Hillman Capital Management recently disclosed its portfolio updates for the first quarter of 2021, which ended on March 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 GlaxoSmithKline PLC (GSK, Financial) and Amazon.com Inc. (AMZN, Financial), while its biggest sells were Nordstrom Inc. (JWN, Financial) and General Electric Co. (GE, Financial).
GlaxoSmithKline
The firm added 226,445 shares, or 4,029.27%, to its investment in GlaxoSmithKline (GSK, Financial) for a total of 232,065 shares. The trade had a 3.54% impact on the equity portfolio. During the quarter, shares traded for an average price of $36.30.
GlaxoSmithKline is a British multinational pharmaceutical company. It is the biggest vaccine producer in the world as well as the biggest consumer health care business, with a focus on tackling respiratory illnesses, infectious diseases and HIV.
On May 25, shares of GlaxoSmithKline traded around $38.65 for a market cap of $97.15 billion and a price-earnings ratio of 12.96. 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 8 out of 10. The cash-debt ratio of 0.18 is lower than 81% of industry peers, but the Piotroski F-Score of 6 out of 9 is typical of a financially stable company. The three-year revenue growth rate is 3.5%, while the three-year Ebitda growth rate is 17.3%.
Amazon.com
The firm established a new holding worth 2,470 shares in Amazon.com (AMZN, Financial) after selling out of its previous investment in the company in the third quarter of 2020. The trade had a 3.35% impact on the equity portfolio. Shares traded for an average price of $3,171.97 during the quarter.
Amazon is a multinational e-commerce giant based in Seattle. Its vast network allows it to deliver many products to customers within one or two days, giving it tremendous pricing power. The company also has cloud computing, digital streaming, artificial intelligence and other tech operations.
On May 25, shares of Amazon traded around $3,256.41 for a market cap of $1.64 trillion and a price-earnings ratio of 61.71. According to the GF Value chart, the stock is fairly valued.
The company has a financial strength rating of 6 out of 10 and a profitability rating of 8 out of 10. The Piotroski F-Score of 6 out of 9 and Altman Z-Score of 6.38 both indicate a healthy financial situation. The return on invested capital has recently risen above the weighted average cost of capital, suggesting the company is returning to profitable growth.
Nordstrom
The firm sold out of its 348,923-share stake in Nordstrom (JWN, Financial), which had a -5.88% impact on the equity portfolio. During the quarter, shares traded for an average price of $36.94.
Nordstrom is a century-old U.S. luxury department store chain based in Seattle. Originating as a shoe store, it has since grown into a full-line retailer with departments for clothing, footwear, handbags, jewelry, accessories, cosmetics and fragrances.
On May 25, shares of Nordstrom traded around $36.66 for a market cap of $5.80 billion. According to the GF Value chart, the stock is modestly overvalued.
The company has a financial strength rating of 3 out of 10 and a profitability rating of 6 out of 10. The Altman Z-Score of 0.67 and current ratio of 0.88 indicate the company will need to raise additional liquidity in order to avoid bankruptcy. The operating margin of 0.82% and net margin of 0.91% have returned to the positives range, but are still underperforming 84% of industry peers.
General Electric
The firm reduced its holding in General Electric (GE, Financial) by 526,318 shares, or 96.68%, leaving a remaining holding of 18,079 shares. The trade had a -3.06% impact on the equity portfolio. Shares traded for an average price of $12.14 during the quarter.
Headquartered in Boston, General Electric is a large-scale multinational conglomerate that operates businesses in a variety of sectors, including home appliances, aviation, health care, financial services and energy.
On May 25, shares of General Electric traded around $13.15 for a market cap of $115.48 billion. According to the GF Value chart, the stock is significantly overvalued.
The company has a financial strength rating of 4 out of 10 and a profitability rating of 5 out of 10. The Piotroski F-Score of 3 out of 9 and Altman Z-Score of 1.44 imply poor balance sheet strength. The ROIC is typically below the WACC, indicating the company is destroying value as it grows.
Portfolio overview
As of the quarter's end, the firm held shares in 43 stocks valued at a total of $228 million. It established three new positions over the period, sold out of six holdings and added to or reduced several other positions for a turnover of 26%.
The top holdings were Wells Fargo & Co. (WFC, Financial) with 3.95% of the equity portfolio, Exxon Mobil Corp. (XOM, Financial) with 3.84% and Kellogg Co. (K, Financial) with 3.76%. In terms of sector weighting, the firm was most invested in health care, energy and communication services.
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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