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Robert Karr Pedals Into Peloton, Hikes Several Top Holdings

Guru reports 2nd-quarter portfolio

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Sydnee Gatewood
Aug 25, 2021

Summary

  • Guru entered new position in Peloton.
  • He also added to the holdings of Dynatrace, Constellation Brands, Global Payments and Estee Lauder.
  • Karr did not make any other changes.
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Robert Karr (Trades, Portfolio), founder of New York-based Joho Capital, disclosed his second-quarter portfolio earlier this month.

A former protégé of Tiger Management’s

Julian Robertson (Trades, Portfolio), the guru, who now manages a family office, focuses on a concentrated number of investments and specializes in online media stocks. He also has a very low portfolio turnover rate of 3% as of the most recent quarter.

Based on these criteria, Karr entered one new position during the three months ended June 30, which was in Peloton Interactive Inc. (

PTON, Financial), and added to the Dynatrace Inc. (DT, Financial), Constellation Brands Inc. (STZ, Financial), Global Payments Inc. (GPN, Financial) and The Estee Lauder Companies Inc. (EL, Financial) holdings. He did not make any other changes.

Peloton Interactive

Karr invested in 5,375 shares of Peloton Interactive (

PTON, Financial), dedicating 0.09% of the equity portfolio to the holding. The stock traded for an average price of $106.68 per share during the quarter.

The New York-based company, which is known for its exercise bikes and treadmills, has a $33.71 billion market cap; its shares were trading around $112.756 on Wednesday with a price-earnings ratio of 130.33, a price-book ratio of 16.17 and a price-sales ratio of 9.27.

The Peter Lynch chart shows the stock is trading above its fair value, suggesting it is overvalued.

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GuruFocus rated Peloton’s financial strength 6 out of 10, driven by a comfortable level of interest coverage and a high Altman Z-Score of 8.44 that indicates it is in good standing. The weighted average cost of capital is also overshadowed by the return on invested capital, indicating value is being created as the company grows.

The company is also supported by strong margins and returns on equity, assets and capital that top a majority of competitors.

Of the gurus invested in Peloton,

Baillie Gifford (Trades, Portfolio) has the largest stake with 6.79% of outstanding shares. Other top guru shareholders include Chase Coleman (Trades, Portfolio), Philippe Laffont (Trades, Portfolio), Catherine Wood (Trades, Portfolio), Sprios Segalas and Jim Simons (Trades, Portfolio)’ Renaissance Technologies.

Dynatrace

With an impact of 3.1% on the equity portfolio, the guru increased the Dynatrace (

DT, Financial) stake by 50.91%, picking up an additional 374,000 shares. During the quarter, shares traded for an average price of $52.12 each.

The investor now holds 1.1 million shares total, accounting for 9.2% of the equity portfolio and is now his fifth-largest position. GuruFocus estimates he has gained 33.89% on the investment since establishing it in the fourth quarter of 2020.

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Headquartered in Waltham, Massachusetts, the software company, which offers an intelligence platform that allows users to modernize and automate IT operations, among other functions, has a market cap of $18.75 billion; its shares were trading around $65.58 on Wednesday with a price-earnings ratio of 251.17, a price-book ratio of 16.01 and a price-sales ratio of 24.78.

According to the Peter Lynch chart, the stock is overvalued.

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Dynatrace’s financial strength was rated 6 out of 10 by GuruFocus. In addition to adequate interest coverage, the robust Altman Z-Score of 10.78 indicates the company is in good standing. The ROIC, however, has been eclipsed by the WACC, suggesting it is struggling to remain profitable.

The company’s profitability did not fare as well, scoring a 2 out of 10 rating even though its margins and returns exceed a majority of industry peers. Dynatrace also has a high Piotroski F-Score of 8 out of 9, indicating operations are healthy.

With a 0.57% stake,

Ron Baron (Trades, Portfolio) is Dynatrace’s largest guru shareholder. Coleman, Steven Cohen (Trades, Portfolio), Simons’ firm, Paul Tudor Jones (Trades, Portfolio), Ray Dalio (Trades, Portfolio), Pioneer Investments, Louis Moore Bacon (Trades, Portfolio) and Caxton Associates (Trades, Portfolio) also own the stock.

Constellation Brands

Impacting the equity portfolio by 0.06%, Karr upped the Constellation Brands (

STZ, Financial) position by 10.83%. The stock traded for an average per-share price of $234.66 during the quarter.

The guru now holds 18,215 shares total, which represent 0.61% of the equity portfolio and is his ninth-largest holding. GuruFocus data shows he has gained an estimated 2.44% on the investment since the fourth quarter of 2020.

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The New York-based company, which produces and markets beer, wine and spirits, has a $41 billion market cap; its shares were trading around $213.57 on Wednesday with a price-earnings ratio of 33.43, a price-book ratio of 3.34and a price-sales ratio of 4.93.

Based on the GF Value Line, which considers historical ratios, past performance and future earnings projections, the stock appears to be fairly valued currently.

