Grantham (Trades, Portfolio), Ronald Muhlenkamp (Trades, Portfolio), Jim Simons (Trades, Portfolio)' Renaissance Technologies, Julian Robertson (Trades, Portfolio), Joel Greenblatt (Trades, Portfolio), John Hussman (Trades, Portfolio) and Pioneer Investments (Trades, Portfolio) also own the stock.
Lockheed Martin
The guru picked up 24,465 shares of Lockheed Martin (LMT, Financial), dedicating 1.31% of the equity portfolio to the holding. Shares traded for an average price of $342.99 each during the quarter.
The aerospace and defense company, which is headquartered in Bethesda, Maryland, has a market cap of $107.75 billion; its shares were trading around $388.16 on Wednesday with a price-earnings ratio of 15.65, a price-book ratio of 17.08 and a price-sales ratio of 1.64.
According to the GF Value Line, the stock is fairly valued.
The valuation rank of 7 out of 10, however, is more indicative of undervaluation even though the share price is closing in on a one-year high.
Lockheed Martin's financial strength was rated 5 out of 10 by GuruFocus, driven by a comfortable level of interest coverage as well as a robust Altman Z-Score of 4.02 that indicates it is in good standing. The ROIC also eclipses the WACC, indicating good value creation.
The company's profitability scored an 8 out of 10 rating on the back of an expanding operating margin, strong returns that outperform a majority of industry peers and a high Piotroski F-Score of 8, which suggests business conditions are healthy. It also has a one-star predictability rank.
With a 0.18% holding, Simons' firm is Lockheed's largest guru shareholder. Other top guru investors include Yacktman Asset Management (Trades, Portfolio), Greenblatt, Pioneer, Muhlenkamp, John Rogers (Trades, Portfolio) and Paul Tudor Jones (Trades, Portfolio).
Centene
With an impact of 1.04% on the equity portfolio, the investor boosted his Centene (CNC, Financial) position by 59.37%, buying 112,262 shares. During the quarter, the stock traded for an average per-share price of $61.87.
Snow now holds 301,352 shares total, representing 2.79% of the equity portfolio. GuruFocus estimates he has gained 34.32% on the investment since establishing it in the second quarter of 2019.
The St. Louis-based managed care company, which focuses on providing health care programs to uninsured, underinsured and low-income individuals, has a $40.41 billion market cap; its shares were trading around $69.28 on Wednesday with a price-earnings ratio of 16.54, a price-book ratio of 1.54 and a price-sales ratio of 0.35.
Based on the GF Value Line, the stock appears to be fairly valued currently.
The valuation rank of 8 out of 10 is more in favor of undervaluation even though the share price and price-sales ratio are nearing multiyear highs.
GuruFocus rated Centene's financial strength 5 out of 10. Although the company has issued approximately $9.5 billion in new long-term debt over the past three years, it is at a manageable level due to adequate interest coverage. The Altman Z-Score of 2.57 also indicates it is under some pressure since assets are building up at a faster rate than revenue is growing.
The company's profitability scored a 7 out of 10 rating despite having a declining operating margin and returns that underperform over half of its competitors. Centene is supported by a moderate Piotroski F-Score of 6, consistent earnings and revenue growth and a four-star predictability rank. GuruFocus data shows companies with this rank return an average of 9.8% annually.
Andreas Halvorsen (Trades, Portfolio) is Centene's largest guru shareholder with a 2.25% stake. Other top guru investors include the Vanguard Health Care Fund (Trades, Portfolio), Pioneer, Hotchkis & Wiley, Simons' firm, the Eaton Vance Worldwide Health Sciences Fund (Trades, Portfolio), Cohen, Grantham, Louis Moore Bacon (Trades, Portfolio), Lee Ainslie (Trades, Portfolio) and Greenblatt.
PNC Financial Services
Impacting the equity portfolio by -1.46%, Snow curbed his PNC Financial Services (PNC, Financial) holding by 97.11%, selling 57,695 shares. During the quarter, the stock traded for an average price of $164.89 per share.