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GuruFocus rated Constellation’s financial strength 4 out of 10 on the back sufficient interest coverage. The Altman Z-Score of 3.24 also indicates the company is in good standing even though assets are building up at a faster rate than revenue is growing.

The company’s profitability fared better with a 7 out of 10 rating. In addition to an expanding operating margin, Constellation is supported by returns that outperform a majority of competitors as well as a high Piotroski F-Score of 7. Despite seeing a slowdown in revenue per share growth over the past 12 months, it 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.

Bill Nygren (Trades, Portfolio) is the company’s largest guru shareholder with a 0.77% stake. Pioneer Investments, Jeremy Grantham (Trades, Portfolio), Dalio, Diamond Hill Capital (Trades, Portfolio), Simons’ firm, Joel Greenblatt (Trades, Portfolio), Jones, PRIMECAP Management (Trades, Portfolio), Cohen and several other gurus also have positions in Constellation Brands.

Global Payments

Upping the holding by 0.25%, the investor purchased 1,500 shares of Global Payments (

GPN, Financial). The transaction had an impact of 0.04% on the equity portfolio. During the quarter, the stock traded for an average price of $201.21 per share.

Karr now holds a total of 596,955 shares, making up 15.91% of the equity portfolio. It is his third-largest holding. According to GuruFocus, he has gained an estimated 0.62% on the investment since the second quarter of 2019.

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The fintech company headquartered in Atlanta, which provides technology and software solutions for payment processing for online merchants, has a market cap of $48.8 billion; its shares were trading around $166.01 on Wednesday with a price-earnings ratio of 57.29, a price-book ratio of 1.83 and a price-sales ratio of 6.22.

The GF Value Line suggests the stock is modestly undervalued currently.

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Global Payments’ financial strength was rated 4 out of 10 by GuruFocus. As a result of issuing new long-term debt over the past three years, the company has weak interest coverage. The Altman Z-Score of 1.97 indicates the company is under some pressure since assets are building up at a faster rate than revenue is growing. The ROIC has also fallen below the WACC, indicating issues with creating value.

The company’s profitability scored a 7 out of 10 rating despite having a declining operating margin and returns that are largely underperforming in comparison to other industry peers. Global Payments also has a moderate Piotroski F-Score of 6, indicating conditions are typical for a stable company. While it has recorded a decline in revenue per share over the past three years, the company still has a three-star predictability rank. GuruFocus says companies with this rank return, on average, 8.2% annually.

Of the gurus invested in Global Payments,

Steve Mandel (Trades, Portfolio) has the largest stake with 1.89% of outstanding shares. Laffont also has a significant holding, followed by Larry Robbins (Trades, Portfolio), Pioneer Investments, Grantham, Ken Fisher (Trades, Portfolio) and several other gurus.

Estee Lauder

Boosting the Estee Lauder (

EL, Financial) holding by 10.1%, Karr bought 900 shares. The transaction had an impact of 0.04% on the equity portfolio. Shares traded for an average price of $302.88 each during the quarter.

He now holds 9,807 shares total, giving it 0.44% space in the equity portfolio. Since entering the investment in the first quarter of 2018, GuruFocus estimates Karr has gained 78.87%.

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The New York-based cosmetics company, which owns brands like MAC, Clinique, Aveda and Smashbox, has a $121.6 billion market cap; its shares were trading around $335.38 on Wednesday with a price-earnings ratio of 43.06, a price-book ratio of 19.96 and a price-sales ratio of 7.62.

According to the GF Value Line, the stock is significantly overvalued currently.

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GuruFocus rated Estee Lauder’s financial strength 5 out of 10 on the back of adequate interest coverage and a high Altman Z-Score of 6.13, which implies the company is in good standing even though assets are building up at a faster rate than revenue is growing. The ROIC also significantly outperforms the WACC, indicating good value creation is occurring.

The company’s profitability scored an 8 out of 10 rating, driven by an expanding operating margin, strong returns that outperform a majority of competitors and a moderate Piotroski F-Score of 5. Despite generating consistent earnings and revenue growth, Estee Lauder’s three-star predictability rank is on watch.

With a 0.85% stake,

Baillie Gifford (Trades, Portfolio) is Estee Lauder’s largest guru shareholder. Segalas, Pioneer Investments and Daniel Loeb (Trades, Portfolio) also have significant positions in the stock.

Portfolio composition

Karr did not make any other changes to his portfolio during the quarter.

Over half of the guru’s $704 million equity portfolio, which is composed of 22 stocks, is invested in the technology sector. The consumer cyclical, industrials and basic materials spaces have much smaller representations.

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According to GuruFocus’ top holdings data, Karr’s 10 largest positions also include Microsoft Corp. (

MSFT, Financial), Alibaba Group Holding Ltd. (BABA, Financial), Livent Corp. (LTHM, Financial), Euronet Worldwide Inc. (EEFT, Financial), Ceridian HCM Holding Inc. (CDAY, Financial), Amazon.com Inc. (AMZN, Financial) and Facebook Inc. (FB, Financial).

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Disclosures

I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
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