He now holds 1,716 shares total, which make up 0.04% of the equity portfolio. GuruFocus data shows he has gained 23.84% on the investment since establishing it in the first quarter of 2019.
The bank holding company, which is headquartered in Pittsburgh, has a market cap of $82.26 billion; its shares were trading around $193.42 on Wednesday with a price-earnings ratio of 10.11, a price-book ratio of 1.52 and a price-sales ratio of 4.91.
The GF Value Line suggests the stock is currently modestly overvalued.
The valuation rank of 5 out of 10 is more indicative of it being fairly valued even though its share price, price-book and price-sales ratios are all approaching 10-year highs.
PNC Financial's financial strength was rated 3 out of 10 by GuruFocus despite having a comfortable level of interest coverage and debt ratios that are outperforming compared to over half of other industry players. The WACC also surpasses the ROIC, indicating poor value creation.
The company's profitability fared a bit better, scoring a 5 out of 10 rating on the back of strong margins and returns that outperform a majority of industry peers. PNC is also supported by a high Piotroski F-Score of 7, steady earnings and revenue growth and a 2.5-star predictability rank. GuruFocus says companies with this rank return, on average, 7.3% annually.
Of the gurus invested in PNC Financial, Hotchkis & Wiley has the largest stake with 0.43% of outstanding shares. T. Rowe Price, Pioneer, Chris Davis (Trades, Portfolio), Mario Gabelli (Trades, Portfolio), Charles Brandes (Trades, Portfolio), Ray Dalio (Trades, Portfolio), Greenblatt, Grantham, Dodge & Cox, Tom Russo (Trades, Portfolio) and Ken Fisher (Trades, Portfolio) also own the stock.
AECOM
The guru exited his AECOM (ACM, Financial) investment, selling all 148,804 remaining shares. The transaction had an impact of -1.26% on the equity portfolio. During the quarter, shares traded for an average price of $56.90 each.
GuruFocus estimates Snow gained 30.73% on the investment.
The Los Angeles-based engineering company, which is a leading consultant on infrastructure solutions, has a $9.89 billion market cap; its shares were trading around $66.95 on Wednesday with a price-earnings ratio of 48.29, a price-book ratio of 3.45 and a price-sales ratio of 0.81.
According to the GF Value Line, the stock is significantly over valued currently.
The valuation rank of 2 out of 10 aligns with this assessment since the share price and price ratios are approaching 10-year highs.
AECOM's financial strength and profitability were both rated 5 out of 10 by GuruFocus. In addition to weak interest cover, the company is being weighed down by an Altman Z-Score of 1.88 that indicates it is under some pressure. The WACC also eclipses the ROIC, indicating issues with creating value.
The company's operating margin is expanding, but its returns are negative and underperforming a majority of competitors. AECOM is also supported by a moderate Piotroski F-Score of 6, but the one-star predictability rating is on watch due to revenue per share declining over the past five years.
PRIMECAP is AECOM's largest guru shareholder with a 14.99% stake. Barrow, Hanley, Mewhinney & Strauss, Simons' firm, Richard Pzena (Trades, Portfolio), Jones, Dalio, Greenblatt and Fisher also own the stock.
Additional trades and portfolio performance
Other new positions Snow established during the quarter included Pfizer Inc. (PFE, Financial), HP Inc. (HPQ, Financial), Carter's Inc. (CRI, Financial), Cooper-Standard Holdings Inc. (CPS, Financial) and Photronics Inc. (PLAB, Financial).
The firm's $689 million equity portfolio, which is composed of 136 holdings, is most heavily invested in the financial services (31.46%) and consumer cyclical (11.73%) sectors, followed by a smaller exposure to the industrials (11.15%) and technology spaces (11.15%).
According to GuruFocus, the All Cap Equity Composite Fund returned 9.38% in 2020, underperforming the S&P 500's 18.4% return.
Disclosure: No positions.
Not a Premium Member of GuruFocus? Sign up for a free 7-day trial here.
